DFI Volume 4

Ministry of Agriculture &
Farmers Welfare
Report of the Committee on

Doubling Farmers’ Income
Volume IV
“Post-production interventions:
Agricultural Marketing”
Capturing Value from every Grain, every Ounce,

every Drop of agricultural produce
Document prepared by the Committee on Doubling Farmers’ Income,

Department of Agriculture, Cooperation and Farmers’ Welfare,
Ministry of Agriculture & Farmers’ Welfare.
August 2017
Doubling Farmers’ Income – Volume IV
Post-production interventions: Agricultural Marketing
Foreword
The country has witnessed a series of concerted discussions dealing with the subject of
agriculture. In 1926, the Royal Commission of Agriculture was set up to examine and report
the status of India’s agricultural and rural economy. The Commission made comprehensive
recommendations, in its report submitted in 1928, for the improvement of agrarian economy
as the basis for the welfare and prosperity of India’s rural population. The urban population
was about 11 per cent of the whole, and demand from towns was small in comparison. The
Commission notes, that communication and physical connectivity were sparse and most
villages functioned as self-contained units. The Commission encompassed review of
agriculture in areas which are now part of Pakistan, Bangladesh and Myanmar. The net sown
area in erstwhile British India was reported as 91.85 million hectares and cattle including
buffaloes numbered 151 million. Almost 75 per cent of the cultivated area was under cereals
and pulses, with rice and wheat occupying 46 per cent of the net sown area. The area under
fruits and vegetables was about 2.5 per cent and that under oilseeds and non-food crops was
about 20 per cent. In the ensuing years, as well known, the country underwent vast changes in
its political, economic and social spheres.
Almost 40 years later, free India appointed the National Commission on Agriculture in 1970,
to review the progress of agriculture in the country and make recommendations for its
improvement and modernisation. This Commission released its final report in 1976. It refers to
agriculture as a comprehensive term, which includes crop production together with land and
water management, animal husbandry, fishery and forestry. Agriculture, in 1970 provided
employment to nearly 70 per cent of the working population. The role of agriculture in the
country’s economic development and the principle of growth with social justice, were core to
the discussions. The country was then facing a high population growth rate. After impressive
increase in agricultural production in the first two Five Year Plans, a period of stagnancy set in
and the country suffered a food crisis in the mid-1960s. The report in fifteen parts, suggested
ample focus on increased application of science and technology to enhance production.
Thirty years hence, the National Commission for Farmers was constituted in 2004 to suggest
methods for faster and more inclusive growth for farmers. The Commission made
comprehensive recommendations covering land reforms, soil testing, augmenting water
availability, agriculture productivity, credit and insurance, food security and farmers
competitiveness. In its final report of October 2006, the Commission noted upon ten major
goals which included a minimum net income to farmers, mainstreaming the human and gender
dimension, attention to sustainable livelihoods, fostering youth participation in farming and
post-harvest activities, and brought focus on livelihood security of farmers. The need for a
single market in India to promote farmer-friendly home markets was also emphasised.
The now constituted DFI (Doubling Farmers’ Income) Committee besides all these broad
sectoral aspects, invites farmers’ income into the core of its deliberations and incorporates it as
the fulcrum of its strategy. Agriculture in India today is described by a net sown area of 141
million hectares, with field crops continuing to dominate, as exemplified by 55 per cent of the
area under cereals. However, agriculture has been diversifying over the decades. Horticulture
now accounts for 16 per cent of net sown area. The nation’s livestock population counts at
more than 512 million. However, economic indicators do not show equitable and egalitarian
growth in income of the farmers. The human factor behind agriculture, the farmers, remain in
i
frequent distress, despite higher productivity and production. The demand for income growth
from farming activity, has also translated into demand for government to procure and provide
suitable returns. In a reorientation of the approach, this Committee suggests self-sustainable
models empowered with improved market linkage as the basis for income growth of farmers.
India today is not only self-sufficient in respect of demand for food, but is also a net exporter
of agri-products occupying seventh position globally. It is one of the top producers of cereals
(wheat & rice), pulses, fruits, vegetables, milk, meat and marine fish. However, there remain
some chinks in the production armoury, when evaluated against nutritional security that is so
important from the perspective of harvesting the demographic dividend of the country. The
country faces deficit of pulses & oilseeds. The availability of fruits & vegetables and milk &
meat & fish has increased, thanks to production gains over the decades, but affordability to a
vast majority, including large number of farmers too, remains a question mark.
The impressive agricultural growth and gains since 1947 stand as a tribute to the farmers’
resilience to multiple challenges and to their grit & determination to serve and secure the
nation’s demand for food and raw material for its agro-industries.
It is an irony, that the very same farmer is now caught in the vortex of more serious challenges.
The average income of an agricultural household during July 2012 to June 2013 was as low as
Rs.6,426, as against its average monthly consumption expenditure of Rs.6,223. As many as
22.50 per cent of the farmers live below official poverty line. Large tracts of arable land have
turned problem soils, becoming acidic, alkaline & saline physico-chemically. Another primary
factor of production, namely, water is also under stress. Climate change is beginning to
challenge the farmer’s ability to adopt coping and adaptation measures that are warranted.
Technology fatigue is manifesting in the form of yield plateaus. India’s yield averages for most
crops at global level do not compare favourably. The costs of cultivation are rising. The
magnitude of food loss and food waste is alarming. The markets do not assure the farmer of
remunerative returns on his produce. In short, sustainability of agricultural growth faces serious
doubt, and agrarian challenge even in the midst of surpluses has emerged as a core concern.
Farmers own land. Land is a powerful asset. And, that such an asset owing class of citizens has
remained poor is a paradox. They face the twin vulnerabilities of risks & uncertainties of
production environment and unpredictability of market forces. Low and fluctuating incomes
are a natural corollary of a farmer under such debilitating circumstances. While cultivation is
boundarised by the land, market need not have such bounds.
Agriculture is the largest enterprise in the country. An enterprise can survive only if it can grow
consistently. And, growth is incumbent upon savings & investment, both of which are a
function of positive net returns from the enterprise. The net returns determine the level of
income of an entrepreneur, farmer in this case.
This explains the rationale behind adopting income enhancement approach to farmers’ welfare.
It is hoped, that the answer to agrarian challenges and realization of the aim of farmers’ welfare
lies in higher and steady incomes. It is in this context, that the Hon’ble Prime Minister shared
the vision of doubling farmers’ income with the nation at his Bareilly address on 28th February,
2016. Further, recognizing the urgent need for a quick and time-bound transformation of the
ii
vision into reality, a time frame of six years (2016-17 to 2022-23) was delineated as the period
for implementation of a new strategy.
At the basic level, agriculture when defined as an enterprise comprises two segments –
production and post-production. The success of production as of now amounts to half success,
and is therefore not sustainable. Recent agitations of farmers (June-July 2017) in certain parts
of the country demanding higher prices on their produce following record output or scenes of
farmers dumping tractor loads of tomatoes & onions onto the roads or emptying canisters of
milk into drains exemplify neglect of other half segment of agriculture.
No nation can afford to compromise with its farming and farmers. And much less India,
wherein the absolute number of households engaged in agriculture in 2011 (119 million)
outpaced those in 1951 (70 million).Then, there are the landless agricultural labour who
numbered 144.30 million in 2011 as against 27.30 million in 1951. The welfare of this
elephantine size of India’s population is predicated upon a robust agricultural growth strategy,
that is guided by an income enhancement approach.
This Committee on Doubling Farmers’ Income (DFI) draws its official members from various
Ministries / Departments of Government of India, representing the panoply of the complexities
that impact the agricultural system. Members drawn from the civil society with interest in
agriculture and concern for the farmers were appointed by the Government as non-official
members. The DFI Committee has co-opted more than 100 resource persons from across the
country to help it in drafting the Report. These members hail from the world of research,
academics, non-government organizations, farmers’ organizations, professional associations,
trade, industry, commerce, consultancy bodies, policy makers at central & state levels and
many more of various domain strengths. Such a vast canvas as expected has brought in a
kaleidoscope of knowledge, information, wisdom, experience, analysis and unconventionality
to the treatment of the subject. The Committee over the last more than a year since its
constitution vide Government O.M. No. 15-3/2016-FW dated 13th April, 2016 has held
countless number of internal meetings, multiple stakeholder meetings, several conferences &
workshops across the country and benefitted from many such deliberations organized by others,
as also field visits. The call of the Hon’ble Prime Minister to double farmers’ income has
generated so much of positive buzz around the subject, that no day goes without someone
calling on to make a presentation and share views on income doubling strategy. The Committee
has been, therefore, lucky to be fed pro-bono service and advice. To help collage, analyse and
interpret such a cornucopia of inputs, the Committee has adopted three institutes, namely,
NIAP, NCAER and NCCD. The Committee recognizes the services of all these individuals,
institutions & organisations and places on record their service.
Following the declaration of his vision, the Hon’ble Prime Minister also shaped it by
articulating ‘Seven Point Agenda’, and these have offered the much needed hand holding to
the DFI Committee.
The Committee has adopted a basic equation of Economics to draw up its strategy, which says
that net return is a function of gross return minus the cost of production. This throws up three
(3) variables, namely, productivity gains, reduction in cost of cultivation and remunerative
price, on which the Committee has worked its strategy. In doing so, it has drawn lessons from
the past and been influenced by the challenges of the present & the future.
iii
In consequence, the strategy platform is built by the following four (4) concerns:
 Sustainability of production
 Monetisation of farmers’ produce
 Re-strengthening of extension services
 Recognizing agriculture as an enterprise and enabling it to operate as such, by
addressing various structural weaknesses.
Notwithstanding the many faces of challenges, India’s agriculture has demonstrated

remarkable progress. It has been principally a contribution of the biological scientists,
supplemented by an incentivizing policy framework. This Committee recognizes their valuable
service in the cause of the farmers. It is now time, and brooks no further delay, for the new
breed of researchers & policy makers with expertise in post-production technology,
organization and management to take over the baton from the biological scientists, and let the
pressure off them. This will free the resources, as also time for the biological scientists to focus
on new science and technology, that will shift production onto a higher trajectory - one that is
defined by benchmark productivities & sustainability. However, henceforth both production &
marketing shall march together hand in hand, unlike in the past when their role was thought to
be sequential.
This Report is structured through 14 volumes and the layout, as the readers will appreciate, is
a break from the past. It prioritizes post-production interventions inclusive of agri-logistics
(Vol. III) and agricultural marketing (Vol-IV), as also sustainability issues (Vol-V & VI) over
production strategy (Vol. VIII).The readers will, for sure value the layout format as they study
the Report with keenness and diligence. And all other volumes including the one on Extension
and ICT (Vol. XI), that connect the source and sink of technology and knowledge have been
positioned along a particular logic.
The Committee benefited immensely from the DFI Strategy Report of NITI Aayog. Prof.
Ramesh Chand identified seven sources of growth and estimated the desired rates of growth to
achieve the target by 2022-23. The DFI Committee has relied upon these recommendations in
its Report.
There is so much to explain, that not even the license of prose can capture adequately, all that
needs to be said about the complexity & challenges of agriculture and the nuances of an
appropriate strategy for realizing the vision of doubling farmers’ income by the year of India’s
75th Independence Day celebrations.
The Committee remains grateful to the Government for trusting it with such an onerous
responsibility. The Committee has been working as per the sound advice and counsel of the
Hon’ble Minister for Agriculture and Farmers’ Welfare, Shri Radha Mohan Singh and Dr. S.K.
Pattanayak, IAS, Secretary of the Department of Agriculture, Cooperation and Farmers’
Welfare. It also hopes, that the Report will serve the purpose for which it was constituted.
12th August, 2017 Ashok Dalwai

Chairman, Committee on
iv
About Volume IV
The fourth volume of the Report of the Committee on Doubling Farmers’ Income (DFI)
examines the status and reforms needed in the agricultural marketing system. A clear
differentiation is proposed between the system that facilitates marketing of agricultural produce
and the modes to connect the produce to markets. The latter is a physical function, and is
discussed in the first part of this volume. The former is the environment and the logic behind
that function, to guide and enable the ways that agricultural produce can realise optimal value.
The volume discusses the market network and system, which was earlier designed to address a
state of subsistence farming that existed prior to the period of about two decades. The distress
to farmers arises from production not finding markets. In appreciation of this issue as a priority
concern, a state of surpluses which causes an inverse relation between production and value is
discussed. Emphasis is given to enabling an environment that opens up to a larger number of
stakeholders to drive competition. The mere availability of market yards is not sufficient, and
to be effective, they must also serve to channel the produce of farmers and manage transactions
at other locations.
Considering the changing consumption patterns, this volume discusses the need for the system
to have a market-led approach and stimulate demand-driven production. This volume informs
of the requisite to provide demand based analytics. While price signals are important, they are
mainly ex-post facto signals, and the marketing system needs to also monitor demand. Demand
forecasts, will lead to planned production and a directed flow of produce. However, a cautious
policy is suggested before its full roll out can happen. Marketing as a support activity, should
enable farmers by contributing value added inputs, on what to produce, where to send their
harvest, and to administer their input and output costs accordingly. Such inputs will progress
the agriculture sector from a push mode into markets, towards servicing a pull from consumers.
The role of marketing is to be the key enabler to take agriculture sector beyond the function of
cultivation only, into the arena of business. This volume discusses various reforms to transition
the agricultural marketing system and also suggests the roadmap for a truly unified ‘National
Agricultural Market’ that is not only efficient but also effective, particularly for the small &
marginal farmers.
The following fifth & sixth volumes of this Report, discuss the sustainability concerns and
framework of agriculture, as it is critical to ensuring consistent and continued growth.
Ashok Dalwai
--- --- ---
v

Volume IV
“Post-production interventions:
Agricultural Marketing”
Contents
Foreword ............................................................................................................................ i
About Volume IV ..................................................................................................................... v
Why Marketing? .......................................................................................... 1
INTRODUCTION .......................................................................................................................... 1
OBJECTIVES OF MARKETING ......................................................................................................... 4
OUTCOMES FROM AGRICULTURAL MARKETING ............................................................................... 5
SUBSISTENCE TO SURPLUS FOOD ECONOMY ................................................................................... 6
ROLE OF MARKETING IN MONETISATION........................................................................................ 7
GOVERNMENT’S ROLE IN MARKETING............................................................................................ 8
TRANSITIONS IN THE MARKETING SYSTEM ...................................................................................... 9
ANNOTATION .......................................................................................................................... 10
Marketing Effectiveness & Market Efficiency.................................11
EFFECTIVE MARKETING SYSTEM.................................................................................................. 11
EFFICIENCY OF MARKETS ........................................................................................................... 13
IMPORTANCE OF EFFECTIVE & EFFICIENT MARKETS – THE COBWEB .................................................. 13
CONTAINING THE INEQUITY........................................................................................................ 14
INDICATOR OF MARKETING EFFICIENCY ........................................................................................ 16
CROP SPECIFIC EXAMPLES OF MARKET EFFICIENCY ......................................................................... 17
MARKETING POLICY .................................................................................................................. 20
ANNOTATION .......................................................................................................................... 21
Evolution of Agricultural Marketing .................................................23
MARKETING PERSPECTIVE.......................................................................................................... 23
HISTORICAL INTERVENTIONS IN AGRICULTURAL MARKETING ........................................................... 24
OPERATION FLOOD................................................................................................................... 27
MARKET SUPPORT BY GOVERNMENT ........................................................................................... 27
Regulation of markets................................................................................................................... 28
Input subsidies .............................................................................................................................. 28
Minimum support prices ............................................................................................................... 28
Food subsidies ............................................................................................................................... 28
FIRST STEPS TOWARDS LIBERALISATION........................................................................................ 29
Liberalisation of Control Orders .................................................................................................... 29
Model APMC Act 2003 and Rules 2007 ......................................................................................... 29
SOME NOTABLE CHANGES IN THE MARKETING SYSTEM .................................................................... 30
Direct Marketing ........................................................................................................................... 30
vi
Contract farming ........................................................................................................................... 31

Private wholesale markets ............................................................................................................ 32
Organised retailing ....................................................................................................................... 33
Farmer producer organisations (FPOs) ......................................................................................... 34
Cooperatives in agricultural marketing ........................................................................................ 34
Food & agro-processing ................................................................................................................ 34
CHALLENGES TO AGRICULTURAL MARKETING................................................................................ 35
NEED FOR NEXT LEVEL OF REFORMS ............................................................................................ 37
NEXT STEP IN REFORMS ............................................................................................................. 39
National Agriculture Market ......................................................................................................... 39
Firm push for robust reforms ........................................................................................................ 41
Other reforms needed ................................................................................................................... 44
STRATEGIC VISION .................................................................................................................... 44
ANNOTATION .......................................................................................................................... 45
Capture every Grain, every Ounce & every Drop ..........................47
ADMINISTERED PRICE VERSUS MARKET PRICE ................................................................................ 47
MARKETABLE SURPLUS ............................................................................................................. 48
Market demand for optimal value ................................................................................................ 49
VISION TO CAPTURE SURPLUS .................................................................................................... 50
VALUE CHAIN & SUPPLY CHAIN ................................................................................................... 51
Value chain analysis ...................................................................................................................... 53
New Market Architecture ......................................................................57

BACKGROUND ......................................................................................................................... 57
EXISTING MARKET ARCHITECTURE ............................................................................................... 58
APMC markets .............................................................................................................................. 58
Rural Periodical Markets ............................................................................................................... 59
DENSITY OF MARKETS ............................................................................................................... 60
Assessment of Gap ........................................................................................................................ 60
NEW APPROACH TO MARKETS ................................................................................................... 65
PRIMARY RURAL AGRI-MARKET (PRAM) CENTRES ........................................................................ 68
LOCATION AND FACILITIES ......................................................................................................... 70
Location ........................................................................................................................................ 70
Systems and Infrastructure ........................................................................................................... 70
NATURE OF PRAMS AND FUNCTIONS.......................................................................................... 70
Producer – Consumer markets ...................................................................................................... 70
Aggregation platforms .................................................................................................................. 71
Fund Requirement:........................................................................................................................ 71
OTHER ENABLERS IN AGRICULTURAL MARKETING .......................................................................... 71
Small farmers, small volumes ....................................................................................................... 72
Farmer producer organisations .................................................................................................... 73
Need to build FPOs/VPOs .............................................................................................................. 77
Scale up village level, farmer producer organisations .................................................................. 78
STABLE TRADE REGIME ............................................................................................................. 80
Agricultural Trade Policy to support farmers ................................................................................ 80
FUTURES TRADING ................................................................................................................... 81
vii
Integrating the physical, derivatives and input markets .......................................................... 83

ANNOTATION .......................................................................................................................... 84
MSP and Procurement ............................................................................87
PRICE SUPPORT IN AGRICULTURE ................................................................................................ 87
Making MSP more effective .......................................................................................................... 90
MARKET SUPPORT IN AGRICULTURE ............................................................................................ 90
Procurement Bouquet ................................................................................................................... 91
BROAD-BASING PRICE AND PROCUREMENT INTERVENTIONS - NEW INITIATIVES.................................. 93
Price Deficiency Payment Scheme (PDPS) ..................................................................................... 93
Market Assurance System (MAS) .................................................................................................. 94
Private Procurement & Stockist Scheme ....................................................................................... 97
Notifying a reserve price ............................................................................................................... 99
ANNOTATION ........................................................................................................................ 100
Warehousing ........................................................................................... 103
BACKGROUND ....................................................................................................................... 103
Current warehousing capacity .................................................................................................... 104
Brief assessment of warehousing capacity requirements ........................................................... 107
District level planning ................................................................................................................. 110
WAREHOUSE RECEIPTS SYSTEM (WRS) ..................................................................................... 110
Elements of a warehouse receipt system .................................................................................... 111
STRENGTHENING NEGOTIABLE WAREHOUSE RECEIPT SYSTEM (NWRS) .......................................... 115
PLEDGE LOAN SCHEME ........................................................................................................... 116
Pledge loan scheme implemented by different banks ................................................................ 117
Pledge loan by State Agricultural Marketing Departments/Boards ........................................... 118
Pledge finance by collateral security management agencies ..................................................... 120
Schemes for pledge financing against electronic warehouse receipts ........................................ 120
Interest subvention scheme ........................................................................................................ 121
Critical Assessment ..................................................................................................................... 121
STRENGTHENING WAREHOUSING AND THE PLEDGE LOAN SCHEME................................................. 122
ANNOTATION ........................................................................................................................ 123
Value System Partnership Platform ............................................... 125
NATIONAL AGRI-VALUE SYSTEM PARTNERSHIP PLATFORM............................................................ 127
OBJECTIVES AND SCOPE .......................................................................................................... 128
GOVERNANCE STRUCTURE ....................................................................................................... 129
BEGIN WITH 100 DISTRICTS ..................................................................................................... 132
FUNDING THE PLATFORMS ....................................................................................................... 132
OPERATIONAL GUIDELINES ...................................................................................................... 132
OUTCOMES FROM VALUE CHAIN INTEGRATION ............................................................................ 133
Supply, Demand and Price Forecasting ......................................... 135
INTRODUCTION ...................................................................................................................... 135
THEORETICAL UNDERPINNINGS................................................................................................. 135
CURRENT STATUS OF PRICE FORECASTING .................................................................................. 137
Agricultural outlook & situation analysis for food security ......................................................... 137
viii
Network Project on Market Intelligence ..................................................................................... 137

Project to forecast prices of major 19 agricultural commodities ................................................ 141
CASE STUDY - INITIATIVES BY KAPC........................................................................................... 142
Collaboration with Experts .......................................................................................................... 145
Collaboration with private sector ............................................................................................... 146
Web and Android based software .............................................................................................. 146
LIMITATIONS AND REMEDIES .................................................................................................... 146
Quality of Time Series data ......................................................................................................... 146
MEASURES TO IMPLEMENT MARKET INTELLIGENCE ...................................................................... 149
RESTRUCTURING DMI............................................................................................................. 149
Agricultural Trade Policy ................................................................... 153
INTRODUCTION ...................................................................................................................... 153
PRODUCTION VERSUS EXPORTS: A STATUS CHECK........................................................................ 154
Current export status ............................................................................................................. 156
India’s share in global markets .............................................................................................. 157
State level data on exports..................................................................................................... 160
AGRI-EXPORTS NOT COMMENSURATE WITH PRODUCTION: CAUSE AND EFFECT ................................ 160
Supply side constraints ........................................................................................................... 161
Demand side constraints (Trade Barriers) .............................................................................. 163
FRAMEWORK TO PROMOTE EXPORTS ........................................................................................ 168
Market intelligence ................................................................................................................ 169
Trade management ................................................................................................................ 170
Production cluster .................................................................................................................. 170
Trade agreements .................................................................................................................. 171
Impact of WTO ....................................................................................................................... 171
RESTRUCTURING OF AGRICULTURAL TRADE DEVELOPMENT ........................................................... 174
STRATEGY FOR AGGRESSIVE TRADE ........................................................................................... 175
NEED FOR A STABLE TRADE REGIME .......................................................................................... 176
Import restrictions .................................................................................................................. 176
Export limits ........................................................................................................................... 178
LONG TERM AGRICULTURAL TRADE POLICY ................................................................................ 178
ANNOTATION ........................................................................................................................ 179
Livestock and Fisheries Marketing ................................................. 181
BACKGROUND ....................................................................................................................... 181
LIVESTOCK PRODUCE AND PRODUCTS......................................................................................... 181
PRIMARY LIVESTOCK CONSUMPTION ......................................................................................... 182
STATUS OF MARKETING OF LIVESTOCK COMMODITIES .................................................................. 186
Marketing of live animals....................................................................................................... 186
Marketing of livestock products ............................................................................................. 188
Marketing produce of live animals......................................................................................... 193
INTERVENTIONS IN LIVESTOCK MARKETING................................................................................. 203
NCDFI eMarket - Digitalization of dairy cooperative trade .................................................... 203
Markets and online trading in livestock and produce ............................................................ 206
FISHERIES MARKETING ............................................................................................................ 209
Status of the fish processing Industry .................................................................................... 209
ix
Status of domestic fish marketing .......................................................................................... 210

Value to fishermen ................................................................................................................. 212
INSTITUTIONAL SUPPORT FOR FISH MARKETING (DOMESTIC / EXPORTS) ......................................... 212
National Fisheries Development Board .................................................................................. 212
Marine Products Exports Development Authority (MPEDA) .................................................. 213
ANNOTATION ........................................................................................................................ 214
Nutrition led marketing ...................................................................... 217
CONTEXT .............................................................................................................................. 217
CHANGED AWARENESS FOR A CHANGED FOOD PLATE ................................................................... 217
HEALTH IMPLICATIONS OF CONSUMER HABITS ............................................................................. 219
EXAMPLES OF UNEXPLOITED NUTRITION ..................................................................................... 223
INFLUENCING DEMAND, FROM THE CONSUMERS PLATE TO FARM.................................................... 226
INTERVENTIONS TO EDUCATE ON FOOD CHOICES .......................................................................... 228
ANNOTATION ........................................................................................................................ 231
Recommendations ................................................................................ 233
SYNOPSIS .............................................................................................................................. 233
RECOMMENDATIONS .............................................................................................................. 233
References ...................................................................................................................... 237
Annexures ...................................................................................................................... 239
Index of Figures
Figure 2.1 Cobweb relationship ............................................................................................................................ 14
Figure 2.2 Price Dispersion at farmgate - select crops ......................................................................................... 16
Figure 2.3 Price wedges between farmgate and wholesaler ................................................................................. 18
Figure 2.4 Price wedges between wholesaler and retailer .................................................................................... 20
Figure 3.1 State-wise licenses issued for Direct Marketing .................................................................................. 31
Figure 3.2 State-wise progress of Contract Farming ............................................................................................ 31
Figure 3.3 State-wise progress of private market ................................................................................................. 33
Figure 4.1 Illustrative of Demand-Value mismatch ............................................................................................. 48
Figure 4.2 Range of system-wide activities & items for analysing the integrated value chain ............................ 54
Figure 5.1 Existing market structure – which enforces an intermediary exchange at every stage ........................ 58
Figure 5.2 PRAMs as foundation of market structure will generate a directed flow of trade ............................... 66
Figure 5.3 Primary Retail Agri-Market centres to organise village level handling .............................................. 68
Figure 5.4 PRAM in the hub and spoke logistics network ................................................................................... 69
Figure 5.5 FPO model of market connectivity...................................................................................................... 76
Figure 5.6 City-proximate farms and marketing operations ................................................................................. 76
Figure 7.1 Components of a Warehouse Receipt System ................................................................................... 111
Figure 8.1 Synergising value chain interventions with GOI priorities ............................................................... 126
Figure 9.1 Price Forecast Training Using Historic Data .................................................................................... 143
Figure 9.2 Price Forecast, MSP, and Cost .......................................................................................................... 143
Figure 9.3 Arrival Seasonality Index .................................................................................................................. 144
Figure 9.4 Price, Costs, MSP and Arrival Seasonal Index Superimposed .......................................................... 144
Figure 10.1 Supply and demand side issues ....................................................................................................... 161
Figure 10.2 Circle of inefficiencies hurting agri-export potential ...................................................................... 162
x
Figure 10.3 Managing the export supply chain .................................................................................................. 169

Figure 11.1 Meat consumption trends in India (OECD-FAO data) .................................................................... 183
Figure 11.2 Trends in mutton consumption (per capita annual) ......................................................................... 184
Figure 11.3 Trends in chicken consumption (per capita annual) ........................................................................ 184
Figure 11.4 Trends in Egg Consumption (per capita annual) ............................................................................. 185
Figure 11.5 Trends in milk consumption (per capita annual) ............................................................................. 185
Figure 11.6 Trends in milk consumption (per capita annual) ............................................................................. 185
Figure 11.7 Milk production and corresponding Growth Rate ........................................................................... 193
Figure 11.8 Share in milk production by species (2016-17) ............................................................................... 193
Figure 11.9 Egg production and corresponding Growth Rate ............................................................................ 196
Figure 11.10 Share in egg production – backyard and commercial (2016-17) ................................................... 196
Figure 11.11 Eggs market chain ......................................................................................................................... 197
Figure 11.12 Egg exports from India (numbers in crore eggs) ........................................................................... 199
Figure 11.13 Wool production and corresponding Growth Rate ........................................................................ 200
Figure 11.14 Wool Production by animal source (2016-17) .............................................................................. 200
Figure 11.15 NCDFI eMarket Forward Auction process ................................................................................... 204
Figure 11.16 NCDFI eMarket Reverse Auction process .................................................................................... 205
Figure 11.17 Trends in fish consumption (per capita annual) ............................................................................ 210
Figure 12.1 Anaemia in Children ....................................................................................................................... 219
Figure 12.2 Underweight in Children below 5 years - Weight for Age .............................................................. 220
Figure 12.3 Overweight or Obesity in Women ................................................................................................... 221
Figure 12.4 Overweight or Obesity in Men ........................................................................................................ 222
Figure 12.5 Food Pyramid for Indians ................................................................................................................ 229
Index of Tables
Table 1.1 Five major transitionary stages witnessed in Indian agriculture ............................................................. 9
Table 3.1 Major Policy Interventions in marketing .............................................................................................. 24
Table 3.2 Milk Production and share in market channels ..................................................................................... 27
Table 4.1 Surplus occurs at each stage in marketing ............................................................................................ 48
Table 4.2 Breakup of sources to capture the 100 per cent of surpluses ................................................................ 50
Table 4.3 Range of value capturing activities and items by actors in the larger value system ............................. 53
Table 5.1 Basic data on marketing linked information from major States - ......................................................... 61
Table 5.2 Comparative market coverage by States – across all market types....................................................... 62
Table 5.3 Market Density Assessment ................................................................................................................. 64
Table 5.4 State-wise land holding patterns ........................................................................................................... 72
Table 5.5 State-wise number of FPOs promoted by SFAC .................................................................................. 74
Table 6.1 Percentage margin of profit on A2+FL for the year 2016-17 ............................................................... 88
Table 6.2 Status of production, marketed surplus and procurement for the year 2016-17 ................................... 97
Table 7.1 Total Warehousing capacity available ................................................................................................ 104
Table 7.2 Warehousing created under ISAM scheme......................................................................................... 105
Table 7.3 Marketed Surplus estimated for major crops for storage requirement ................................................ 107
Table 7.4 MSR of various crop types ................................................................................................................. 108
Table 7.5 Marketed surplus, distribution, warehousing assessment ................................................................... 109
Table 7.6 Number of warehouses registered with WDRA ................................................................................. 112
Table 7.7 Pledge finance against produce stored in State Warehouse Corporations in different states .............. 118
Table 7.8 Pledge finance against produce stored in Central Warehouse Corporations in different states .......... 118
Table 7.9 Pledge finance provided by APMCs in different states ...................................................................... 120
Table 7.10 Pledge finance provided by collateral manager NBHC .................................................................... 120
Table 10.1 India global status in production ....................................................................................................... 155
xi
Table 10.2 Production versus Exports: India’s status versus World ................................................................... 156
Table 10.3 Trade balance in APEDA monitored products during 2016-17 ........................................................ 156
Table 10.4 Export of APEDA products .............................................................................................................. 157
Table 10.5 India’s share in global Imports ......................................................................................................... 158
Table 10.6 Global position of India’s agro exports ............................................................................................ 159
Table 10.7 Examples of Indian exports facing high tariff peaks ........................................................................ 163
Table 10.8 Tariff escalation in major importing regions .................................................................................... 164
Table 10.9 Examples of green box measures...................................................................................................... 173
Table 11.1 Livestock Population in India (in million) – Livestock Census, 2012 .............................................. 182
Table 11.2 Export of carabeef and poultry (2016-17) ........................................................................................ 189
Table 11.3 Export of small ruminants, processed meats, casings (2016-17) ...................................................... 189
Table 11.4 Egg wholesale price (monthly average over 5 years) - Rs per 100 pieces ........................................ 198
Table 11.5 Raw wool imports by India............................................................................................................... 201
Table 11.6 Dairy Auctions on NCDFI eMarket.................................................................................................. 204
Table 11.7 Overview of Reverse Auctions on NCDFI eMarket ......................................................................... 205
Table 11.8 Quantity of ornamental fish sold in selected markets of India (2015) (In lakhs) ............................. 211
xii
Why Marketing?
All produce - every grain; every ounce; every drop - from agriculture sector must find gainful end-use.
Demand-driven production of agricultural produce, rather than production-propelled marketing, is the
need of the day now. India is one of the largest markets for agricultural produce and markets need to
function as a unified platform to make all consumers accessible to all the farmers in the country.
Introduction
There are often overlaps and ambiguities in the expectations from agricultural marketing and
its outcomes, both as a system of governance and as a function of business. India has seen a
transition in agricultural marketing, from the period of subsistence farming, to one which is
developing into a surplus food economy. The scope of agricultural marketing, its role in
monetisation of agriculture produce and the creation of value from delivering relevant flow of
market information, for farmers to be demand linked in all their farming and post-production
activities are discussed in the volume.
Agricultural marketing as a term, is used to refer to different facets, as an academic study, as a

function of the supply chain, as well the marketing regulations and associated policy. In actual
application, the core function of providing market intelligence is frequently overlooked,
consigned to providing information on market status only.
As an academic discipline, “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”.1 In developing countries, it is
understood to compose of product marketing and input marketing. The actors in product
marketing include farmers, traders, wholesalers, processors, importers, exporters, marketing
cooperatives, regulated market committees and retailers.
Marketing is also defined by Philip Kotler2 as a human activity directed at satisfying the needs
and wants through an exchange process. The American Marketing Association defines
marketing as the performance of business activities that directs the flow of goods and services
from producers to users. Emphasis is drawn to the qualifying function to direct the flow of
goods from producers to meet the demand from users. This direction comes from understanding
the consumer, converting such information into demand matrices and standards, and sharing it
as market intelligence with producers, to deploy the relevant means to execute the exchange.
The term agricultural marketing, is conversely, used indiscriminately to infer an umbrella label
that comprises all the activities involved in the supply of farm inputs and output - including all
those operations which are related to the procurement, collecting, grading, storing, food and
agro-processing, transportation, financing and selling of the agricultural produce. In effect,
1 Agricultural Marketing in India, SS Acharya & Agrawal, 6 th Edn 2016

2 Marketing Management: Analysis, Planning and Control, Kotler 1972
1
marketing is imagined to include all overarching aspects of agribusiness, while excluding the
core activity of cultivation. This all-encompassing interpretation actually covers the full range,
of pre-production and post-production functions; the input and output supply chain, agri-
logistics, food & non-food processing, distribution, retailing, etc., of all agribusiness.
Nonetheless, each is a specialised sector, some even assigned the status of industry. On the
other hand, the market demand analytics and associated information that inter-connects these
business operations, and a core function of marketing as a service, has largely been neglected.
Although, as an academic subject, the study of agricultural marketing may embrace all topics
of the supply chain, the intention of such study is to arrive at an understanding of the physical
flow of goods to and from farms. This operational understanding is for the purpose to ensure
that marketing services, can be pragmatic when providing market information and intelligence,
and be relevant in guiding the material flow. This market intelligence normally flows
backwards from fork-to-farm, in making the output supply demand-linked. These tenets of
come into play when an individual opts to start any venture for any commercial purpose.
For a farmer engaged in an agricultural enterprise, both input and output marketing determine
the net income from the venture. The comparatively higher growth rate in production, implies
that inputs to farms have, in contrast, been systemically marketed. The ongoing food losses,
coupled with inflationary pressure on most output and food items, indicates that output
marketing has not kept pace with production. The output from farms has not met equal and
necessary support from agricultural marketing in India. As a result, though the inputs find
farmers as ready consumers, the output is unguided in finding optimal value. The farmer is
effectually a bad purchaser of the inputs, as well a poor seller of his/her outputs.
Marketing in the agricultural value system implies both input and output marketing. Input
marketing uses information that will lead to evidence based planning for the timely and
reasonable supply of seeds, fertilizers, plant protection technologies and other equipment and
machinery that contribute to farming. Output marketing starts when the produce attains a form
in which it could be collected for further economic purposes and exploitation.
This volume lays emphasis on output marketing, while input marketing will be discussed in
the later volumes dealing with production and productivity.
The farmers’ produce is evacuated through market places that act as a platform for exchange.
Prior knowledge about consumer demand, across regions, is critical to develop efficiency in
the sourcing, supply and distribution across the country. This is also influenced by various
economic considerations, and on the technical and logistical capabilities to connect the
produce, involving post-production activities of aggregation/assembly/pooling, sorting/
assaying/testing, transportation, food/agro-processing, storage, distribution and retail.
Marketing, as a support function, helps to direct the other activities, for greater optimisation of
the costs involved and for improved value realisation.
2
To make the agricultural enterprise cost-efficient, and to achieve desired growth, the foremost
input relates to understanding of the past, current and future demand for each agricultural
produce - which is the purposeful role of all marketing.
For the purpose of this volume of the report, discussions on marketing will therefore also refer
to providing intelligence and information that helps to direct the supply of agricultural produce
to consumers in sufficient quantity, at the time and place, as needed by them. Two main
scenarios emerge from a failure in this function;
a) when the marketing system fails to provide such relevant information of demand, any
growth in production has little value and little contribution to farmers or society;
b) further, if the surplus produce does not move to the appropriate markets and bring
additional revenue to farmers, the situation is a disincentive for future production.
Understanding the market, means comprehensive forecast of demand by locations, compliance

with food safety and applicable standards, acquiring new consumers to support farming growth,
observing applicable rules and monitoring regulatory changes. While the activities to take the
produce to market, are driven by enterprises and supported through Ministries and agencies for
their infrastructural needs, the essential backing of information on demand and the freedom to
trade, is frequently observed to be incomplete in India.
The Agricultural Marketing System refers to other governmental systemic interventions in

rules, regulations and policy. From a governance perspective, marketing as a system, will
include reforms to enhance farmers’ access to a unified market, formulation of standards and
adherence to food safety standards. The government also regulates the flow of goods, to and
from farms, and therefore maintains a role to provision the related market infrastructure and
provide the other basic enabling infrastructure for agri-businesses to flourish. The agricultural
marketing system therefore also relates to economic growth of the agriculture sector and
ensuring safe and affordable food to consumers, both of which are directly linked to the food
security of the country. Managing the agricultural ecology and the impact on the climate, are
other matters of concern that relate to the agricultural marketing system.
Since the agricultural markets in India are regulated, the agricultural marketing system is,
therefore, a meld of government support mechanisms for marketing infrastructure, rules and
regulations. Marketing is a specialised service that provides market demand analytics and
information, to guide the farmers’ production and expedite other post-production activities, for
meeting the desired outcomes.
The National Commission on Agriculture (1976), as well the National Commission for Farmers
(2006), had emphasised that it is not sufficient to produce a crop or animal product; it must be
marketed so as to return value to the producer. Increased production resulting in greater
marketable surplus, is complemented by increase in demand from the population. However,
the surplus produce does not always find a suitable market, leaving demand unsated. This
situation of surplus conjoined with unfulfilled demand, necessitates a rethink on the agricultural
3
marketing system in the country. The discourse on marketing needs to be about how it
contributes to the supply chain, and not as an outlier of the integrated value chain system.
Objectives of Marketing
The report of the National Commission of Agriculture (1976), discussed agricultural marketing
in Part XII of its fifteen part report (under supporting services and incentives).
The Commission stated that the objectives of an efficient marketing system, are3:
(a) to enable the farmers as primary producers to reap the best possible benefits;
(b) to provide facilities for lifting all the produce the farmers are willing to sell, at a price
incentive;
(c) to reduce the price spread between the primary producer and ultimate consumer; and
(d) to make available all products of farm origin to consumers at reasonable price without
impairing the quality of the produce.
A recent addition to the objectives of agricultural marketing, is to contribute to the doubling

the famers’ income by 2022-23.
After almost 40 years, although the basket of produce has changed shape and the technologies
have altered the way goods and information are moved, the above objectives continue to remain
relevant. Nevertheless, in 2017, marketing is no longer an afterthought and has far greater
prominence, tending to supersede all other interventions in priority. Marketing is now the
forethought to develop agriculture into sustainable agri-business.
As a corollary, the marketing system has greater responsibility to deliver relevant flow of
market information, for farmers to be appropriately demand linked in all their farming and
post-production activities. Without associated demand information, farmers will seek cost plus
pricing rather than optimal demand linked value for their produce. The information from the
marketing plays two crucial roles to empower the producers capable of producing marketable
surplus. The first, by providing them with relevant demand linked information on desired
quality, standards and specifications of the produce. The second, to provide information that
helps the supply chain to become efficient by functioning to service a pull mode into markets.
From the perspective of doubling farmers’ income, market linked farming, investment in the
supply chain, market expansion and minimising losses are the desired outcomes from
agricultural marketing policies. These outcomes can help affect a transformation in the income
status of farmers.
3 Report of the National Commission on Agriculture, 1976
4
Outcomes from Agricultural Marketing

Agricultural Market networks were originally conceived to channelise the production of
foodgrains, fibre crops and spices, and for regulating their trade. This originated at a time of
deficit production and the marketing infrastructure was accordingly designed into handling
yards and bulk warehousing networks, and did little to encourage direct participation of farmers
with other new marketing opportunities. The new opportunities came from crop diversification
and changed consumer preferences, which resulted in a value and volume shift, away from the
original set of targeted crops.
The consumer demand shows a marked preference and growth in diary, fruits, vegetables,
poultry and meats, each with a distinctive mechanism for their supply chain and marketing
requirements. Future market development intervention, will need to cater to the full basket of
agricultural produce. The value and market linkage will be differentiated for this varied
produce basket, compared to the earlier focus on foodgrains and fibre crops.
The result of a good marketing system are several, but some desired common outcomes are:
i. Monetising the Produce: marketing facilitates the sales of agricultural products. The
monetised exchange or sales transaction of goods, is a result of the value assigned to
the quantity of produce being exchanged. The value is factored by the demand and
supply status, which in turn is impacted by the marketed volume and the asking price.
The monetisation of the agricultural produce is very important as it integrates
agriculture with the national economy and contributes to the GDP. Hence, intelligence
on market demand to establish quantity and quality, as well as transparent price
discovery is necessary to outcome the equitable monetisation of the farmers’ produce.
ii. Demand Signal Platform: Barring cases where demand is artificially buttressed,
marketing systems have purpose to balance the demand with supply. The bridge in the
form of agri-logistics, function to execute this purpose. The sum value realised and even
the unit price of goods being exchanged for money, depends on this balance. The
balance depends on the quantity being supplied and the total cost of supply. When this
balance results in a price point that is higher than the total cost of supply (production
plus logistics), the ensuing margin is shared by the stakeholders involved in the supply
chain. Misinterpreting the demand results in either making the product too dear, which
impacts by lowering the offtake, or by feeding a glut like situation to impact the unit
price downwards. Unchecked, both scenarios result in reduced value and wasted efforts.
Moderation of demand supply gaps is a desired outcome of marketing.
iii. Market growth: India’s agricultural environment is transitioning from a state of deficit
towards a status of surpluses. This has been mainly brought about on the back of
intensive farming efforts, inducting new technologies, improved seeds and planting
materials, better irrigation, etc. The market realities have also changed due to increasing
liberalisation, privatisation and globalisation, as well changes in consumer preference.
Agri-logistics technologies have also modernised to allow farm produce to connect with
5
demand further afield. These are opportunities to grow the markets in size and diversity.
An aware and competitive marketing system, will attune itself to suit this evolution in
India’s agriculture, and adjust to capture and exploit new markets. The opening up of
the markets to promote competition and long term growth as a desired outcome.
iv. Capital formation and investment in technology: Marketing is no longer a simple

activity of arranging the assembling of produce at an open yard and finding ready takers
for the value assembled. The produce being output, the quantity being collected, the
distance to secondary user or consumption market and aspired quality of produce,
stipulate unique demand on the type of facilitation needed from the logistics chain. As
marketing gets more effective and determines the specifics to meet its objectives, it will
generate the need for investment in modern supply chain infrastructure, and in suitable
information technologies. An effective marketing system also involves the flow of
information to guide the cropping cycles, and therefore, also has a role in incentivising
the use of technology across the full range of farming practices. The outcome is added
investment in agriculture allied activities and job creation.
As the country advances in its economic development, there are discernible shifts in
consumption patterns. Agricultural marketing can assist to tap into these changes and enlarge
the market range of farmers, provide inputs to guide associated policies, such that it inspires
the development of economies of scale, both in production and the post-production activities.
Subsistence to Surplus Food Economy

A few decades ago, in 1970, when the National Commission on Agriculture was constituted,
agriculture had a more dominant role in the Indian economy, contributing nearly half of the
national income, and providing employment to about 70 per cent of the working population.
The country had emerged from a state of high food insecurity in the mid-1960s. The period of
insecurity, brought immense attention on regulating the agricultural markets, not only to protect
the farmers and provide an environment of fair trade, but to monitor and control the status of
production and availability of foodgrains. The marketing system and government interventions
were thereby devised with the agenda to give impetus to agricultural production, to regulate
the supply of food and to assure the country its food security.
This was achieved through policy measures, initially adopted in the mid-1960s, such as input
subsidy, minimum support price, public storage, procurement and distribution of foodgrains,
trade protection measures and regulation of markets. The policy interventions from 1960s, were
primarily meant to avert situations which may again lead to a deficit.
At a time of sustained deficit, it was obligatory to regulate, to control and monitor the
production and the flow of food across the country. Comparison is recalled from times when
supply of cement and rubber was in deficit, and it was common practice for the government to
regulate the supply of these items, to prevent monopolistic marketing and other unfair practices.
However, these controls were done away with, once the supply side was developed, and the
market was freed to function in an open and a competitive environment.
6
India’s agriculture has travelled a long way from a period of subsistence farming to that of
surplus output, calling for a paradigm shift in the earlier stance taken with the agricultural
marketing system. It emerges that agriculture markets, established in 1960 to handle a situation
of deficit production, are now inefficient in handling marketable surplus efficiently. The
marketing system needs to promote alternate concepts, e.g. provisioning of alternative market
channels, participation of private sector, using e-platforms for market expansion and enabling
a stable and farmer friendly market environment.
Compared with the production at the start of the 1960s, India now harvests 40 times as much
tomato, 14 times more potato, 8 times more wheat, thrice as much in poultry and meat, 13 times
more fish, 8 times more milk and almost 40 times more eggs. The scaling up of our food
production far surpassed the growth in population – in comparison, the population grew only
2.9 times, from 460 million in 19614 to an estimated 1325 million in 20175.
The agriculture marketing system is needed to help the agricultural sector to adjust to this
changed scenario, from a marketing environment that was designed for a time of subsistence
to one where marketing of surpluses is required. Volume-I of this report, shows historical
trends in production of a wide variety of agricultural produce.
Role of Marketing in Monetisation

In India, as late as 1960, it was estimated that at least one third of India’s agricultural production
and about one fourth of its Gross National Product (GNP) was non-monetised6. It is well known
that subsistence farmers sell a part of their output to enable themselves to buy a few necessaries
and to carry out other minimum money payments. They also sell their labour, however, with
the same purpose in mind. In subsistence farming system there is low marketable surplus due
to which exchange function is stunted. The absence of income or savings had made agriculture
a non-monetised sector in pre-1960's.
However, the situation changed in the post green revolution phase. Market infrastructure in
agricultural markets, policies and institutes were developed so as to facilitate the sale of farm
produce, and these market yards became the first point of monetisation. Agricultural markets
geared up to play an exchange function, with the agenda to allow agriculture become a profit
oriented commercial activity. The flows and interconnections that interplay in agri-markets can
be summarised as follows:
 The flow of agricultural produce, mediated by transportation, storage, processing, etc.

 The flow of money, reconciled though cost, price, income, margin, saving, credit, etc.
 The flow of information on demand, manifested in quality, volume, specifications, etc.
These will transpire through a series of coexisting activities that are undertaken by a range of
4 Census India, 1961

5 MoSPI, 2017
6 The Role of Marketing in Economic Development of Developing Countries, Alex N. Ifezue (2005)
7
operators. A field research in the region of Coimbatore, in early 1980s by Harriss-White7, found
a total of 51 different activity combinations, among 149 “marketing” firms. The activities like
buying, selling, brokering, transport, packaging, grading and processing are the operating links
of the value chain system, resulting in the tangible flows and the fungible exchanges.
Monetary exchange can be directed through instrumented arrangements such as vertically

linked contract farming, leased farming, commodity futures, or horizontal access to multiple
spot markets. Each is an opportunity option, decided by capabilities of the interacting farmers
and consumers of the produce. The transactions can be initiated by individual farmers, farmer
groups such as cooperatives, FPOs, associations, industrial farms, etc.
Since a market is intended to function as an exchange, where goods are monetised, any
monopolistic arrangements need to be warded off. The marketing system, therefore, needs to
open up the markets to generate greater competition and transparency for the benefit of farmers.
To monetise agricultural products, the marketing system has to be effective, so as to promote

transparency and cross-stakeholder linkage, such that each related activity can be performed
efficiently. An effective marketing system needs to be responsive to changed dynamics, and
streamline the flows that relations between input suppliers, farmers and consumers. As
production sees enhancement through productivity measures, the marketing system is seen
having a major role in enhancing income of farmers.
Government’s role in Marketing

From the perspective of the government, agricultural marketing has a role to make production,
supply and trade of agricultural produce sustainable, economically beneficial and equitable.
The added objective of securing the nation’s food, also makes the government a buyer of
produce, and this too has an impact on how agriculture progresses.
The marketing system had focused on informing market price (status) and not on market
intelligence (demand forecast). At a national level, the government can also provide market
intelligence as a service, as well as tweak its regulations to expand the market footprint of
farmers, internally and internationally. Impetus to streamline and grow agricultural trade will
showcase that India can be the forerunner that breaks the trend, that economic development
dilutes the business of farming.
Agriculture can be the core service of India, provided that policies and information flow
emphasises on linking agriculture with markets, expands the range of markets and makes the
market channels compete for tapping into the Indian farmer.
With agriculture having gone through various transitions in its development, the policies of the
government also require to adapt to the changed scenario in agricultural marketing.
7 Three roles of Agricultural markets, Economic and Political Weekly, Vol KLVII no. 52, Harris-White, Ali Jan (2012)
8
Transitions in the Marketing System

Along with a transition of agriculture, the Agricultural Marketing System has also evolved to
a certain level.
Table 1.1 Five major transitionary stages witnessed in Indian agriculture

Phase Status and Approach Remarks
 Improved food security through agrarian
Status: Deficit in food production reforms & large scale investment in
irrigation and power.
Phase I : Pre-Green
Approach: Marketing system  Enacted Zamindari Abolition Act (1950)
Revolution Period (1950-65)
designed to handle deficit, regulate - organise agriculture and animal
trade and manage food security. husbandry on modern-scientific lines,
abolish begari
 Advent of Green Revolution
(distribution of high yielding varieties)
 Number of important institution set up
Status: Self Sufficiency in Food
during 1960 and 1970 (Food Corporation
grains, start of ‘Operation Flood’
of India, CACP, CWC and State
Phase II : Green Revolution
Agriculture Universities
Period (1965-80) Approach: Marketing system to
 Nationalisation of Commercial Banks
incentivise output and manage its
distribution through procurement.  NABARD and Regional Rural Banks
(RRB) established
 Cooperative Credit Societies
strengthened
Status: Diversification  Diversification towards high value
produce
Phase III: Post-Green
Approach: Expansion of  Focus on commercial horticulture,
Revolution Period (1980-91)
technology to other produce types setting up of Coconut Development
and regions Board and National Horticulture Board
Status: Approaching surplus  Improving the functioning of markets
and liberalising agriculture trade.
Phase IV: Economic Approach: Liberalisation and  Model APMC Act 2003 to increase
Reforms Period (1991-2015) toward greater international private sector participation in marketing
market access and processing.
 Signing of AOA of WTO
Status: Food Secure but problem  Electronic National Agricultural Market
Phase V: One nation, One
of plenty emerges  Model APML Act 2017 allowing for
market, One tax
operation of alternate markets and
ICT enabled marketing
Approach: Towards a National unified national markets
(2015 onwards)
unified market  GST roll out, streamline inter-state trade.
The Agricultural Marketing System in the country, had for a long period, mainly focused on
market infrastructure and regulations, where strategic strengthening of the distribution and the
supply chain network for agricultural produce was largely ignored. Farmers were provided
options to off-load their produce at the nearest market yard, while the option and ability to
directly connect with markets farther afield was not part of the strategy.
However, markets are moving in a direction where greater private sector participation is
envisioned, as well as in other supply chain infrastructure. To strengthen private sector
operations, the marketing system needs to divert attention on its own key role. This role is to
manage and inform the quantitative demand from markets, in advance of final price discovery,
9
so as to make the other functions more demand linked and be efficient.
Annotation
The reasoning behind marketing requires a rethink, to move away from overseeing the flow of
produce (from farm-to-consumer), towards a function that underlines the flow of market linked
information (from fork-to-farm), to guide and mentor the market and logistics networks to
efficiently handle surpluses that are generated.
Agricultural marketing entities have focused on informing market price (transaction status) and
not much on market intelligence (demand forecast). Marketing as a service requires to provide
both intelligence and information, to allow producers to adjust to the changes taking place in
the external market environment, to make farming market linked and economically sustainable.
The Agricultural Marketing System incorporates government policies and strategies, for
enabling efficiencies in the supply chain activities for agricultural produce. The marketing
system, needs next level reforms to give impetus to modernise the markets, expand upon the
market network and promote more market linked activities at village level.
Agricultural marketing as a system has the main objective to catalyse and support the monetary
exchange from farm produce, to organise the commerce that a farmer commences upon,
starting from when the farmer plans to sow the first seed. The agricultural marketing system of
the government, must adopt market intelligence as a function, to provide scheduled marketing
inputs to all stakeholders, as an important and ongoing undertaking.
Key Extracts
 Marketing is a vital role as a link mechanism, between producers with consumers.
Marketing function is intended to direct the flow of goods to crystallise demand, for
productive effectiveness & efficiency of agriculture as a business.
 Marketing systems function through policies to build competitiveness with in-built
mechanism to reduce monopolistic and oligopolistic operations.
 Marketing policies are expected to create an enabling environment for varied
instruments such as contract farming, farmer producer companies, direct marketing,
futures market, etc.
 The agricultural marketing system needs to be revisited on the basis of efficiencies
achieved and its effectiveness, keeping in mind the larger produce basket.
10
Marketing Effectiveness & Market Efficiency

Effectiveness and efficiency – Being effective is about doing the right things to pursue purposeful goals,
while being efficient is about doing these things right in a gainful manner for maximum productivity.
Effective Marketing System

The changes in the agrarian environment in India, requires an associated adjustment to the
goals pursued by the marketing system. A mind-set shift, from facilitating and protecting
agricultural trade at predefined locations readily accessible to farmers, towards one that
expands the market ecosystem, encompasses a wider array of participants and empowers
farmers to access locations further afield is required.
The farmers no longer cater to just the local demand as their produce is channelled to
populations remote from production areas. Whereas earlier, a marketing system was considered
effective if it provided for market yards and transactions within immediate range of farms, the
yardstick today needs to include, the interconnectivity between markets and the value
dispersion between farms and consumers.
An effective marketing system is not deterred by operational inefficiencies in the flow of

produce, but counters those inefficiencies by the effective dissemination of market intelligence
(demand) and information (price), and by easing the rules and regulations to promote more
relevant and responsive supply chains.
The effectiveness of an agricultural marketing system will vary depending on the situation of
the target regions, consumer, product and technologies in hand. Besides, global factors can
come into play for certain commodities, where forecasting and pre-empting factors outside of
own region is also expected to contribute to marketing effectiveness.
From perspective of enhancing farmers’ income, to demonstrate the efficiency and

effectiveness of the marketing system, the specific goals and factors to adopt can be as follows:
Demand signals to supply side – a well organised marketing system will communicate
backwards from Fork-to-Farm, in advance to production, such that the entire supply chain
will function to service the forecasted demand. Market intelligence, on basis of past trends
and predictive analysis is a key driver, especially in times of undirected surplus production.
An effective marketing system will strive to minimise the blind push into markets and
instead promote a pull mode from markets.
Increase in revenue generation – a well organised marketing system will increase the
sum total of revenue generated in the agricultural value chain system. An effective
marketing system will also aim to persuade that there is more equitable sharing of the net
revenue generated, among all the stakeholders in the value chain system.
11
Market expansion rate – organised marketing will always seek to open markets and
support extensive supply chain networks. Agricultural trade, when encompassing cross
regional demand and supply, results in providing a stabilising influence on the economics
involved. The effective marketing system will always promote the expanding of the market
range of the producer/supplier and provide a choice of purchase for the buyer. Market
expansion also boosts vibrancy in domestic agricultural trade.
Unified market – a well organised domestic marketing system will integrate by

developing extensive connectivity across a network of demand centres and supply regions,
creating uniformity in the market arena. Treating the country as one market is essential.
Effective integration of the marketing system would reduce price dispersion across the
country (variation in prices across sellers of the same item), especially that which occurs
due to regional demand inconsistency. A unified market dampens value fluctuations.
Increased competitiveness – a vibrant marketing network will create a competitive

market environment. Transparency and optimal price discovery is a major consequence
from competition, which is one of the aims of effective markets. Competitiveness also
leads to improved resource optimisation and brings about cost efficient practices. An
effective market system, therefore leads to efficiency in output marketing, and measures
would include food loss, cost of holding inventory, inventory-turn ratios, etc., and
profitability.
Facilitate selling channels – an effective marketing system would create alternate market
channels to widen the consumer base. The agricultural market yards currently function as
singular transaction points. A primary transaction with farmers happens at first instance,
with no option of facilitating the sale at another market location. No option is available to
a farmer at these yards, to avail marketing services to do a transaction at another market
location or channel (e-commerce, institutional, etc.). Therefore, a marketing system is
effective if it promotes multiple selling or market options.
The National Commission on Farmers (NCF), constituted in 2004, had recommended a single
market for farmers. The Commission also recommended that agricultural marketing be placed
on the Concurrent List. The NCF further stated that marketing, storage and processing of
agricultural produce needs to shift to one that promotes grading, branding, packaging and
development of markets for local produce, domestic and international. The distinction made is
that the marketing system needs to become effective though developing better post-production
care and open options to access and connect with new market channels.
Marketing effectiveness is a matter of strategic intent, whereas, the factors to assess efficiency
are a measure of operational or tactical results.
12
Efficiency of Markets
Markets are operational hubs where the consolidated movement of goods from producers to
consumers is initiated. The main objective of these operations is to fulfil the physical delivery
as per the individual transactions. Where such operations are done at the lowest possible cost,
consistent with the provision of the services desired, it can be termed as efficient.
Efficient market operations for farm products ensures that8:

(i) Increase in the farm production is translated into a proportionate increase in the level
of real income in the economy, thereby stimulating the emergence of additional
surpluses.
(ii) Good production years do not coincide with low revenues to the producers achieved
through effective storage, proper regional distribution and channelizing of latent
demand.
(iii) Consumers derive the greatest possible satisfaction at the least possible cost. An
efficient marketing system is an effective agent of change and an important means for
raising the income levels of the farmers and the levels of satisfaction of the consumers.
It can be harnessed to improve the quality of life of the masses.
A number of approaches are there for assessing marketing efficiency in a particular market
channel of a produce. Thus, market efficiency depends on: (i) the effectiveness with which a
marketing service is performed (ii) the cost at which the market operations are performed (iii)
the effect of this cost and the impact of the service on production and consumption.
An ideal measure of marketing efficiency, particularly for comparing the efficiency of alternate
markets / channels, should be such that it takes into account: (i) total cost of operations; (ii) net
operating margins; (iii) income received by the farmers, and (iv) prices paid by the consumer.
Any change that further reduces the costs of accomplishing a particular operation without
reducing consumer demand, indicates an improvement in the market’s efficiency. But a change
that reduces costs, and also reduces consumer satisfaction, does not indicate increase in its
efficiency. And a high level of consumer satisfaction, even if at a higher operational cost may
mean increased marketing efficiency, if the additional satisfaction derived by the consumer
results in increased demand to outweigh the added cost incurred in the marketing operations.
Importance of Effective & Efficient Markets – the Cobweb

In the current day situation, the surplus production is not finding markets. The unfulfilled
demand is reflected in higher prices in different part of the country. It is important that
consumer has a choice and free trade be promoted.
The shortfall in the marketing system, to assess and project demand signals in advance, has
8 Source: Agricultural Marketing in India, Acharya and Agarwal, 6th edition, pg 475-476
13
resulted in farmers following price trends as indicators to supply. Price is a measure that is
post-circumstantial. The circumstances may not repeat next season or even within a season,
and reaction on production side, to price alone, is a weakness of the system.
In Figure 2.1, points 1 to 4 depict price points against supply status. When price goes up (1),
farmers produce more next season and price falls down (2) - farmers change crop, the supply
reduces next season, and the seesaw cycle repeats (3) & (4). This seesaw, can result in
decreasing the extremes in the swings, both in production and price, towards an eventual state
of equilibrium. This convergence in fluctuation is a result of unguided, action and reaction, as
a result, future growth is stunted, while price and supply balance to reach a steady state.
Figure 2.1 Cobweb relationship
Represented in the other two charts above, the spiral of fluctuating price can also sustain a
continuous or cycle of fluctuation, or even a diverging spiral of increasing price with seesawing
supply. All of these are indicators of marketing inefficiencies. Agricultural marketing systems
must aim to dampen the cobweb reactivity through advance and strategic information sharing.
The trigger to supply needs to be forecasted demand and not the price.
The imbalance represented by the lag effect between surplus output and price drops, can result
in a gradual fall in production and lowering price fluctuations until an equilibrium is naturally
found. However, the reverse can happen, where the situation can spiral out of hand.
Currently the marketing system, though the Agmarknet portal shares price information and not
projected demand. Therefore, the system is geared to provide price information as indicator of
the ongoing transactions, whereas, the producer needs to know forecasted demand projections
(volume) to take informed decisions, all the way back to crop planning. Therefore, the outcome
of the information from the system is mismatched from the need of the farmers.
Containing the Inequity

An increase in price is not always good for the marketing system and indicates inefficiency in
the system. Increase in price can result in stifling the demand, triggering a shortage in
14
production in the next season (cobweb model) and eventually a reverse swing occurs. This
market inefficiency is also to the advantage of commodity traders that have capacity to hold
inventories until the next upward price swing. For the famers, the temporal increase in price of
a crop, is a false signal to sow more of that particular crop for the next season.
This lag effect between price signal and sowing patterns is an acute failure of the marketing
system. The price signal is ex-post (after sales), and the farmer’s reaction is ex post facto (after
the fact has relevance). Marketing system is efficient if it provides a price signal that is ex-ante
(e.g. before the next sowing season). Demand forecasting with volumetric information and
prospective price determination, even if with some elasticity, is a far better signal to farmers
than the current system with an annual lag in its effect.
Price, production, consumption are intrinsically correlated. A fall in price is not a failure too,
if met with equal or higher increase in volumes, as the net value is a factor of price and quantity.
However, any fall in price local to a region (at mandis around a producing area), or in a period
of time (around harvest season), is a sign of inefficiency when left unattended by the marketing
system. This happens when markets are not spatially and temporally integrated.
The marketing system is inefficient when it cannot address imbalance between demand and
supply. The tactics used to meet demand include operations over place, time and form.
The inefficiencies in the system impact the farmer negatively, but become opportunities for
others. Commodity traders will make procurements at harvest season and store the foodgrain
for transactions at a higher price point after some time, when supply is limited. Farmers could
do the same, provided they had the economic capacity to bear the inventory holding cost. Credit
against warehouse receipts and other solutions can satisfy the cash flow requirements of a
farmer, while allowing them opportunity to avail the price arbitrage over time. Storing capacity
dedicated for use of small farmers, or group of farmers, especially possible in case of
foodgrains, can also serve this purpose.
There can be many reasons for surplus production not finding a market, but the main reason is
lack of marketing linkages for a large number of produce types. The market infrastructure does
not have the capacity or capability to handle the production and link it with the rest of the
country. This lack of integration of markets needs to be corrected. Most of the market
development is done at state level, which ignore the concept of a national market system,
focusing on intra-state marketing only.
Lack of information from demand side to farmers results in reverse interrelation between
production and income. Production gluts with price slumps, and production slumps with price
bumps are commonly seen, at times to extremes. While it is natural to have an inverse
relationship between market supply and pricing, demand analytics plays an important role to
understand and address the extremes. A drop in price should not automatically translate into a
drop in income, since larger volume is available to sell and income should ideally be
15
maintained. By mapping demand at markets, the available surplus can be spread and the
quantum of production can be directed to other destinations of demand.
Unlike for crops with long holding life and having a “spread in time”, in perishables, a
production glut is more local to a region, while a supply slump may exist in another part of the
country. Marketing needs to appropriately develop a “spread in place” by spatial movement of
the goods to a place where demand exists. Such monitoring and linking of demand is a
capability that the marketing system has to develop.
In case of Central Pool procurement, holding the stock close to population centres, makes the
system more efficient and spreads its availability in advance of demand. This tactic also avoids
large inventory build-up in the production areas – this normally happens because warehousing
infrastructure was developed on the basis of production and not linked to future demand. The
distribution of warehouses can be rationalised depending on demand projections (from public
distribution and from secondary processors).
Indicator of Marketing Efficiency

Marketing efficiency analysis has generally focused more on transaction levels or the overall
efficiency of the supply chain operations. As such, most assessments on marketing efficiency
highlight broken links in the value chain system.
There is also the need to have a marketing intelligence mechanism that monitors and analyses
other economic signals for purpose of marketing inefficiency.
A measure of the efficacy of the

national marketing system can be
the extent of price dispersion for the
same produce, across multiple
markets in the country. Price
dispersion for farmgate prices was
presented in the Economic Survey of
India (2015-16) for select crops.
The graph indicates the ratio

between the lowest to the highest
price for the same crop in the
country. This price dispersion, at
farm-gate, is clear indicator for the
need for a single “one market” ideal.
Some reasons for farm-gate price
dispersion would include onwards
connectivity from farm-gate to next Figure 2.2 Price Dispersion at farmgate - select crops
level market, the concurring demand Source; Economic Survey of India, 2015-16 (NSS- SAS 2013)
16
or supply fluctuation at the time of farm-gate sale, the storability and sensitivity of crop to other
dynamics, etc. However, the marketing effectiveness is measured through efficiency achieved
in reducing the overall price dispersion at farm-gate.
Price dispersion also happens between farm-gate and consumer. Some dispersion is expected
due to reasons which include the associated logistics cost to connect farm-gate with wholesale
market at consumer end. Crop that has regional specialisation for production will normally
have a cost plus increment at consumer end in other regions. The causes of market segmentation
are many – differences in remoteness and connectivity (rural roads), local market power of
intermediaries, degree of private sector competition, propensity of regional exposure to shocks,
local storage capacity, mandi infrastructure and farmers access to them, storage life of the crop
and crop specific processing cost9.
The prevailing cost efficiency also has impact on price dispersion, with some natural dispersion
being expected and inherent to the system.
Equation 2-1: Natural price dispersion

(1) (2) (3) (4)
Cost of production + cost of logistics + risk + marketing margins = Natural price dispersion
Logistics (2) and risk (3) are correlated to food mile (distance) and fuel, holding life or
sensitivity of the produce, technology used, monitoring and regulatory compliance, inventory
holding cost, etc. However, extreme price dispersion that cannot be explained by the cost of
risk and the logistics involved, indicate inefficiencies in the marketing system and results in
acute price wedges between the consumer and farmer.
Marketing margins (4) are unnaturally escalated in a multi-layered marketing network that has
numerous intermediaries between the farmers and wholesale market. This factor also makes
for longer supply chains, despite the destination markets being at short distances. A long
supply chain results from multiple stakeholders in the chain of custody, as the produce
moves to market, and dilutes the total share of value to be portioned across all players.
High price dispersion is also the result of value leakage due to high level of value chain
segmentation and non-transparent pricing structure. Both impact upon the total value that is
recovered at the end of the supply chain and normally such inefficiencies get passed on to the
farmer. A few crop specific examples of price wedges presented in the Economic Survey are
repeated in the next section, indicating the efficiency or lack thereof, in the fork to farm chain.
Crop specific examples of Market Efficiency

The price dispersion between farm-gate and whole sale market at consumer end (price wedge),
is extracted from the Economic Survey of India 2015-2016 to indicate the efficiency status.
9 Economic Survey 2015-2016
17
Figure 2.3 Price wedges between farmgate and wholesaler
18
These price wedges also provide clear indication of opportunity for agri-business
entrepreneurs. High inefficiency areas, are target areas for businesses, to select and build
models that can readily compete with the existing inefficiencies.
Among the crops represented, the biggest price wedges are for the perishable types, potatoes,
onions and groundnuts. The wedges are lower for rice, wheat (two commodities where MSP
notification is followed by government procurement).
Greater market integration is essential for farmers to get higher farm-gate prices. While the
GST bill is a step in the right direction, a lot more needs to be done by the states, including,
creating better physical infrastructure, improved price dissemination campaigns, and removing
laws that force farmers to sell to local monopolies.
19
Additionally, similar price dispersion, or wedges, exist between wholesaler and retailer, which
are also important indicators on the efficiency at last mile operations.
Figure 2.4 Price wedges between wholesaler and retailer
Extracted from Economic Survey of India, 2015-16
Marketing Policy
Growth and development of agriculture and allied sectors directly affects the well-being of a
large population base, both rural and urban citizens. The immediate impact is also reflected in
the prosperity and employment opportunity in the rural economy.
The development trajectory of the country is closely linked to the socio-economic development
in the rural areas of the country. The larger share of the country is located in villages and they
are contributors and growth drivers of the nation. In a country as diverse as India, the human
20
backdrop and situational realities vary and development is not always uniform. There is
frequently the need for government level interventions to give direction for more equitable and
inclusive growth.
Therefore, agricultural marketing, besides having function of managing market information,

also has involvement of government, which intervenes to support agricultural trade, domestic
and international. The purpose of agricultural marketing policies and regulations is to protect
farmers from exploitation from market intermediaries and traders and also ensure transparent
transactions and timely payment for their sale proceeds.
The Government, Central and States, implement various support mechanisms and undertake
other interventions with intention to make agriculture more competitive and enhance income
to farmers. The support provided ranges from price intervention, market intervention, provision
of market infrastructure, other infrastructure, procurement of select commodities, etc. The
procurement intervention by the government, makes it a market channel for the farmers. In
doing so, the government influences the market dynamics. When procurement is done without
objective planning on final end-use, the government can also upset the demand metrics,
artificially buttressing crop production, without any strategic aim. Therefore, a close look at
the procurement system is warranted, to align strategic reserves and gratuitous buying with
consumer demand and future growth for farmers.
Effectiveness of government policy can be measured through assessing how much of the local
produce connects, and is directly traded by farmers, with markets outside the production region.
At the moment, a farmer will normally off load her produce at the first instance, in the hands
of agents or local markets, leading to a larger than necessary layering of actors in the delivery
system. This happened, since efforts were made to ease the farmers’ first mile transaction due
to past constraints in logistics connectivity.
This system provides farmers immediate access to primary level monetisation of their produce,
and is necessary. Nevertheless, as the capabilities of the farmers develop, there is also the need
for policies to support direct market connectivity. The concept of market infrastructure need
not be only focused on developing centres of transactions, but also as village level
assembly/pooling/packing to facilitate onwards connectivity to cross regional markets, with the
operations under custody of the primary producer or first mile aggregator.
Annotation
Marketing effectiveness in a measure of expanding the market system to generate larger
revenue streams and competitiveness. Market channel efficiency depends on reduction of
marketing cost, adoption of technology in grading, packaging, transportation, storage, value
addition, wholesaling, retailing and exploring economies of scale through aggregation.
The one-India market concept may benefit from placing agricultural marketing under the
Concurrent List. While cultivation is limited to the land and area of farming operations,
21
marketing has no boundaries and needs to operate on a pan-India level to meet demand across
the country, and further afield.
Among the crops represented, the biggest price wedges are for the perishable types, potatoes,
onions and groundnuts. The wedges are lower for rice, wheat (two commodities that are
produced by a large majority of farmers and where MSP declaration is followed by government
procurement).
Greater market integration is essential for farmers to get higher farm-gate prices. While the
GST bill is a step in the right direction, a lot more needs to be done at the State level, including,
creating better physical infrastructure, improved price information dissemination campaigns,
and reforming regulations that force farmers to sell to local monopolies.
Future marketing intervention by the State governments need to be align with the One-nation,
One-market concept by laying greater emphasis on long term connectivity for agricultural
produce, across states and geographies.
Key Extracts
 Marketing system helps to direct and crystallise demand, for making agricultural trade
more productive, effective & efficient.
 Marketing systems develop capacity to ensure operational and pricing efficiencies in
the market channels of different produce.
 Marketing systems play a vital role in servicing a link mechanism, for producers with
consumers and allows price discovery mechanism to be transparent.
 There is a need for a market intelligence system that monitors and analysis other
economic signal for the purpose of marketing efficiency.
 Marketing efficiency is also to be achieved by reducing farm gate price dispersion by
creating better physical infrastructure, improved price dissemination and marketing
policies to ensure transparency and timely payment to famers.
 Marketing systems function through policies to build competitiveness with in-built
mechanism to reduce monopolistic and oligopolistic operations.
 Marketing policies can create enabling environment for varied instruments such as
contract farming, farmer producer companies, direct marketing, futures market etc.
22
Evolution of Agricultural Marketing

A historical perspective on agricultural marketing and the price support, through a system of policies,
regulations and market interventions. The system has been evolving over the years and denotes that the
system is influenced with market realities. Reforms are needed in response to assessments in socio-
economic growth and to suit the changing business environment and the strategic needs of the country.
Marketing Perspective
Historically, the government has been largely focused on providing markets to provide farmers
the platform to trade and meet regional demand. The government also extended support to
provide price support, with the establishment of Food Corporation of India in 1964 and the
Agricultural Price Commissions in 1965. The price support was initially in the form of
notifying a minimal floor price and through direct procurement by FCI at a price that was
higher than the minimal price.
Prior independence, the key concern of the Government related to agricultural marketing was
to keep the prices of agro-raw materials for the industry and food items in check. The first
regulated Karanjia Cotton Market was established as early as in 1886 under Hyderabad
Residency Order. The first marketing legislation was the Berar Cotton and Grain Market Act
of 1897, which became the Model Act for legislation in other parts of the country.
The provisions of this Act empowered British Resident to declare any place in the assigned
district a market for sale and purchase of agricultural produce and constitute a committee to
supervise the regulated markets. The then Government of Bombay Province was the first to
enact the “Bombay Cotton Market Act” in 1927 and this which was the first marketing law in
the country, which attempted to regulate markets with a view to evolving fair market practices.
The then government, also constituted the Royal Commission on Agriculture in 1926 which
made several recommendations for regulation of marketing practices and establishment of
regulated markets.
The establishment of the Directorate of Marketing and Inspection in 1935, the enactment of
the Act for grading and marking of agricultural produce in 1937, the conduct of commodity
market survey and the establishment of regulated markets in the States are some of the other
measures taken before Independence to improve the marketing situation.
After independence, during the sixties and seventies, most State governments enacted the
Agricultural Produce Market Regulation Act (APMR Act). It authorized the States to set up
and regulate marketing practices in wholesale markets. In the initial five year plans, the main
thrust was on intensive agriculture. The expressed objective was to concentrate resources and
efforts in specially endowed areas with adequate production agricultural potential in terms of
water and infrastructure to achieve a quick break-through in production. Coinciding with the
Green Revolution wherein productivity enhancement was achieved, the country witnessed
23
emergence of State regulated markets.
All primary wholesale assembling markets were brought under the ambit of these Acts. Well-
laid out market yards and sub-yards were constructed and for each market area, an Agricultural
Produce Market Committee (APMC) was constituted to frame the rules and enforce them. To
cope up with the need to handle increasing agricultural production, the number of regulated
markets has been on the rise. While by the end of 1950, there were only 236 regulated markets
in the country, now the number is more than 6600. These are primarily wholesale principal
markets comprising 2339 principal with their attached sub-market yards. In addition, the
country has more than 22,000 Rural Periodical Markets or Grameen Haats under the control
of local bodies, panchayats, councils, APMCs, etc., which lack even the basic amenities and
marketing infrastructure.
Under the APMR Act, only the State Government could set up markets, thus preventing private
players from setting up markets and investing in marketing infrastructure. Development of
primary agricultural produce markets was taken up as an institutional innovation and
construction of well laid out market yards was considered as an essential requirement for
regulating the practices in primary wholesale markets. This markets had specific farm
catchment areas, and resulted in fragmentation of markets within the State, hindering the free
flow of agro-commodities from one market area to another.
Historical Interventions in Agricultural Marketing

Over time, the range of agricultural produce, and the quantity of production has changed, and
these markets became bottlenecks to the free movement of produce. The markets became
opportunistic trading platforms under control of a few, rendered restrictive and monopolistic,
falling well below the intended objectives. Further, the existing regulatory framework does not
support free flow of agricultural produce; it restrained the direct interface of farmers with the
processors/exporters/bulk buyers/end users, and as such, let in a large number of intermediaries
who may or may not be adding any value to the farmer, along the agri-value system. There
arose multiple staging points and handling in the flow of agri-produce, with multiple levels of
mandi charges, and this ended up in escalating the prices for consumers without commensurate
benefit to farmers.
Table 3.1 Major Policy Interventions in marketing
Year Major Policy & Legislative interventions

1897  Berar Cotton and Grain Market Act
1898  Livestock Importation Act
1930  Indian Sale of Goods Act
1937  Agricultural Produce (Grading and Marking) Act
1938  Rice Milling Industry (Regulation) Act
1947  Rubber Board Act
1947  Vegetable Oil Products (Control) Order
24

1950  Zamindari Abolition Act
1952  Indian Standards Institutions Certification Marks Act
1952  Forward Market Control (Regulation) Act
1954, 1964,
1976 &  Prevention of Food Adulteration (PFA) Act
1986
1955  Essential Commodities Act
1955, 1997  Fruit Products Order
1956  Sugar Control Order
1956  Agricultural Produce (Development & Warehousing) Corporations Act
1957  Wheat Roller Flour Mill Licensing and Control Order
1958  Trade and Merchandise Marks Act
1958  Standards of Weights and Measures Act
1959  Sugar (Movement Control) Order
1959  Sugarcane (Press-Mud-Control) Order
1960s &  Intensive Agricultural District (IADP, 1964) & Area Programme (IAAP,
1970s 1965); Agricultural Produce Marketing (Regulation) Act
1962  Warehousing Corporations Act
1962  National Cooperative Development Corporation Act
1963  Gur (Movement Control) Order
1963  Export (Quality Control & Inspection) Act
1964  Food Corporation of India Act
1964, 1980  Cold Storage Order (under EC Act, repealed in 1997)
1965  National Dairy Development Board Act
1965  Fruit Products Order (FPO)
1965  Agricultural Prices Commission (renamed CACP in 1985)
1966  Sugarcane (Control) Order
1967  Solvent Extracted Oil, De-oiled Meal and Edible Flour (Control) Order
1969  Monopolies and Restrictive Trade Practices Act
1970  Cotton Corporation of India Act
1970  Sugar (Packing and Marketing) Order
1971  Jute Corporation of India Act
1972  Sugar (Restriction on Movement) Order
1973  Meat Food Products Order
1975  Tobacco Board Act
1975  Packaged Commodities Order
1975  Vegetable Oil Products (Standards of Quality) Order
1977  Vegetable Oil Products (Control) Order
1977  Pulses, Edible Oilseeds and Edible Oils (storage control) Order
25

1979  Levy Sugar Supply (Control) Order
1980  Prevention of Black Marketing and Maintenance of Supplies of Essential
Commodities Act
1982  North Eastern Regional Agricultural Marketing Corporation
(NERAMAC) Act
1984  National Horticulture Board Act
1985  Agricultural and Processed Food Products Export Authority Act
1986  Spices Board Act
1986  Bureau of Indian Standards (BIS)
1986, 1991,
1993 &  Consumer Protection Act
2002
1986  Cotton (Control) Order
1992  Milk and Milk Product Order (MMPO)
1997  Standards of Weights and Measures (packed goods) Act
2000  National Agricultural Policy (NAP)
2000  Jute and Jute Textiles (Control) Order
2003  Model Agricultural Produce Marketing (Development & Regulation) Act
2004  Ban on futures trading of 54 commodities (including, rice, wheat,
oilseeds, pulses) were removed.
 Processed food items exempted from licensing under Industries
(Development & Regulations) Act 1951, except those reserved for small
scale industries (SSI) and alcoholic beverages.
 Food processing & cold-chain added to list of priority sector for bank
lending.
 Automatic approval for FDI upto 100% for most processed foods, except
alcohol and beer and those reserved for SSI.
2006  Food Safety and Standards Act
2007  National Policy for Farmers (NAF)
2007  Warehousing (Development and Regulation) Act
2013  National Food Security Act
2014  Schemes for commercial horticulture development subsumed into Mission
for Integrated Development for Horticulture (Baagvani Mission)
2016  National Agriculture Market (e-NAM) launched
 100% FDI in marketing of food products produced & manufactured in India
2017  Model Agricultural Produce & Livestock Marketing (Promotion &
Facilitation) Act
Above list identifies the broad measures taken by the government over more than a century to
in regards to agricultural produce and product marketing, to build the market structure as it
exists today.
26
Before the phase of economic liberalisation in 1991, the government support was robust in
terms of infrastructure and market support. The advent of economic liberalisation was expected
to lead to the liberalisation in the agricultural marketing system as well and release the spirit
of enterprise in the agriculture sector. However, the expected benefits of an increasingly
liberalised national environment did not manifest in the agricultural marketing arena.
The agriculture sector did not witness much of new ideas and the APMC controlled marketing
mechanism continued.
Operation Flood
In the dairy sector, the setting up of National Dairy Development Board in 1965 was the
precursor to Operation Flood. India is today the largest producer and consumer of dairy and in
the year 2015-16, milk production is cross 155 million tons. The market size was assessed at
US$ 70 Bn in 2014-15, of which the organised formal sector was sized at about US$ 12 Bn.
Table 3.2 Milk Production and share in market channels

Production Market channel
(tons per day) % share of production
Milk Production daily 4,26,000 100
Consumed in production areas 1,96,000 46
Surplus sold from production areas 2,30,000 54
Surplus handled by formal sector 1,41,600 33
Surplus handled by informal sector 88,400 21
After local consumption, about 54 per cent of the production is the surplus that is marketed
outside the production area. About 33 per cent of the milk production (62 per cent of the
surplus), is channelled to consumers through the small and informal sector such as local sweet
shops and other retail. The organised formal market channels, operated by large scale
processors through Cooperatives and Private enterprises, handles about 21 per cent of the total
production (38 per cent of surplus). The National Action Plan for Dairy Development is
targeting 300 million tonnes of milk production with 50 per cent channelled through the
organised formal sector by 2023-24.
Market Support by Government

India’s main policy goals remained with focus to attain food self-sufficiency, to ensure
remunerative prices to farmers, and to maintain stable prices for consumers. To meet these
goals, India continues to rely on a number of policy instruments:
- regulation of markets,
- input subsidies for producers,
- minimum support prices (MSP), and
- food subsidies for consumers.
27
Regulation of markets
The Agricultural Produce Market Committee (APMC) Act requires that farm produce be sold
only at regulated markets through registered intermediaries. The Essential Commodities Act
(ECA), allows central and state governments to place restrictions on the storage and movement
of commodities deemed essential by governments. Notwithstanding moves to deregulate,
fragmented market players continue to dominate the industry. The transportation, marketing
and distribution of agri-food commodities did not develop in a scientific manner, linked or
directly linked to demand from growing markets and the demand for what was earlier an
essential commodity has also undergone changes.
Input subsidies
The starting point of Indian agriculture and concerns on food insecurity, necessitated provision
of subsidies on fertilizer, electricity, fuel and irrigation. Intensive farming and production
growth were motivators for policy interventions.
Prices of both domestic and imported fertilisers are subsidised and in most states, electricity is
provided to agriculture at very low prices or free, among other support which led to distorting
demand and the response from farmers. Prior assessment of soil health, or impact of unfettered
irrigation on the agricultural environment had not been part of regular planning. Excessive use
of subsidised inputs, rising soil salinity and ground water depletion are some of the resulting
concerns. When these inputs result in outputs that do not find associated demand, the outcome
is discontent.
Minimum support prices

Price Policy of the Government is an important instrument in the marketing arena. The
Government of India (GoI) supports producers by announcing minimum prices for certain
commodities considered key to its agriculture. The MSP are set on recommendations of the
Commission for Agricultural Costs and Prices (CACP), based on cost of production and other
factors. The MSP mechanism has recently been extensively evaluated for its efficacy10 by the
NITI Aayog in 2016.
There are other associated schemes such as the Price Stabilisation Scheme and Market
Intervention Scheme that also come into play as minimum support systems for farmers. At one
level, these support programs act as demand influencers, on the other these are measures to
protect farmers from unrequited farming efforts. Conversely, the procurement made to mitigate
fluctuations in farm-gate prices, are at times reactive to the retail prices at the consumer end.
Food subsidies
India has enacted the National Food Security Act 2013, to protect and assure low income
consumers of access to affordable food. The Food Corporation of India (FCI) and other Govt.
and State agencies procure food grains from farmers at the MSPs and sells at subsidised prices
10 Evaluation Report on Efficacy of Minimum Support Prices (MSP) on Farmers, NITI Aayog - 2016
28
through the public distribution system (PDS). MSP linked benefits have been realised largely
in areas where such MSP associated procurement happens and has tended to contribute to
higher production and pressures to raise MSPs every few years. Food subsidy expenditures
have almost trebled in the past decade.
First Steps towards Liberalisation

After 10 years of opening up the Indian economy and in the beginning of the new millennia
the first seeds of agricultural reforms was sown.
Liberalisation of Control Orders

Stock limits in respects of essential agricultural commodities are imposed through Control
Orders issued under the provisions of the Essential Commodities Act, 1955 by the States from
time to time. With effect from 15 February 2002, the Government of India removed 11 classes
of commodities in full and one in part from the list of essential commodities declared earlier.
The Government issued the Removal of Licensing requirements, Stock limits and Movement
Restrictions on Specified Foodstuffs Order, 2002 on 15 February 2002 allowing dealers to
freely buy, stock, sell, transport, distribute, dispose, etc., any quantity in respect of wheat,
paddy/rice, coarse grains, sugar, edible oilseeds and edible oils, without requiring any license
or permit under any order issued under the Act.
In order to facilitate free flow of market forces and for the overall benefit of consumers, two
more commodities have also been deleted from the list with effect from 31 March 2004. At
present the list of essential commodities contains 15 items.
In the context of ongoing liberalisation of Indian economy, a rationalising and progressive

dismantling of the system of control and restriction in the agricultural economy is warranted.
There is need to differentiate the stock held for captive end-use viz the inventory held for
opportunistic market arbitrage (not having their own end-use). At the first instance, there is
need to differentiate the genuine requirement of inventory by the food/agro-processing industry
and food retail chains. Given the operating cycles of these stakeholders, the required inventory-
turns to assure their business can be assessed and immediately permitted. Normally inventory
is held to de-risk from input supply disruptions and is a factor of the type of product (safe
holding life) and operating capacity of these captive users/stakeholders.
Similarly, the stock limit on exporters can be eased so that their secondary market connectivity
is not effected. A multiple of the weighted average of the annual trade by such actors can be
the starting point to rationalise and eventually remove the stock limits for more commodities.
Model APMC Act 2003 and Rules 2007

In 2003, the Department of Agriculture, Cooperation & Farmers’ Welfare (DAC&FW)
formulated a Model Agricultural Produce Marketing (Development and Regulation) Act,
followed by Model Rules 2007 for the States/UTs to adopt. These were intended to usher in
29
the desired reforms in the erstwhile APMR Acts, to induce commensurate private investment
in agricultural marketing. However, many States carried out partial reforms only, on a pick-
and-choose basis, thereby defeating the objective of creating a uniform trade environment
across the country.
As a result, there was no noticeable ground level progress and all desired results were not
forthcoming. Nevertheless, on the evolutionary chart, they did help to open the shut doors to
alternative marketing channels in some progressive States. However, even thereafter, the
necessary changes in the agricultural marketing system did not happen as was expected. The
reforms as adopted by the state governments has been largely ineffective. One of the reasons
appears to be depriving private markets a level playing field.
Some notable changes in the marketing system

It would not be complete to review the existing marketing system without mention of
emergence of changed marketing situation in some of the States in the country. Alongside, the
evolution of regulated markets, some alternative marketing systems have developed.
Alternative marketing systems such as cooperative marketing, contract farming, retail chain
linkages etc., got an impetus in the aftermath of the first level of marketing reforms. Alternative
marketing systems provide other marketing platforms for farmers to sell their produce.
Direct Marketing
Direct marketing in the context of agricultural marketing, where farmers directly transact with
the produce consumers. These operates in two basic formats (i) Farmers’ Markets, and (ii)
Direct sourcing from farmer’s field by processors (primary consumers).
These markets are proven to be beneficial to both producers and consumers. These markets
have helped in mitigating the problems of fragmented supply chain. Further, the quick
movement of produce from farmer to consumer, saves losses considerably. In these markets no
market fee is charged but service charges are collected from sellers. About 488 such farmers'
markets are operating in different States in the name of Apnamandis in Punjab, Haryana, Rythu
bazaars in Andhra Pradesh and Telangana, Uzhavar Sandhai in Tamil Nadu, Shetkari Bazaars
in Maharashtra and Raitha Santhe in Karnataka. As per a study11 on these bazaars it is revealed
that the producer’s share in the consumer’s rupee and marketing efficiency was more in case
of Rythu bazars (Farmers’ market in Guntur) when compared to organised retail outlets and the
least was in case of hawkers and petty vegetable enterprises.
However, footfall is limited to the local consumer and therefore future growth is limited. Any
production that is in surplus to the absorption capacity in the market region requires physical
connectivity with demand that is further afield.
The other variant of direct marketing is by way of direct sourcing of the produce from farm-
11 Rao et al (2013)
30
gate by the processors, exporters, retail chain players, etc. Direct marketing and direct sourcing
allows farmers to skip multiple layers in their transactions and benefits by skipping of
intermediary margins. Though recommended in the Model APMC Act & Rules, very few of
States have issued such licenses for direct sourcing.
Figure 3.1 State-wise licenses issued for Direct Marketing
No. of Direct purchase

SN Name of State
licences issued
1. Madhya Pradesh 1
2. Andhra Pradesh 2
3. Gujarat 3
4. Rajasthan 3
5. Telangana 3
6. J&K 3
7. Punjab 11
9. Himachal Pradesh 12
10. Karnataka 37
11. Maharashtra 219
Direct sourcing can manifest as contract farming instruments.
Contract farming
Contract farming can address many traditional ills, such as lack of market connectivity, long
chain of market intermediaries, ignorance about the buyer demands, etc. Contracts from bulk
consumers can serve to offer regular and consolidated demand to farmers and an assured
exchange against predetermined quality and quantity. This allows farmers to vertically
integrate with specific and organised market channels.
Figure 3.2 State-wise progress of Contract Farming
No. of Companies
State Crops under Contract Farming
under CF
Punjab Malting Barley 1
Haryana Barley, Basmati, Ordinary Paddy, Potato 4
Chhattisgarh Bitter Gourd, Bean, Green Chili, Tomato, 2
Lady finger, Bottle gourd, cucumber
Gujarat Cotton 1
M.P Cotton 1
Sponge/Ridge gourd, Lady finger, Chili,
Maharashtra Tomato, White Onion, Potato, Baby corn, 5
Soybean, Beans, Pomegranate, Sweet corn
Karnataka Organic Cotton 1
DAC&FW through model Act, 2003 suggested that States promote contract farming and by
now 20 States provided contract farming provision in their APMC Acts while Punjab legislated
a separate Contract Farming Act in 2013. So far, 14 States only have notified the Rules to
31
actualize the contract farming on the ground level and only States of Maharashtra, Haryana,
Punjab, Karnataka, Gujarat, M.P and Chhattisgarh have registered companies/ firms for
undertaking contract farming in their States.
Contract farming is frequently extended to non-crop activities also. Poultry farmers for both
eggs and broilers function under large enterprises in many States of the country particularly
Tamil Nadu, Kerala, Karnataka and Andhra Pradesh. Of late, most of the food processing units
have shown keen interest to enter into some form of contracted supply for their feedstock from
producers.
The reasons identified for this slow progress include (i) conflict of interest perceived by
APMCs/Marketing Boards which are designated as the registering, agreement recording and
dispute settlement authorities in most of the States; (ii) complex and long procedures for
registration and recording of agreement; (iii) provisions of stockholding limit under Control
Orders issued at any point of time deters buyers to enter into contracts to aggregate the
contracted produce, even for the intended purpose of processing, exporting, linking to retail
chain; and (iv) poor publicity of contract farming among the farmers about its benefits.
Several studies reveal that contract farming is a mode of marketing that can marry small farmer
efficiency to large scale of economy of processors. The vertical integration promotes transfer
of management skills to the field, provides assured buyers for the produce, reduces risks from
unplanned transaction and opens avenues for institutional credit.
Contract farming has a constraint from farmers’ perspective, in that they are limited in their
production to the direct demand and their growth is linked to the contractor’s capacity to grow
the market share. Further, large processors have option to source globally, depending on cost
efficiency and quality requirements.
The opening of markets will however, help farmers decide on the optimal market opportunity,
contracted or other wholesale. Though contract farming is not a sole solution for problems in
agricultural marketing, it can very well be leveraged in certain regions and for specific crops
for increasing farmers’ income.
Private wholesale markets

So far 21 States/UT have made enabling provisions for setting up of such markets and only 11
States have notified the rules thereunder to implement the provision. Various restrictive and
hindering stipulations in the amendments like permitting one limited crops for trading in private
market, prescribing certain distance from existing Mandi to set up private market, exorbitant
licence fee for setting up of such market and more importantly asking such licensee to collect
market fee at applicable rate and pass on the same to the Mandi Board are proving deterrent to
come up private markets.
States need to liberalise the marketing regulations to promote development of private markets
32
and not doing so hinders the intended reforms and dilutes the desired impact.
Figure 3.3 State-wise progress of private market

No. of Private Market licences
SN Name of State
issued
1. Maharashtra 43
2. Gujarat 27
3. Rajasthan 9
4. Karnataka 3
Organised retailing
Retail is the last mile connect with end-consumers, either food or for non-food items. The food
and agro-processor have a forward distribution channel for their retail needs and their enterprise
level marketing is handled by individual processor and brand owners. In the fresh food
segment, consumers are predominantly linked through small and fragmented retail
merchandising (small grocers and street hawkers). However, the example of SAFAL (the fruit
& vegetable marketing subsidiary of Mother Dairy) is mentioned as an example of
indigenously organised retailing network. SAFAL operates in Delhi out of approximately 400
retail outlets, and sells about 350 tonnes of fresh produce daily in Delhi-NCR markets.
Such front-end organisation has reflected in daily supply from almost 180 farmers associations
(comprising about 8000 farmers), as well from other wholesale markets. Effectively, the
consolidated demand from their small format outlets generates more than 110,000 tonnes of
annual demand for fresh produce, from farms in States adjoining Delhi, and another 15,000
tonnes coming from existing wholesale markets.
The farms, through farmer associations, directly transact with SAFAL to supply the required
produce. This model does not involve any contractual arrangements, but is a form of need based
collaboration, with farmers free to sell their produce to other agencies. However, the
arrangement creates long term mutual interest. Most importantly, though the produce basket
keeps changing across seasons, the sustained demand has allowed the linked farmers
association to take up farm-gate activities including transport management, till SAFAL
receiving centres in Delhi. This has brought value gains to the farmers.
The growth in scale of private operators in food retail sector is also visible. Many Indian
companies have organised the supply chain locally, from farm sources, for their own retailing
requirements. Some traditional wholesalers at terminal markets have also organised and
initiated joint ventures with global majors to get access to capital and to gain expertise in supply
chain management. Organised retail of agricultural produce is not only growing from fixed
format outlets, but has also shown a spurt in the online space. Increasingly, there are many
enterprises that are marketing fruits, vegetables, meats, fish and others from online platforms.
Most of these have developed on the back of entrepreneurial spirit that saw opportunity in the
33
existing inefficiencies in food supply systems.
Farmer producer organisations (FPOs)

There is a need to aggregate farmers in order to offset fragmentation in land holding and bring
benefits of economies of scale. Organising producers into formal management practices help
to initiate collective decisions on cultivation to make the best use of market intelligence, as
well creates opportunities for producers to get involved in value adding decisions and activities
such as input supply, credit, pre-conditioning, processing, marketing and distribution. The
aggregation of farmer into FPOs (cooperatives/SHGs/FIGs/Producer company), aid their
integration into the supply chain, and in taking up roles traditionally by market intermediaries.
Government of India issued guidelines to encourage states to directly support FPO promotion
as a regular activity under various Schemes including RKVY (Rashtriya Krishi Vikas Yojana)
during the XII Plan. These guidelines are meant to help the states follow a standard
methodology for FPO promotion, as well as to provide indicative costs and a monitoring
framework. States may directly engage promoters to mobilize the small farmers. Alternatively,
SFAC is empanelling suitable Resource Institutions (RIs) on their behalf.
The instrument of Farmer Producer Company (FPC), registered under Companies Act is
emerging to be effective. FPCs offer a wide range of benefits compared to other formats of
aggregation of the farmers. FPC members are able to leverage collective strength and
bargaining power to access financial and non-financial inputs and services and appropriate
technologies leading to reduction in transaction costs. Members can also collectively tap high
value markets and enter into partnerships with private entities on equitable terms.
FPCs have performed well in states like Maharashtra, Madhya Pradesh and Kerala and farmers
have been able to realise higher returns for their produce. Most of the FPOs remain focused on
addressing issues of crop planning, technology infusion, input supply and primary marketing.
However, it is expected that more would expand their roles further up the value chain, entering
into post-harvest management, transport, storage and value added processing and engage in
contract production of primary agricultural produce.
Cooperatives in agricultural marketing

Cooperatives were recognized as one of the means to aggregate farmers for establishing scale
in their production and marketing activities, besides easing access to credit and other services.
Cooperatives have achieved limited success over the years except those in the States like
Maharashtra and Gujarat. Notable examples are in the dairy sector (GCMMF-AMUL) and in
grapes (MAHAGRAPES) where collective operation has resulted in the reduction of
transaction costs and improved the bargaining power of smallholders’ vis-à-vis foreign traders.
Food & agro-processing

Historically, agriculture and food processing industries remained stagnant due to low public
investment, poor infrastructure, inadequate credit availability and high levels of fragmentation.
34
A number of reform measures have been taken to promote investment in the sector, including
in the logistics for supporting the supply chain from processor to consumer. Most of the food
processing enterprises have been exempted from the provisions of the Industries (Development
and Regulation) Act, 1951 (except beer and alcoholic drinks, and items reserved for the small-
scale sector). For foreign investment, automatic approval is given for up to 100 per cent equity
for a majority of processed foods.
Apart from infrastructure constraints, the food processors face problems in procurement of raw
materials for processing due to restrictive provisions of the regulated markets. An issue often
highlighted by food processers is the variation in the operation of the APMC Act in different
states. Most states require food processors to register for direct marketing with the respective
marketing committee at multiple locations, but some states allow single point registration.
Some states exempt food processors from paying mandi tax on agricultural produce purchased
for inputs in other states; other states charge mandi tax at the point of consumption.
Another major constraint faced by food processors is the lack of availability of processing
variety crops, especially for fruits and vegetables. This is primarily due to the inadequate
extension and linkage between production and processing. For this, the concerned departments,
such as processing, agriculture and horticulture could have a joint marketing cell to share the
demand and qualitative requirements of the processing industry. This will bring about demand-
driven production perspective in the sector. The industry has specific requirements on crop
types, food safety aspects and practices at farms. The marketing system would contribute
through upstream communication to farmers, such that appropriate supply and vertical
integration with processors is made an option. The industry plays a vital role in employment
generation and provides an assured demand to farmers, against predetermined quality
parameters. It can also, for its competitive benefit, market its demand to domestic farmers.
The food and agro-processing units are important mode for farmers to monetise their produce.
The output from these units will benefit from supply side analytics. Global availability of
commodities used as feedstock by the industry, as well as local supply side information for
processing is important if vertically integrated farming is to be promoted by the production
departments.
Challenges to Agricultural Marketing

There continue to remain challenges to agricultural marketing, despite various positive
initiatives, and these are frequently debated. The most recent assessment was by the
“Committee of State Ministers, in charge of Agriculture Marketing to Promote Reforms”, the
report released in January 2013. The Committee highlighted that agricultural marketing is
posed challenges due to fragmented supply chain with inadequate marketing infrastructure, long
intermediation and lack of accurate and timely market information/intelligence system.
Various aspects of supply chain infrastructure are discussed in volume III of this report. The
output supply chain benefits from market intelligence, to plan and adjust supply to markets
35
depending on demand projections, making the operations more relevant and efficient.
Therefore, a challenge is also to map shifts in demand over time and provide timely
information, for supply side to make adjustments in advance to their planned activities. The
Committee of States Ministers reported challenges, extracted here12:
(i) Limited access of agricultural produce markets: There is huge variation in the
density of regulated markets across the country, varying from 118 sq km. in Punjab to
11,214 sq km. in Meghalaya.
(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 and a major entry barrier for new entrepreneurs, preventing
competition. Many market yards established long back, do not even have space for
construction of added shops, godowns, etc. The traders, commission agents and other
functionaries organise into associations, which generally does not allow easy entry to
new persons, stifling the very spirit of competitive functioning. The system of licensing
is quite restrictive and has outlived its utility and there is need to remove barriers to
revitalise the present marketing configurations.
(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 per cent of the sale value of the produce. In addition,
commission charges vary from 1 to 2.5 per cent in foodgrains and 4 to 8 per cent 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 per cent 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 per cent for cereals, 4.3-
6.1 per cent for pulses, 5.8-18.0 per cent for fruits and 6.8-12.4 per cent for vegetables.
The total post-harvest losses of agriculture commodities were earlier 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
12 Extracted from report of the Committee of State Ministers, in charge of Agriculture Marketing to Promote Reforms, 2013
36
for marketing infrastructure projects.

(vii) Lack of national integrated market: Under the present system, the marketable surplus
of one area moves out to consumption centres 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 single market for agricultural commodities by
removing all the existing barriers of licensing, movement and storage.
(viii) Less farmers’ price realisation: 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 realisation particularly by the Small and Marginal farmers in the country
owing to their lower marketable surplus, higher transaction.
To address these concerns and others, the Department of Agriculture Cooperation & Farmers’
Welfare formulated recommendations known as the Model Agricultural Produce and Livestock
Marketing (Promotion & Facilitation) Act, 2017, which incorporates various changes to reflect
the agenda of a unified national market for agriculture, besides facilitating alternate market
channels, including opening up the system to private sector as well for alternate online
marketing platform.
Need for next Level of Reforms

Agriculture like any other enterprise, is sustained only when it generates net positive returns to
the producer. A market is a place, where goods are monetised, and price per unit is determined,
to result in the total value that a farmer-producer fetches. Value is linked to final demand, in
qualitative and quantitative terms and the markets are also a medium to connect to such
demand. Therefore, the interconnectivity of agricultural markets and the marketing efficiency
are critical to the overall value system.
The country has undergone a phase of liberalisation in the banking, industrial and services
sectors. That has made these domains more competitive and responsive to market demand.
However, the agriculture including marketing has been bypassed a similar liberalisation.
Instead, a more knee jerk response in policy terms is evident, where market dynamics are
37
coloured with the earlier protectionist perspectives. The best protection to farmers is in
promoting long term market linkages, such that markets are connected across place, time and
form with farms.
The necessary condition for transferring remunerative prices to the farmers is a competitive
environment that facilitates fair and transparent price discovery. Current times, are largely one
of marketable surpluses, through there remain certain sectors like oil seeds that face severe
deficit despite ongoing demand. This situation is conducive to play of market forces, the only
condition being that no monopoly practices are supported. However, the common perception
as it stands today, is the inevitability of higher administered prices and government
procurements. Given the probability of an agriculture marketing structure not to remain perfect
or ideal in real situation, the support by way of MSP and procurement would be necessary and
therefore remain relevant. However, in the opinion of the Committee, given the improving
levels of production, extent and quality of infrastructure, including agri-logistics, market forces
can be deployed to play a more important role than hitherto.
The support by the Government for the welfare of farmers, needs to be rationalised such that
the desired outcome is the immediate wellbeing as well as developing the long term self-
sufficiency of the agricultural eco-system. The policies need a reoriented direction, such that
agriculture does not acquire the characteristics of a public sector, but adopts an enterprise
approach. Unplanned and continued subsidising of input and outputs have contributed to fiscal
deficits and does not take the country’s agriculture on a growth track. Agriculture has reached
a stage where is to be viewed a commercial activity.
Cultivation has been regular recipient of ongoing and able support, through extension and
technology transfer. There will remain the need to continue support to cultivation and improve
technology transfer to farms. The input support to farmers are discussed in later volumes of
this report. However, the farmer is in acute distress when his/her surplus of produce is unable
to link with a market and/or realise equitable value. The breakdown arises from subsequent
inability to fully monetise the surplus production. Performance of the agricultural marketing
system is directly reflected in the distress of the farmer. Immediate revisiting of the strategies
behind the agricultural marketing system is needed.
The erstwhile marketing system, served well the original agenda to incentivise the farmers to
ramp up production, for meeting food security requirements. At a time of deficit, it was
necessary to regulate and monitor the production and control the flow of food across the
country. It was once normal practice for the government to regulate the supply of cement and
rubber, when these commodities were in deficit, but these controls were done away with, once
the supply side was developed, and market was freed to function in a competitive environment.
A similar and phased opening up of the agricultural marketing system is warranted, especially
when large marketable surplus of agricultural produce is being generated, yet the quantities
find unbalanced supply into the markets. The basket of agricultural produce has expanded and
38
policies need no longer be limited to wheat and rice. In all, the country’s farms produce far
more than one billion tonnes of agricultural produce.
Agriculture now displays a cosmopolitan profile, with a high level of output from horticulture,
dairying, poultry and fisheries, besides the customary produce like cotton, sugar cane, cereals,
pulses and oilseeds, etc. The existing marketing system requires to adapt to and become future
ready. New reforms in marketing are urgently needed as we close the second decade of the new
millennium.
Greater reforms in the agricultural marketing system to the farmers’ benefit is stressed upon.
Next step in reforms

Between 2003 and 2016 the agricultural marketing environment did not undergo any desired
level of changes to the benefit of farmers. The quantum of produce captured at APMC markets,
upgradation of markets or the development of new markets were not satisfactory. The various
aspects of the slow progress are discussed earlier in this chapter.
Despite surpluses in various commodities, the deficit in pulses and oilseeds remained or got
aggravated. After the first step of reforms, not much was realised in substance and the APMC
monopoly continued and a level playing field was into provide. Keeping in mind the limited
adoption of the first step towards reforming the marketing system, the changed dynamics in
the business eco-system, as well as technological advancements, the government has already
introduced the next steps to correct certain imbalances. Next stream of reforms are needed.
The unified National Agricultural Market and the Model Agricultural Produce and Livestock
Marketing, (Promotion and Facilitation) Act, 2017 are the precursors to further reforms in the
agricultural marketing system
National Agriculture Market

The classical agricultural marketing studies, advocate market integration over space and time,
as a basic to marketing efficiency. Today agricultural marketing across the country has been
divided and fragmented into a large number of APMCs, which restrict the movement of
commodities beyond their notified geographical area. This compromises market efficiency
over space, and absence of warehousing and other pertinent facilities like pledge loan dilute
the marketing efficiency over time. This understanding, has paved the way for the government
to initiate market integration across the country.
The government introduced a Central Sector Scheme for promotion of a National Agricultural
Market (NAM) to bring about a transformation in the agricultural marketing environment. A
unified market can be best realised through a pan-India electronic platform which can facilitate
the participation of buyers and sellers from all over. The e-NAM network was inaugurated on
14-April-2016 and by March of 2018, a total of 585 markets are expected to be on the e-NAM
platform. As of July 2017, 455 regulated markets from 13 states have been integrated into the
39
scheme and 42.18 lakh farmers and 89,199 traders have been registered on e-NAM portal with
a turnover of Rs. 16,163.1 crore from the trading of 63.17 lakh tonne produce.
Under this scheme, to operationalise a pan India electronic platform, the key enablers are
provision for e-auction, material accounting, trade fulfilment, fund processing and post-sale
document creation (like generation of e-bills) which would increase efficiency of
intermediation. Generating e-permits for all transactions conducted on the platform would
create an audit trail verifiable across the country and simplify movement of goods. In many
states, farm harvest prices prevail at sub-optimal price and e-NAM will help check such market
imperfections. Better price realisation for farmers will serve as an important incentive for
raising productivity and production and in turn lead to higher growth of output.
Some key features that an NAM must have to realise the intended potential are:
 Auction of the produce takes place simultaneously in the same electronic platform in
all regulated markets (APMC markets) in the country, as well as private markets, as
and when they come to be established.
 Every regulated market is supported by infrastructure for quality assaying of the
produce. Harmonised standards & grades are accepted across markets, to allow
seamless trade across platforms.
 Collection of sale proceeds from the buyer and remitting it to the bank account of the
seller is facilitated by the market.
 Restrictions in transportation of the commodity are removed. A buyer, irrespective of
his location, can participate in any market of choice. The required agri-logistics
infrastructure for storage and transportation is put in place.
 The institution of agency to support inter-mandi trade, as also the dispute resolution
mechanism are in place.
The fortuitous roll out of GST with effect from 1-July-2017 has given a fillip to achieving a
single market. India is truly on the way to becoming a nation with one-tax and one-market.
Creating a true national agricultural market

The vision of a full-fledged national agricultural market, is where all types of markets have
inter-operability in communication, standards, systems, operating under a common regulatory
framework. This can happen when all markets, including alternate models of markets,
established or notified as such under the provisions of the model APLM Act 2017, whether in
private or public sector, come online and adopt a common electronic platform; for electronic
alone has the capacity to transcend the barriers of physical space and integrate the
geographically distributed multiplicity of markets.
A critical ingredient would be, to let as many markets and as many models of markets as
possible to bloom under different ownership types. This allows for a liberalised and
40
competitive environment. This entails that there may be more than one software system and
these will require an interoperable architecture, built to open and commonly adopted IT system
standards.
The way forward is that an online platform like e-NAM, would incorporate inter-operability
and serve as a central platform for any number of e-platforms that may come up in the country.
However, the virtual trade that online platforms promote, would be conditional upon certain
parameters, these include -
i. Harmonised tradable parameters and standards for the produce
ii. Network of assaying laboratories and needed technical manpower
iii. Agri-logistics encompassing cleaning, grading, packaging, storage (dry & cold),
transport (multi-modal, dry/cold)
iv. Services agencies to handle post-sale processes – aggregation, storage
transportation as per conditions agreed upon
v. Dispute resolution mechanism, at the markets – district, state and national level
vi. Special Purpose Vehicle (SPV) at state and national level to set up, operate and
manage the online trading
For this purpose, the Ministry of Agriculture & Farmer’s Welfare may consider the need to
appoint a dedicated advisor to monitor and evaluate the implementation of the e-NAM, at least
over the next 3 to 5 years.
The SPV at the central level would work to ensure than the standards and specifications are in
place for an inter-operable IT architecture. It will also work towards the harmonising of all
applicable produce and product standards, to serve a unified national market.
A unified national agricultural market would require licensing of market functionaries

stakeholders at the national level. For this purpose, the Committee suggests that the government
may require adopting a Central Act, which will create a legal framework that will facilitate
creation of a truly national unified agricultural market.
Firm push for robust reforms

In the context of less than desired market environment as brought out in the preceding sections,
and the new focus on agriculture with particular emphasis on farmers’ income and welfare,
market reforms became the natural choice as core to the overall basket of agricultural reforms.
To initiate much needed changes, the Department of Agriculture, Co-operation & Farmers’
Welfare constituted a Committee in September 2016 to formulate a model that would reflect
the current needs, as well as make the system future-ready. This initiative, along with a series
of others, was in harmony with the mandate of this Committee, which was referenced to make
necessary recommendations, in parallel to the strategy for doubling farmers’ income. This
41
Committee, therefore, provided inputs for the reforms to be initiated in the marketing system,
and brought out the Model Agricultural Produce and Livestock Marketing, (Promotion and
Facilitation) Act, 2017. This Model Act was shared with all the states and union territories on
24-April-2017.
3.9.2.1. Model APLM Act, 2017

In 2017, Government of India formulated the Model Agricultural Produce and Livestock
Marketing, (Promotion and Facilitation) Act, 2017. As per this new Model APLM Act, 2017,
the new definition of market area restricts the power of the market committee to enforce
regulation in their principal market yards and submarkets yards only. This will go a long way
towards removing the entry barriers and trade barriers in the agricultural marketing system of
the country, and is something in tune with the concept of unified market for agricultural
produce. This will also make the marketing system more competitive by attracting new players
and do away with the monopolistic and oligopolistic tendencies of the present players of the
APMC markets.
The inclusion of Livestock in the title of the new Model Act is a step in the right direction. In
some states the livestock and livestock products are not notified commodities. This will help
in introducing good marketing practices in the livestock sector.
The new Model Act will end the monopoly of APMC by allowing more players to set up
markets and create greater competition at the markets. The market fee caps under the new
Model Act (including developmental and other charges) at not more than 1 per cent for fruit
and vegetables, and 2 per cent for food grain. It caps commission agents’ fee at not more than
2 per cent for non-perishables and 4 per cent for perishables. This will drive efficiency in supply
chain, build a transparency in trade operations, and an equitable environment in marketing. The
new legislation will also have provision for promoting online or spot (e-national agriculture
market) agriculture market platforms and ensure that all these measures are revenue neutral for
States. The distinguishing features of the Model APLM Act, 2017 are:
(i) Abolition of fragmentation of market within the State/UT by removing the concept of
notified market area in so far as enforcement of regulation by Agricultural Produce
and Livestock Market Committee (APLMC) is concerned (State/UT level single
market).
(ii) Full democratization of Market Committee and State/UT Marketing Board.
(iii) Disintermediation of food supply chain by integration of farmers with processors,
exporters, bulk retailers and consumers
(iv) Clear demarcation of the powers and functions between Director of Agricultural
Marketing and Managing Director of State/UT Agricultural Marketing Board with the
objective that the former will have to largely carry out regulatory functions, while the
latter will be mandated with developmental responsibilities under the Act.
42
(v) Creation of a conducive environment for setting up and operating private wholesale
market yards and farmer consumer market yards, so as to enhance competition among
different markets and market players for the farmer’s produce, to the advantage of the
latter.
(vi) Promotion of direct interface between farmers and processors/ exporters/ bulk-buyers/
end users so as to reduce the price spread bringing advantage to both the producers &
the consumers.
(vii) Enabling declaration of warehouses/ silos/ cold storages and other structures/ space as
market sub-yard to provide better market access/ linkages to the farmers.
(viii) Giving freedom to the agriculturalists to sell their produce to the buyers and at the
place & time of their choice, to whom so ever and wherever they get better prices.
(ix) Promotion of e-trading to enhance transparency in trade operations and integration of
markets across geographies.
(x) Provisions for single point levy of market fee across the State and unified single
trading licence to realise cost-effective transactions.
(xi) Promotion of national market for agriculture produce through provisioning of inter-
state trading licence, grading and standardization and quality certification.
(xii) Rationalization of market fee & commission charges.
(xiii) Provision for Special Commodity Market yard(s) and Market yard(s) of National
Importance (MNI).
(xiv) Providing a level playing field to the licensees of private market yard, private market
sub-yard, electronic trading and direct marketing vis-à-vis the APLMCs and removing
the conflict of interest that the latter are likely to practise, if both development and
regulatory functions are centred in the same authority.
The Model APLM Act, 2017 delivers progressive and facilitative provisions for the integration
of processors, exporters, bulk buyers, end users, etc. with farmers. To overcome the conflict of
interest and rationally paying a fraction of market fee, there is provision that Director of
Agricultural Marketing will issue a license to such buyers and buyer will be liable to pay to
Revolving Marketing Development Fund at only 25 per cent of the applicable market fee. Apart
from above, all other restrictive provisions have been removed.
The provisions made for private markets is with intent of “ease of doing business”, as it
provides for level playing field both for APMC market and private market. Under the new
legislative model, APMC will not be the regulator of private markets and licensee of such
markets can collect the user charges and retain with him, thus, making it an economically viable
proposition.
The provision for declaring warehouses / silos / cold storages or other such structure or place
as market sub yards is made to provide better market access / linkages to farmers. This
43
development will help integrate the warehouses / silos / cold storages etc., into the online e-
platform. This, in turn, will help in facilitating operationalisation of warehouse receipt system
and capturing of information for a responsive market information system.
The Model APLM Act, 2017 is recommended for the States to adopt, to initiate greater and
relevant marketing changes in agriculture and to encourage a single national agriculture market.
Other reforms needed

In order that the Model Act is adopted by the States and UTs quickly, there need to be hand
held by way of organising orientation and training besides. Further, to make the provisions of
this Model Act operational, once adopted by the States an UTs, it is also important that the
Ministry rolls out the Model Rules at the earliest.
The inadequacies in the provisions relating to contract farming have been elaborated previously
in section 3.6. It is obvious, that contract farming can play a substantive role in de-risking the
farmers. To facilitate the entering into a contract whereby pre-production purchase price is
agreed upon, an independent and robust contract farming act is essential. Such an act should
provide for an efficient system for management of both inputs and outputs and create a formula
that promotes win-win situation for both parties. This will ensure sustainability and scale up.
The common apprehension about contract farming is windfall gains that the promoting
company may benefit of, and the unwillingness of the farmer to honour the agreement when it
is inconvenient. It is therefore be necessary to incorporate safety-net provisions, for the farmers
to also partake of any unexpected windfall gains due to any market buoyancy.
It is also important that an independent regulatory authority is brought in and remove the
conflict of interest by disengaging the contract farming stakeholders from the existing APMCs.
The core spirit of such an act should be to enable the small and marginal farmers to mobilise
themselves into groups and operate scales of economy in partnership with an industry. This
Committee, as authorised by the Ministry is already working on the APML Market Rules and
a model Contract Farming Act.
In recognition of the importance of warehousing as a promoter of optimal prices, and keeping

in mind the time bound of doubling the farmers’ income, this Committee is also working on
guidelines to popularise the pledge loan and e-NWR based marketing.
Strategic Vision
The vision to capture value from every grain, every ounce and every drop, has to have a strategy
that enables that all produce finds avenue to reach a point of value realisation. The value
realised has to be demand linked and hence optimal, and not merely linked to cost of inputs.
For long, the general approach towards farmers has been to provide them a minimum price for
their efforts. The recent National Commission for Farmers (NCF), also recommended that
farmers be provided a minimum price linked to cost of their inputs. These past approaches to
farmer’s income were not market linked, and instead were guided by the desire to offer farmers
44
succour in the form of a controlled minimum support price. While this patrician approach may
have some merit, this Committee felt there is need to have a more comprehensive approach -
one that looks to the future and creates market led growth for the farmers.
Succour is a form of fixed relief against the input costs, and will tend to restrict the farmers
from greater growth opportunities that today’s market generates. As established through the
price dispersions and wedges in the system (see chapter 2), the minimum price is far below the
final value that the produce generates. In the opinion of this Committee, the cost plus 30 per
cent, or even 50 per cent as suggested by the NCF only complicates matters by strengthening
focus on a minimum price structure, and pursuance of which, this Committee feels would be
an injustice to the farmers. It would be wrong to presume that markets cannot be made efficient
enough to provide farmers much more than the floor price.
The need of the hour is to work towards bringing farmers the optimal value, linked to market
prices, rather than a cost plus linked minimum price. There is no alternative to this approach,
if farmers are to realise enhanced farm income. For this, the agricultural marketing system
needs to have a new strategy, one that targets optimal prices to farmers. The strategy will be
overlaid with three broad targets:
a. To enable an effective flow of farm produce to its point of value realisation through the
means of efficient market networks.
b. To maintain a holistic value based system approach, and hence provide relevant market
intelligence to direct the flow of produce.
c. To match demand with supply so that producers fetch optimal value for their produce
rather than seeking a minimal value.
However, markets have multiple variables and are influenced by demand and supply dynamics
that can even be global in nature. There are therefore, no ideal or perfect markets and hence
there will remain the need, as explained earlier, for government intervention, from time to time.
In sum, the government would remain an active and robust player in the agricultural market
environment. The government’s intervention should however, not result in disruption of the
market environment but should only aim to safeguard the country’s food and nutritional
security, and as well allow for economic growth to farmers.
Annotation
In many areas of the country, a situation of surplus is frequently witnessed. The time has come
to develop competitiveness in the marketing system, to open the stage to more players, who
will compete to source the production and take advantage of the large consumption demand
across the country.
The country needs to be careful that events do not lead to the agriculture to develop character
of a public sector but constructively advance an enterprise approach towards agriculture.
Enterprise approach will require supporting farm to market connectivity and linkage with
45
demand information through changes in the way institutional support is directed. Further
interventions in agriculture productivity, must aim to make marketing equally productive while
optimising resource use during cultivation.
The marketing system has to provide farming enterprises market information in advance to
crop planning, as well as enable a choice of market channels. Such directional change should
aim at long term reduction in cost based support systems to move towards support that makes
the farmers more effective in responding to market demands. Systemic reforms can lead to the
establishment of an effective agricultural marketing system, and eventually also lead to the
complete deregulation, at least in the domestic market, in the coming decade.
Key Extracts
 Growth in farmer’s income is intrinsically linked to marketing of their harvested
produce, besides other input reforms.
 India’s agricultural marketing policies have undergone frequent changes but still carry
the legacy of a past closed economy.
 The past liberalisation in the industry and service sector has not been implemented in
the agricultural marketing sector.
 Fundamental reforms are needed in agricultural marketing to bring competition by
attracting new players, replacing monopolistic environment.
 The evolution in the marketing policies, with production in focus, have not promoted
a participatory market environment but led to subsidy linked production.
 Government support in agricultural marketing must match its ongoing support through
procurement, which on its own can disrupt the natural forces of the market.
 New generation reforms must supplement and complement the changes under GST and
to promote the concept of a single national market.
46
Capture every Grain, every Ounce & every Drop

A comprehensive revisit of marketing polices with an approach to make interventions predictable and
aligned with market dynamic is needed. This will also require greater participation of private sector.
The past experience and the constraints mentioned in the previous chapters call for a changed
and comprehensive approach to address the formidable issues of agricultural marketing in
India. The strategic approach would need to aim at a holistic marketing solutions so as to bring
optimal value to the farmers, which is linked to market price rather than minimum price, and a
changed architecture to open channels that can capture all the marketed surpluses.
Administered price versus Market price

This Committee for Doubling Farmers’ Income (DFI) realises the importance of setting floor
prices of various produce types, as it established the minimum support price. Originally, the
price support was indicated by notifying a minimal floor price for specific produce. A separate
price was used for direct procurement by FCI, which used to be higher than the minimal price.
Today, the notified Minimum Support Price (MSP) is the price at which procurement of
notified commodities is carried out by government agencies through FCI and other price
support or market intervention schemes.
The DFI Committee observes, that though MSP is an important intervention by the
government, it is not sufficient by itself. The honouring of the MSP through its use in
procurement is a more substantive condition in making the MSP mechanism effective. Hence,
there is the need for a bouquet of procurement tools that can cater to different commodities in
different ways.
However, this Committee also observed that MSP as discussed these days, is an administered
purchase price, based on a predetermined margin on the cost of inputs. Market prices are
observed to be far higher than the cost plus price model propounded under MSP mechanisms,
for the large basket of produce types, particularly after a lapse of a certain time period, post the
harvest.
The cost plus price proposed for farmers, by implication restricts them to a fixed margin against
cost of cultivation. Even if 50 per cent is added as profit margin on the costs, the subsequent
value to farmer is far removed from the wholesale price at terminal markets. The price
dispersion at farm-gates and between them and wholesale markets is large for most crops. This
is a relevant reality to be considered when assessing value of the produce and the share of that
value assigned to farmers. A mind-set shift that looks at market linked realisation, instead of
administered returns to farms is needed to take agriculture into enterprise mode.
The marketing system has to develop options that address the price dispersion between
wholesale markets and farm-gate. This will lead to market led price realisations and not
47
gratuitous cost plus price mechanism only. Farmers’ well-being is directly linked to their ability
to carry out exchange at markets of choice, and this vision is discussed further.
Marketable Surplus
The assessment of the marketable surplus is made after putting aside the own consumption of
the farmers. The producer is also a consumer, and marketable surplus is the quantum after
factoring in this first consumer. This
marketable quantity is the amount that is sent
to markets to get monetised. Usually, this
surplus undergoes exchange at the closest
platform or the primary market channel that
is accessible to the farmers.
However, these physical markets are linked

to the demand from consumers within their
catchment. They, therefore, have a limited
capacity to absorb the supply of produce.
When the supply is more than the immediate
demand, there is a surplus in that region’s
market – the supply minus the local demand
is the next level ‘surplus’ at these markets.
The system is designed to relieve the farmers

Figure 4.1 Illustrative of Demand-Value mismatch
of their produce at first instance, its value
being ascertained by the demand-supply mismatch, resulting in a drop in the price due to local
surplus. However, there remains a large demand at other market centres, which could have
returned a higher value for the producer, than that which is generated at the near-farm markets.
Table 4.1 Surplus occurs at each stage in marketing
Source Quantity Surplus

Consumer Remarks
Market (notional) (example)
Farmer 100 Farmer 97 Marketable surplus sent to nearest
market to get monetised
Primary retail 97 Consumer 60 Supply can be in surplus to demand
or market catchment at nearest market, which lowers value
Secondary 60 Consumer 30 Next level market get supplied,
market catchment which may also be in surplus
Terminal 30 Consumer -10 Last mile market remains unsated and
market catchment seeks imports
Figures as example
The farmer has no recourse to connect with demand farther afield and undertakes an exchange
at the first market, off-loading the entire quantity at the value determined locally. The
48
unstructured system creates opportunity for various intermediaries who undertake the logistics
to connect with the wider demand in the country, at more favourable value. The intermediaries
actually serve an important function of arranging the onward supply of produce, however, the
current system does nothing to structure this flow of produce, or open the market opportunity
for small farmers to direct their marketable surplus to other demand centres.
Marketable surplus is a function of consumption and must be evaluated against various stages
of demand and not merely at the level of farmer. Each market region has a limited capacity to
absorb the production and the remaining is the market’s ‘marketable surplus’. The value of a
farmer’s produce is a function of demand and any mismatch with supply will detract from real
market value, and will result in regional price dispersions.
The marketable surplus is distinct from the marketed surplus, which is expressed as a ratio of
output-marketed to output-produced. Though the marketed surplus ratios are increasing, the
marketing system must see that the exchange is possible at markets of choice and not
necessarily at the nearest or primary market.
The market architecture needs to be evaluated and re-engineered so that, as a system, it can
enable a directed flow of produce, to markets that can offer greater value to farmers.
Market demand for optimal value

Marketing of agricultural produce has at core a vital function, that is, to evaluate and project
the market demand for farm products. This is intrinsically linked to the business of agriculture
and income enhancement of farmers. This function is important to support agri-business, with
the necessary market intelligence, for planning and supply of both farm-inputs and outputs.
Market intelligence as a marketing function, is an important support activity to the overall

supply chain. It is important to understand that marketing is not the supply chain, but enables
the supply chain to be more of effective and efficient, providing direction and value to the
overall agenda of matching demand with supply to achieve optimal value realisation.
The following are the value adding aspects that will guide the operations that take agricultural
output to markets:
(i) Demand capture – ability to capture historical data on consumer behaviour and
analyse trends.
(ii) Demand Analytics – insights on market demand projections, to assess fluctuations
in consumption patterns in short term and long term.
(iii) Communication of demand – upstream and downstream dissemination of demand
assessments in advance of undertaking core activities in the supply chain.
(iv) Price forecasts – besides informing spot price signals, to provide future pricing
indicators for produce, on the basis of demand and supply projections.
49
(v) Regulatory impact – assess and recommend course corrective measures to rules and
regulations that impact the efficacy of the supply chain.
(vi) Marketing services – to provide services that enable a farmer to avail logistics to
connect with other markets (market platforms) to allow the farmer producer/owner
to make a transaction at a place and time of his/her choice.
Consumer awareness – making the consumer aware of the value of the agri-produce and
product consumed, in terms of nutritional and socio-economic terms. Marketing functions
include having influence on shaping the consumer’s choice.
Vision to Capture Surplus

There is no denying the fact that the farmer today feels himself to be languishing at the bottom
of the pyramid. The sector is suffering from the dichotomy of plenitude of production on the
one hand and poor income for the farmers on the other. Hence, what is needed on priority now
is to work out strategies to capture the totality of marketable surpluses generated by the farmers.
First and foremost, this calls for the creation of an enabling market environment with in-built
mechanism to absorb as high a percentage as possible or the minimum 60 per cent of the
surpluses as mentioned in table below, through an efficient market environment. The same
table below also suggests an indicative breakup of various filters that can be deployed to
capture the 100 per cent of marketable surpluses of different produce and offer the farmers
optimal value on their produce.
Table 4.2 Breakup of sources to capture the 100 per cent of surpluses
Primary Targeted share
SN Intervention Mode Nature of Produce
responsibility in value capture
Open market price
1. Efficient market Environment 60% All produce types
discovery
2 FCI Operations Government of Paddy & wheat
3-5%
3 PSS & PSF Operations India Pulses & oilseeds
4 MAS (Market Assurance States primarily
All cereals & oilseeds
System) Schemes & with support from
2-3% (except wheat, paddy)
Operations GoI
5 MIS Operations GoI and States Perishable produce
6 Private Commercial Trade Private sector with
Joint venture (majority share incentives from 3-5% All produce types
by private sector) Govt.
7 Cooperatives
8 Contract farming All produce types
9 Direct marketing (farmer- (agricultural,
consumer / farmer-bulk) Cafeteria of
25-30% horticultural,
10 Special focus on sensitive initiatives
plantation & livestock
trios - potato, onion & tomato produce)
– through models like Safal
DFI Commitee
The targeted market share for each intervention mode is a broad based guideline, as the
marketable surplus will vary across produce types. The share of surplus (marketed surplus) that
50
goes to market will depend on holding capability of the farmers and his or her own consumption
requirement which they project till the next harvest and the extent of food losses incurred.
The strategy behind market capture is indicated as follows:

a) The 60 per cent of surplus is to be targeted for capture by the open and free market. This
would include the entire basket of agricultural produce, food and non-food. For this, the
marketing network needs to be opened to a larger number of actors, including alternate
market channels.
b) The remaining 40 per cent of produce to be captured through other marketing mechanisms,
would primarily focus on food output, such as foodgrains, pulses, oilseeds, nutri-cereals,
fruits, vegetables and dairy products including milk. This would be categorised under-
i. Ongoing procurement by Government, vide operations of FCI, PSS and PSF.
Currently, these operations procure about (55 to 65 million tons) of cereals and
pulses, which is about 25 per cent of foodgrains produced. This will account for
about 5 per cent of the total agricultural produce of the country.
ii. A similar quantity can be targeted through private stockists. A special scheme to
bring private sector into procurement operations has been proposed in Chapter 6 of
this document.
iii. The ongoing Market Intervention Scheme (MIS) program of the Central government
in partnership with the State governments currently intervenes to procure perishable
produce like fruits and vegetables for which no MSP is notified. The procurement is
not very impressive as seen from the negligible quantity of fruits and vegetables
procured. Along with a new proposed market assurance scheme (MAS), which
provides total freedom to the States to intervene, and procure any cereal (other wheat
& paddy), pulses and oilseeds, then about 2 to 3 per cent of the total agricultural
production can be targeted.
iv. Another cafeteria of initiatives, by way of special interventions in case of sensitive
crops like tomato, onion & potato; promoting market channels by mode of
cooperatives, contracted cultivation and direct industrial marketing can be envisaged
to handle the remaining, approximately 28-30 per cent of the agricultural output of
the country, that includes livestock, horticultural and plantation produce.
A new market architecture, keeping in mind the key system of value linked supply chain is
proposed in the following chapter.
Value chain & supply chain

Value chain is a term that conventionally refers to the set of core activities and support
functions, internal to a business entity, to create and deliver its goods or services. Each core
activity is captive to the firm and required to add value to make the individual enterprise more
competitive in its functioning viz other firms in the same business. The individual firm or
business unit, operates under independent capital and management, to achieve its desired
51
outcomes. Value chain optimisation refers to optimising the value capturing activities and the
internal processes/procedures to improve the efficiency and competitive advantage of
individual firms.
Supply chain refers to the process involved in fulfilling the flow of raw materials or goods from
source to point of consumption. Very few business entities have the entire external supply chain
as a captive activity under their ownership. The supply chain normally requires the system-
wide integrated functioning of multiple firms, each actor having his/her own value chain, to
connect supply with demand. A supply chain can be product agnostic and the actors can be
transient in nature, as each is free to transact functions with others. Supply chain optimisation
means managing and coordinating the chain of custody of the goods from supply side to
demand. A value system approach requires coordinating and optimising the range of
interrelated activities, by multiple stakeholders, each being an independent value chain.
In the agri-supply chain, each actor; the producer, aggregator, transporter, warehousing unit,
processor, distributor and retailer; is not operating under any single umbrella of capital or
management. Each operates individual business(es), and optimise their internal value adding
functions to remain competitive. Single business entities can, through acquisition and mergers,
take ownership and internalise all the functions of the larger supply chain, but such vertical
integration has high risks and is rare.
As such, the agri-supply chain requires the collaborative functioning of independent value
chains as segments of the supply chain system. Since all actors play a role in fulfilling flow of
goods for market delivery, they control a share in the final value realisation. This is also referred
to as the agri-value system or integrated value chain. India’s agri-value system or agricultural
marketing system is currently a multi-layered composite of many actors, largely serving a push
mode into markets. To take agriculture from push mode to pull mode of marketing, an inverse
approach or fork-to-farm value based system needs to be encouraged and developed.
An Agricultural Value System Platform is recommended, to facilitate and guide the

development of modern supply chains that will be cross regional in nature and promote demand
based trade in agricultural produce. The framework of the proposed platform will be in
partnership with think-tanks, industry, academia, donor agencies and government (detailed in
Chapter 8). The agenda will be to promote commercial projects that will function as a market
linked system or an integrated supply chain of agricultural produce. The outcome focus will be
to enhance the value captured by farmers to lead to doubling of their income.
The short term approach will be to dovetail ongoing schemes to support projects that improve
the throughput of produce from farms to secondary markets, skipping intermediary markets.
For the long term, the proposed platform will also serve to optimise the value chain activities
of farming units, by providing value added inputs such as market linked crop planning, resource
management, partnership with other supply chain actors, coordinate extension activities and
assist in improving access to local market channels.
52
Value chain analysis

The chain of value adding activities for each individual enterprise will vary depending on its
core function, produce being handled, distance to market, volume being handled, capacity of
the enterprise and various other factors. The pervading and most relevant information that
integrates all activities is primarily the assessment of demand from target market.
Table 4.3 Range of value capturing activities and items by actors in the larger value system
Activity type Factors effecting Competitive Advantage
Primary inputs - Planting/Feedstock: Availability of (a) Seed (b) Planting material (c)
 Source Livestock (d) Feed, (e) others
 Quality - Expected yield: match advance information on market demand
 Quantity - INM/IPM: Fertiliser/pesticides/organic manure/feed
 Price - Irrigation: Micro or conventional
Cultivation or - Soil health, water quality
Production - Cultivation practices: Open field, protected, orchard, others.
- INM/IPM application practices, veterinary practices
- Livestock management: monitoring, feeding, health
- Harvesting produce: HAACP, assembling/pooling/collection
Post-production - Technology adopted: ICAR package of practices, others
practices - Aggregation, staging and dispatch to local or wholesale markets
- Preconditioning: Need based cleaning, sorting & packaging
- Transport and/or Storage facilities, linked to holding life of produce
- Market Linkages: Where and when to send the produce
- Market channels: distance, access, local and terminal market demand
Institutional - Food or agro-processing: for the processing variety produce
inputs - Organisation of farmers into FPOs and other producer groups
 Credit - Collaboration / Partnership / Services models
 Insurance - Skill Status, front line demos, program awareness
 Extension - Lab to Land, capacity building, others
 Markets
Infrastructure - Infrastructure for irrigation/fertigation, plant or animal health, farm
for operations mechanisation, on-farm handling, on-farm storage, others
- PHM infrastructure: produce transport, warehousing/cold storage,
pooling/assembly/pack-house, preconditioning lines, ripening
- Market channels: market yards, processing units, alternate channels,
farmer markets, e-NAM, institutional markets, others
Market demand - Demand for specific produce types, over time
Value assessment - Quality ranges preferred by produce consumer
- Sources to meet the demand cost to meet the demand
- Value variations on basis of supply fluctuations
Value chain analysis requires identifying the activities of individual enterprises, and applying
a cost benefit diagnostics to aid optimisation decisions. To evaluate the entire value system,
the same logic is applied system-wide to a cluster of firms, a region or the whole country, to
arrive at a broad analysis of the larger value system. An organised and coordinated supply chain
is synonymous with integrated value chain or the agri-value system.
53
Figure 4.2 Range of system-wide activities & items for analysing the integrated value chain
Primary inputs: Institutional inputs:

Cultivation or Post-production Infrastructure for
Source, Quality Credit, Market,
Production Practices operations
Quantity, Price Insurance, Extension
Planting/Feed: Cultivation Organisation of Infrastructure for

Market Linkages:
Availability of- practices: Open Where and when farmers into irrigation/
(a) Planting material Field, Protected, FPO/FIGs and other fertigation, plant or
to send produce
(b) Seed Orchard, others. producer group animal health
(c) Livestock
(d) Feed, others Preconditioning:
INM/IPM Need based Farm
application, Collaboration /
cleaning, sorting & mechanisation, on-
veterinary Partnership models
Expected yield: packaging farm handling, on-
match advance practices, food farm storage,
information on safety, etc. others.
Staging and
market demand Skill Status, front
dispatch to local or
Livestock line demos,
wholesale markets PHM
management: program awareness
INM/IPM: infrastructure:
monitoring,
Fertiliser/Pesticides/ assembly/pack-
feeding, animal Transport and/or
Organic/animal house/pooling,
health Storage facilities,
health Lab to Land, Others preconditioning
linked to holding
Harvesting produce: life of produce
Irrigation: Micro, PHM: transport,
Timing, HAACP, Market to facilitate warehousing / cold
conventional, others
assembling/ Market channels: exchange, price storage, ripening
pooling/collection distance, access, transparency,
Soil Health, Water local and terminal market demand Market channels:
quality, planning
Technologies market yards,
adopted: ICAR processing units,
package of Wholesale, Food or agro-
alternate channels,
practices, others Retail, processing: for
farmer markets, e-
Direct process variety
NAM, institutional
markets, others.
Pawanexh Kohli Pawanexh Kohli
Primary Marketing Intelligence and Information

Market Requirement – Annual, Monthly, Weekly estimates - Quality, Quantity, Place, Time, Form
A system wide evaluation is a policy level tool to target reforms, but the desired value add to
the involved actors will eventually result from individual value chain optimisation. Information
on targeted demand will make each activity, from pre-production, production and post-
production to be market linked. The demand projection is vital information, in any value chain,
so as to avoid cost overruns and make the venture profitable. Understanding market demand
includes measures of quantity, quality, food safety, and effects price discovery at the time of
undertaking a transaction.
The driving force of a business enterprise is timely and accurate information on market
demand. Agriculture too, will need information at regular intervals to optimise the agri-
business value chain system. The information would not only help to make market linked
decisions during crop planning, input sourcing and harvest time-lines, but also provide due
cause for the right sized and rightly located infrastructure, such that capacity creation is with
market flow and throughputs in mind.
54
An integrated value chain is customarily product centric, and the players play their respective
roles along the combined chain of activities that comprise the supply chain for that product.
The system or integrated value chain comprises the series of activities that vertically
assimilated actors will undertake, to bring a product from concept to final use and disposal.
In the integrated value chain system, each assimilated actor, can themselves be product
agnostic, and can bring their resources into use for various other products. For example, a
farmer cultivating and selling mangoes can do intercropping of tomatoes and partake in the
tomato value chain, while retaining his role in the mango value chain. Similarly a transporter
may be part of the potato delivery system and at the next opportunity, use his/her assets to be
a part of the value chain that moves paper rolls. Inter-sectoral shifts of value chain actors is not
uncommon, and is in fact important for optimising capacity utilisation – their value offering.
Farmers can adopt new value chains when they diversify into other crops, undertake inter-
cropping and handle multiple produce types. However, in the post-production phase, they can
upgrade their role in the marketing of each product by undertaking next level activities need to
connect to more optimal markets. Focus and support to identify and strengthen specific value
chains has the potential to enhance income and add possibility to expand market range.
Key Extracts
 India’s agricultural marketing policies have undergone frequent changes but still carry
the legacy of a previous closed economy.
 The administered pricing of agricultural produce can be restrictive to future growth in
farmers’ income and refutes true value based pricing.
 A value based system is demand linked, and therefore pricing that is market-led is
optimal and allows agriculture to be more intrinsically linked to economic growth.
 The marketable surplus is a variable along the marketing chain and correlates to the
capacity of a market’s consumer base to absorb the supply at any instance.
 An inter-connected market system, will allow the supply to skip a market level and
directly connect for transactions at the next level in the supply chain.
 A system-wide integration to meet demand with supply, involves multiple value chains
interacting and the actors integrating their activities into the supply chain.
 The key factor for enterprise level optimisation and supply chain optimisation is to
extract best value through a targeted production and delivery system.
55
New Market Architecture

Market infrastructure and other direct government facilitation for the greater welfare of farmers. The
market architecture must promote inter-connectivity between markets and achieve a seamless flow of
produce of varying characteristics. The marketing system should ideally function in hub & spoke mode
and enable skip level selling while enhancing a choice of markets within accessible range of farmers.
Background
Growth in agriculture and allied sectors positively impacts the well-being of farmers in
particular and the country at large. The farmers have served the nation well by achieving
increase of agricultural output, and it is time that they are supported by a robust and
comprehensive market structure that will lead to greater monetisation of the varied nature and
substantive quantities of their marketable surpluses. Therefore, Government’s focus needs to
be more on the post-production interventions including marketing. While government led
market interventions like procurements of wheat & paddy by Food Corporation of India (FCI);
of pulses & oil seeds under Price Support Scheme (PSS); and that of perishables under Market
Intervention Scheme (MIS) are important, they cannot be a wholesome substitute for an
efficient marketing system.
Agriculture in India is dominated by small and marginal farmers, who constitute about 85 per
cent of the total landholdings, with around 40 per cent share in the total marketable surpluses.
Similarly, in case of livestock farming and fisheries, the output volumes load are small and
dispersed at individual level and have to rely on the marketing system to link with wholesalers
who deal in bulk volumes.
An efficient marketing system will at first instance require an inter-connected network of

market centres. The inter-connectivity of the market centres will require to be correlated with
the type of produce being handled at the market networks.
The National Commission on Agriculture (established in 1970) envisaged that by the year
2000, the country would have 30,000 assembly markets. As per the Commission, markets
should be created close to villages, within a radius of 5 km. For this purpose, it recommended
that existing local shandies should to operate on a daily schedule and be brought under
regulation and upgraded to full-fledged assembly markets or sub-market yards.13 The same
recommendation was repeated by the National Commission on Farmers, 2004.
In the year 1970, the country had 19 States with 356 districts only, which by now have grown
to 30 States and around 700 districts. In 1970 there were 70 million land holdings, which are
now are approximately to 120 million (Census 2011). The total agricultural production
including foodgrains, horticulture, spices, oilseeds, plantation crops, milk is more than one
13 National Commission on Agriculture, Part XII - Chapter 56 (56.1.2)
57
billion tonnes. However, the distance a farmer can travel in one hour is far more than 5 km,
with the country having created a vast network of rural roads and highways.
Today, there are about 2,284 regulated markets with 2339 number of principal and 4276
number of sub-market yards. On average, the market yards cover about 463 sq. km of
geographical area or a radius of 12 km. However, there is a large difference regionally. In
Assam, a wholesale market covers about 6442 sq. km (45 km radius), whereas in Punjab market
covers 116 sq. km of area (6 km radius).
The country also has about 22,932 rural periodic markets accessed by farmers. These markets
operate at intervals of a week or more, though in a few cases they are in function daily. The
periodic markets cover an average area of 146 sq. km or a radius of 7 km. Further, some private
markets have also come up in many states.
These rural periodical markets are not typically serving the needs as envisaged originally by
the Commission of 1970. They operate as points of transaction, and do not provide any
facilitation for farmers to link with other wholesale agricultural markets like the APMCs. Each
market type, has become a point of sale where consumers or aggregators release the farmer of
the harvested value, and the earlier conceived notion of assembly and onwards linkage has not
been developed.
Existing market architecture
APMC markets
The current market system comprises about 2,284 APMCs which operate 2339 principal
markets. These principal markets have extended their footprint through sub-market yards,
which total 4,276. However, these sub-market yards are expected to operate as a part of the
principal market yard under the associated APMC. By and large, sub-market yards are poor in
terms of infrastructure, manpower and operations relative to their principal market yards. In
essence, there are only 2339 principal markets which operate out of 6,615 locations (principal
market yards plus their sub-market yards). These 2339 principal markets are further categorised
as primary, secondary or terminal markets, depending on their location and the volume being
handled.
Wholesale markets Principal markets
Each principal market, has a designated (APMC) with their
Regulated auction sub-market yards
area under its coverage. Regulations
required, that perforce, the notified
produce in the region be transacted only Rural Periodical Markets Informal retail,
Unorganised retail small lot sales
in these regulated yards.
Farmers / Agents / Intermediary

Therefore, a farmer is, by regulations,
unable to freely transact an exchange with Figure 5.1 Existing market structure – which
a buyer from outside the APMC control enforces an intermediary exchange at every stage
58
area. This has tended to enforce a monopolistic mechanism for agricultural produce trade.
Furthermore, the farmers have no facilitating system to bypass the local market and connect
with larger or better paying market - they have no modern organised facility or assembly centre
that aggregate and transport their produce for undertaking a transaction at other market centres.
Even direct sales at APMC markets, which are principally wholesale markets, is difficult for
many farmers. The small & marginal farmers, with uneconomical sized marketable lots, find it
difficult to aggregate their produce to move to these APMCs to participate in the auction system
for suitable price discovery. They therefore, resort to local agents and traders, who relieve the
small farmer of their produce at locally determined prices, and function as first mile aggregators
and transport to transact themselves at the APMC markets. This intermediation has naturally
been depriving the farmer-producers from aiming for optimal or market-linked price
realisation. The current market architecture, thus, does not provide farmers with a choice of
markets, but imposes constraints to their selling options.
As per reports, the sub-market yards largely function as a location for the government
procurement agencies and do not provide opportunity for open auction. The sub-market yards
as of now, handle less than 5 per cent of the volume handled in the principal yards and are
irregular in their operations.
Rural Periodical Markets

There are in the country large number of rural periodical markets (RPMs) located at village
level. These are small haats / shandies that operate at intervals of a week or two and attract
both sellers and consumers from the hinterland. An assortment of daily needs including farm
produce (grains, fruits & vegetables are traded) at these places. These RPMs, numbering about
22,932 (as on 31.03.2017) are owned and managed by different agencies, namely, individuals,
panchayats, municipalities, including State Agricultural Marketing Boards (SAMBs) /
Agricultural Produce Market Committee (APMCs).
These RPMs function under traditionally existing informal procedures to provide the small
farmers the opportunity to directly retail to local consumers. In addition, aggregators and agents
also frequent these haats to informally serve the marketing interests of small farmers. However,
the opportunity to connect with larger markets that offer better value is not available to the
small farmers. These RPMs serve as a stop gap measure, for farmers to tap into local retail
buyers for quick transactions. The key bottleneck is a lack of facilities for the small farmers to
consolidate their produce into viable quantities to link with other markets. This absence of
facilities to pool and move the produce, also tends to deter the farmers from any collaborative
farming, as their direct marketing opportunity is limited to demand local consumers.
In parallel, many states have adopted farmer-consumer markets with varied success. These go
by the names of Rythu Bazaar (A.P. and Telangana), Raitar Santhe (Karnataka), Apni Mandi
(Haryana & Punjab), Shetkari Bazaar (Maharashtra), Uzhavar Saathaigal (Tamil Nadu) and
Krishak Bazaar (Odisha). About 488 such markets are reported across the country, and provide
59
a platform mostly for transactions of produce like fruits, vegetables and flowers which are
perishable in nature. The produce sold in these markets service the limited local demand.
Density of Markets
The availability and access to markets by all farmers in general, and small and marginal farmers
in particular, is an important factor in designing the market architecture. Frequently, the market
density targets, are in relation to the recommendations made by the National Commission on
Agriculture (1976). That Commission had recommended that a market be made available
within range of 5 km of farms, a distance that is negotiable by walk or cart within an hour. This
assessment was subsequently reiterated by the National Commission on Farmers (2004).
In pursuing this recommendation, the optimal market coverage is interpreted to target a

catchment area of 80 sq. km (5 km radius) for each agricultural market. However, the original
recommendation was made at a time when road connectivity was minimal and farmers would
physically bring their produce on head loads or on camel or bullock carts.
This Committee is of the opinion that the travel time - of one to two hours - from farm to market
be the primary factor to ascertain market density, and not the physical distance. Creating
markets in a radius of 5 km would not be relevant in this age of rural road networks, when
farmers are frequently using motorised transport or tractor-trolleys. In areas of large surplus
production, market catchment would also not need to factor in the wider national demand, and
not related only to the local consuming population of the region.
Market density would therefore, be factored by involving multiple variables, including rural
road connectivity, number of farmers in the region, type of produce, production (with cropping
pattern and intensity) and access through road/rail to the unified national market. These factors
are local and specific to each producing region and should be evaluated accordingly, when
creating district and state level plans. The size of each market, the surrounding terrain and the
clustering of farms must also be kept in mind. By and large, a time radius of one to two hours,
for farmers to negotiate the distance from farms to markets, can be used as the guiding factor,
in place of a kilometre based radius, to assess required market density.
Saturating the agricultural landscape, by blindly populating it with many market centres may
not be a cost effective intervention. Addressing the need for aggregation and better access by
farmers to state and national centres through collection centres would be a preferred option.
Establishing assembly/collection centres, will initiate a hub and spoke system, these being the
backward linkages of the wholesale markets or end buyer. These will open access to wholesale
markets, besides serving local retail transactions. However, a broad need assessment is
explained in the following section.
Assessment of Gap
The new Model APLM Act has provisions for establishing different models of markets in
private sector, notifying warehouses and cold storages as markets in addition to government
60
Table 5.1 Basic data on marketing linked information from major States -
Area under Cropping Foodgrain &
(WM= No. of Area No. of Horti Prod Inhabited
Name of major States Agri 000 ha Intensity Total Population oilseeds Prod
PMY+SMY) RPM Sq.km Farmers ('000 tons) Villages
(2012-13) (2012-13) ('000 tons)
Andhra Pradesh 179 0 160205 8007 122.8 49471555 6491522 10446 19883 26286
Arunachal Pradesh 13 257 83743 285 131.7 1382611 302723 372 423 5258
Assam 226 1140 78438 4197 149.3 31169272 4061627 5470 6843 25372
Bihar 0 1794 94163 7778 144 103804637 7196226 15206 18624 39073
Chhattisgarh 187 1132 135191 5691 121.8 25540196 4004796 9097 9303 19567
Gujarat 400 0 196024 12600 122.3 60383628 5447500 7673 23162 17843
Haryana 281 0 44212 6376 181.5 25353081 2480801 16865 8016 6642
Himachal Pradesh 56 0 55673 947 174.2 6856509 2062062 1635 2447 17882
Jammu & Kashmir 25 8 222236 1162 156 12548926 1245316 1610 3535 6337
Jharkhand 190 602 79714 1657 117.9 32966238 3814832 5147 4764 29492
Karnataka 513 730 191791 11748 120 61130704 6580649 9228 20473 27397
Kerala 6 1100 38852 2592 126.5 33387677 670253 510 9867 1017
Madhya Pradesh 545 308252 23130 150.7 72597565 9844439 32627 24061 51929
Maharashtra 902 3500 307713 21874 126.1 112372972 12569373 15121 21668 40959
Manipur 0 119 22327 309 100 2721756 574031 503 811 2515
Meghalaya 2 124 22429 340 119 2964007 494675 285 1117 6459
Mizoram 0 220 21081 116 100 1091014 229603 65 613 704
Nagaland 19 174 16579 489 128.5 1980602 537702 602 1045 1400
Odisha 436 1548 155707 5069 115.6 41947358 4103989 9092 11765 47675
Punjab 435 1395 50362 7870 189.6 27704236 1934511 27603 6627 12168
Rajasthan 454 0 342239 23954 137 68621012 13618870 19148 3785 43264
Sikkim 0 19 7096 144 185.7 607688 117401 7069 425 425
Tamil Nadu 286 501 130060 5140 113.1 72138958 4248457 8056 17364 15049
Telangana 260 0 114840 5643 122.8 35193978 - 8250 7177 -
Tripura 21 533 10486 368 144.1 3671032 295947 731 1682 863
Uttar Pradesh 623 5107 240928 25821 155.9 199581477 19057888 49442 37135 97814
Uttarakhand 66 56 53483 1124 159.2 10116752 1580423 1777 1663 15745
West Bengal 475 2900 88752 9678 185.9 91347736 5116688 17057 30148 37469
WM (Wholesale markets) = sum of Primary Market yards and Secondary Market Yards. RPM = Rural Periodical Markets Data provided by States to DMI
See Annexures for details
If ranking the States by geographical areas, the sq.km covered per market will be far lower than when assessing by gross area under agriculture.
However, if farms are not contiguous or clustered close to markets, then markets can remain underserviced or periodical.
61
Table 5.2 Comparative market coverage by States – across all market types.
Geographic area Net sown area Gross cropped Farmers Villages
States
per market per market area per market per market per market
Available markets, which include the APMC markets
Andhra Pradesh 895 447 549 36265 147 with sub-market yards and the Rural Periodical
Arunachal Pradesh 310 11 14 1121 19 Markets, when evaluated against geographical are of
Assam 57 31 46 2973 19 the State will show that West Bengal and Punjab are
Bihar 52 43 62 4011 22 have a similar density ratio. Odisha, Assam,
Chhattisgarh 102 43 53 3036 15 Meghalaya, Arunachal Pradesh and Jharkhand are
Gujarat 490 315 385 13619 45 examples of low market density per geographical
Haryana 157 227 412 8828 24 range. Yet when compared against gross cropped
Himachal Pradesh 994 169 294 36823 319 area, these states have better market coverage than
Jammu & Kashmir 6734 352 549 37737 192
Punjab and West Bengal.
Jharkhand 101 21 25 4817 37
Karnataka 154 95 113 5294 22
Kerala 35 23 30 606 1 Similarly, assessing market density on the basis of
Madhya Pradesh 566 424 640 18063 95 production alone is not sufficient as the type of crop,
Maharashtra 70 50 63 2855 9 number of harvests in a year and scope to increase
Manipur 188 26 26 4824 21 cropping intensity will have a role in market footfall.
Meghalaya 178 27 32 3926 51 Furthermore, if Primary Rural Agri-markets as
Mizoram 96 5 5 1044 3 collection and dispatch hubs are established, the
Nagaland 86 25 33 2786 7 farmer footfall in wholesale markets can reduce as
Odisha 78 26 30 2069 24
markets will handle flow of produce rather than
Punjab 28 43 82 1057 7
individual transactions. Each primary aggregation
Rajasthan 754 528 723 29998 95
Sikkim 373 76 140 6179 22 centres would electronically dispense with the
Tamil Nadu 165 65 74 5398 19 transactions remotely on behalf of the local farmers.
Telangana 442 217 267 - -
Tripura 19 7 10 534 2 The main criteria of distance or time taken for farmer
Uttar Pradesh 42 45 70 3326 17 to travel to markets is not readily available for
Uttarakhand 438 92 147 12954 129 evaluation and may need primary research.
West Bengal 26 29 53 1516 11
Area in sq.km, Population information as per census. Cropping intensity can indicate cultivation patterns and scope for future growth in production and market requirement.
62
sector markets. The planning for increasing the market access by farmers is to be done by
establishing markets with different ownership and management to create a competitive
environment and creating multiple options for selling the produce.
The state and district level planners need to consider following key factors, in order of priority,
to assess the need for a market-
i. Road (or rail/waterway) connectivity to communicate produce to market.
ii. Reasonable travel time to wholesale market, linked to safe travel time for produce type
(eg. shorter for milk, longer for grain) and cost of travel.
iii. Number of farmers served by a market. As per information from States, on an average,
principal market yards (PMY) receive about 300 farmers daily during rabi and kharif
harvest season which last around 45-55 days respectively. Thus, peak footfalls of
farmers is for about 100 days in a year, farmers normally visiting twice in each season.
In case of sub-market yards (SMY), the footfall in the same periods is about 30-40
farmers daily and most come to sell at MSP to procurement agencies. A normative
figure of 15,000 farmers can be considered to work out the need for additional markets.
iv. Production quantity, the size of each market and its capacity to handle volumes should
be factored for prevailing crop type. On the basis of revenue generated from regulated
markets, a normative quantity of 60,000 tonnes per market can be used as one of the
criteria to work out requirement of additional regulated markets in the States.
v. Consumer population in the State can also be assessed as a factor for added market
requirement. However, with improved connectivity, the market channels including
online marketing will actually mean that markets in the future will cater to nation-wide
consumers under the unified national market.
In the opinion of the Committee, the footfall and volume of trade as explained above will
determine the need for a markets. These parameters in turn are largely a function of the
geographical area, gross cropped area, net sown area, quantity of output, number of farmers
and number of villages. It is advised, that the gap analysis of markets for the state/district is
made by assigning weights to various indicated factors.
At the national level, a broad gap analysis for the country with respect to wholesale agricultural
markets has been made. The States/UTs are initially grouped into region types on the basis of
relative ranking in terms of geographical area (A), total agricultural production (B) and
population (C). Accordingly, was given to the individual parameters as follows:
Weightage for type A regions is - Geographical area – 4, Production – 2, No. of Farmers – 2

and Population – 2; while weightage for type B regions is - Geographical area – 2, Production
– 4, No. of Farmers – 2 and population – 2 ; and for type C regions is - Geographical area – 2,
Production – 2, No. of Farmers – 3 and population – 3.
63
Table 5.3 Market Density Assessment States are advised to apply locally correlated weightage to parameters to develop a more appropriate need assessment
Regulated Geographic Markets needed Markets Markets Market Total Additional

Farmers Production Population
States/UTs markets area per by geographic required basis required basis required basis Markets regulated
per market per market per market
(PMY+SMY) market area production farmers population required markets
(A) Relatively higher Geographical area
Andhra Pradesh 248 657 15584 118 199482 519 487 322 330 435 187
Chhattisgarh 187 727 21416 81 136579 433 253 334 170 325 138
Gujarat 400 490 13619 72 150959 624 481 454 403 517 117
Karnataka 513 374 12828 65 119163 611 556 548 408 547 34
Madhya Pradesh 545 565 18063 97 133207 981 879 820 484 829 284
Odisha 436 357 9413 44 96210 496 320 342 280 387 Nil
Rajasthan 454 754 29998 48 151148 1090 365 1135 457 827 373
Telangana 260 442 9987 59 135361 366 256 216 235 288 28
Arunachal Pradesh 13 6442 23286 147 106355 267 32 25 9 120 107
Manipur 0 0 0 0 0 71 36 48 18 49 49
Meghalaya 2 11215 247338 1238 1482004 71 41 41 20 49 47
Mizoram 0 0 0 0 0 67 35 19 7 39 39
Nagaland 19 873 28300 132 104242 53 42 45 13 41 22
Sikkim 0 0 0 0 0 23 21 10 4 16 16
Tripura 21 500 14093 155 174811 33 54 25 24 34 13
Uttarakhand 58 922 27249 610 174427 170 590 132 67 226 168
Himachal Pradesh 56 994 36823 81 122438 177 76 172 46 130 74
Jammu & Kashmir 25 8889 49813 211 501957 708 88 104 84 338 313
Maharashtra 902 341 13935 32 124582 980 475 1047 749 846 Nil
(B) Relatively higher agri-production
Haryana 281 157 8828 85 90224 141 400 207 169 263 Nil
Punjab 435 116 4447 82 63688 160 594 161 185 339 Nil
Tamil Nadu 283 460 15012 107 254908 414 505 354 481 452 169
West Bengal 475 187 10772 104 192311 283 826 426 609 594 119
(C) Relatively higher Population
Delhi 16 93 2087 7 1049246 5 2 3 112 36 20
Goa 8 463 3919 316 182318 12 42 3 10 14 6
Kerala 0 0 0 0 0 124 176 56 223 143 143
Bihar 0 0 0 0 0 300 569 600 692 561 561
Jharkhand 190 420 20078 53 173507 254 167 318 220 246 56
Uttar Pradesh 623 387 30591 72 320356 767 752 1588 1331 1179 556
Assam 226 347 17972 60 137917 250 227 338 208 259 33
Total(A+B+C) 6,676 37,170 685,450 4078 6377,398 10,450 9,345 9,893 8,046 10,130 3,568
Regulated markets include PMY and SMY and it is assumed that all will function as wholesale markets, irrespective of current status of infrastructure. Data in this table includes market-yard
locations that may be currently inoperative
On broad assessment, there is a requirement for 10,130 wholesale markets functioning across the country .
64
As seen from the contents of the preceding table, the country will benefit from an additional
3568 wholesale markets; apart from strengthening all the existing 6676 number of principal
markets yards (PMY) and converting the existing sub-market yards (SMY) into independent
wholesale markets.
However, it is suggested that for a more credible assessment of additional markets, the
States/UTs may assign differentiated weightage to each parameter as per the unique situation
local to each region and work out the requirement.
The regional market requirements would preferably be developed through District and State
level plans. However, for the system to be effective, the back-end aggregation to initiate such
consolidated movement to wholesale markets is needed. A broad assessment indicates that
assembly points as aggregation centres can be developed near villages. These can be co-located
with the existing milk pooling centres or by upgrading the facilities at existing periodic retail
markets. The concept is explained in following sections.
In the opinion of the Committee, the priority is to upgrade the infrastructure in the existing
market system, so as to bring about an organised flow of produce from rural level to multiple
market zones, on the basis of demand signals. This will make agriculture truly market linked.
In sum, the country may require a total of 30,000 markets comprising wholesale markets, and
rural retail markets in the ratio of 1 : 2.
New Approach to Markets

The small and marginal farmers, as a majority, are restricted in their ability to move all their
surpluses into markets. The existing market architecture does not promote such facilitation and
rural market yards are merely points to assemble and transact, deficient in offering any systemic
linkage with the unified national market. Therefore, the architecture is lacking a value linked
system approach, and is limited to price mechanism that is locally derived, delinking the farmer
from the wider demand.
So far, most of marketing legislation reforms, in relation to the wholesale markets, had been
under the perception that the markets were directly accessed by farmers. This is not true in
practice. Furthermore, market access is not by individuals alone, but has to be correlated to the
managed flow of produce. Not much has been arranged to facilitate and provision the organised
flow of produce from village level, and allow the farmer and his/her production with choice of
access to markets, both across the country and international.
Both, restrictive regulatory practices and the absence of a suitable market structure that can
suck up the widely dispersed small lots of produce in an organised way, have deprived the
farmer from linking with markets of choice and hence his/her optimal share in the consumers’
rupee.
The DFI Committee revisited the market architecture and the data available for such analysis.
It is highlighted that the information is disjointed and a comprehensive redesign, specific to
each region is recommended. However, on a broad-based level, some key changes are urgent
to bring about sustained market linked growth for farmers. These changes are recommended
keeping in mind the existing assets and resources already available in the form of various
market types.
The new architecture will aim to inter-connect the farmers with multiple marketing
opportunities, through the wholesale and retail market networks. The Committee recommends
that the sub-market yards numbering 4276, be upgraded into full-fledged wholesale markets,
which will take the network from existing 2339 principal markets to about 6615 wholesale
market facilities in the country.
To feed these wholesale markets, the Rural Periodical Markets (RPMs), about 23,000 in
number, be upgraded into a function that enables aggregation and transport from village level
to wholesale markets of choice. It is advisable to build on the available infrastructure and
experience of the RPMs to establish large number of primary rural agricultural markets
(PRAMs) to provide the two following services:
i) direct marketing between producers and consumers;

ii) aggregation platforms for the small lots of farmers.
The PRAMs will be the foundation of the new market architecture, having facilities to
aggregate and organise the flow of farm produce and thereby, bring primary post-production
activities at village level. PRAM centres, having a dual function to serve as local retail markets
as well as assembly and aggregation centres, will deepen the market structure and broad-base
direct participation from farmers.
These decentralized primary

centres, will especially benefit the
small & marginal farmers who have
the most need for aggregation of
produce. These PRAMs will allow
farmers a choice to connect with
any market in the nation, provided
viable transport and storage lots are
developed.
This mechanism is similar to the

way milk supply chain works,
where small lots are pooled into Figure 5.2 PRAMs as foundation of market structure will
viable transport lots to connect with generate a directed flow of trade
the processing unit at a distance.
66
In pursuing the establishment of PRAMs, the capability to connect the produce in suitable
quantities with markets of choice will be developed. Further, with farmers enabled with a
choice of markets, the element of market to market competition will follow, to the advantage
of the producers.
The main functional options of the new architecture are:
Market Function Ownership and Management

Aggregation and transportation
collection centres
- Aggregation
Assembly &
- Assaying and weighment

Primary - Post-harvest handling Gram Panchayat/ Town
Rural Agri- - Short term storage Committee/ Municipal
Market - Transportation Committee / Entrepreneur /
centres - Payment FPO / VPO / Cooperative /
(PRAM) APMC
Markets
- Buying & selling small lots

Retail
- Multi commodity in nature

- Transportation
- Auction of produce Agriculture Produce Market
Wholesale markets
- Payment Committee / Private Markets /
(primary, secondary, terminal)
- Storage links / Societies
Private companies / State
- Assaying
government / Procurement
Warehouses - Inventory Management
agencies / Commodity
(also designated as markets) - Pledge Loan
exchanges / FPO / VPO /
- Transportation
Cooperative / Entrepreneur
The model Agricultural Produce and Livestock Marketing (Promotion & Facilitation) Act
2017, includes provisions that aid in increasing the density of different types of Wholesale
Agriculture Markets, namely, primary, secondary and terminal. There is also provision to
expand physical markets through licensing of existing warehouses and cold storages, as well
the market network expansion through virtual online market networks.
The existing wholesale markets will get an expanded footprint with the adoption of the model
APLM Act, 2017 resulting in an increase in the wholesale exchange. The inclusion of existing
warehousing will also ease the physical bottlenecks at existing wholesale markets. This
including online markets, will result in an immediate expansion of markets available and help
the long intended and desired level of market density.
The Committee also recognises, that neither the existing APMC Acts of the states, nor the
Model APLM Act, 2107 include provisions relating to these rural markets, focussed as they
are on wholesale markets only. This Committee recommends framing of Primary Rural
Agricultural Markets (PRAM) as a marketing infrastructure component.
67
Primary Rural Agri-Market (PRAM) centres

The Committee felt that the first-mile stage in the produces’ movement to value realisation,
needs to be strengthened. To align with the new strategy proposed, there is need to restructure
how the markets facilitate the movement of farm produce to its multiple consumption points.
There is the need to create first stage (at village or grameen level), primary rural agri-market
centres (PRAM) as the back-end spokes that feed into the forward hub-spoke network.
Figure 5.3 Primary Retail Agri-Market centres to organise village level handling
These grameen or primary rural agricultural market centres (PRAM) will have two roles. The
first will be as local retail markets for the farmers to transact sales with consumers from near-
farm locations. The second, will be as primary aggregation/pooling/assembly centres of farm
produce, to facilitate the onwards movement to other market destinations. These can be located
at existing rural periodical markets which are at major village/hobli/firqa/gram panchayat centres.
Being close to the farm-gates (at grameen level), the base of the pyramid will allow the farmers
and rural communities to scale up their role in the overall value chain.
Each PRAM would suitably take up the services of a village level logistics hub, where milk
output would be pooled, horticultural produce would undergo pre-conditioning, and other
agricultural produce would be assayed and graded for onwards connectivity to next level
markets. Hence, the PRAMs would necessarily have facilities that will allow first stage post-
production activities at the first mile, located close to the villages and farms.
The PRAM are comparable to the thousands of assembly markets as also envisaged in the
National Commission of Agriculture (1976), which were expected to function as assembly
points for farmers with small scale load aggregation. These kind of organised assembly and
68
aggregation hubs, are a critical weak link that prevents the small famers to organise their
forward linkages and therefore are forced to dispose their small lots to intermediary aggregators
at the first instance.
Figure 5.4 PRAM in the hub and spoke logistics network
The collection facility will function for bulking (gathering together produce from different
farmers to send to the buyer collectively). Such collection facility should be located within one
hour travel of producing areas. It should also focus on requirement of orderly marketing i.e.
cleaning grading, packing, labelling, etc.
The experience so far, however, shows that it has been difficult to promote primary wholesale
agricultural markets, where farmer-sellers outnumber the traders. The Primary Rural Agri-
Markets (PRAMs), will allow a large number of farmers to collaborate and direct their produce
to wholesale markets of choice across the country. The ability to aggregate and communicate
produce to other regions, will allow market-to-market competition to the farmers benefit.
This back-end organisation will also create near-farm jobs at the small pack-houses, mini-
storages and the supporting processing units that will come up in the PRAMs. The type of
technology deployed will depend on the type of produce from their catchment region. Existing
aggregators can be upgraded as managers of these facilities, as well involve large food retailers
that would wish to secure their back-end sourcing.
69
Creation of such retail and collection centres at block level that allows a supply cascade could
potentially generate higher returns throughout the supply chain.
Location and Facilities
Location
The location of PRAMs should be in rural/semi-urban/peri-urban identified based on their
potential to serve as a hub for a certain produing region. The choice of such a hub should be
guided by its potential to serve as a ‘Farmer-Consumer Direct Market’ or/and ‘Aggregation
Platform’ that can linked the produce with any wholesale agriculture market.
Systems and Infrastructure

The Department is advised to develop “Guidelines for Farmers’ Markets” and share with the
States/UTs. The Guidelines besides operational issues should also define the standards &
specifications relating to layout, sale platforms, buildings etc., so that these markets evolve
along ‘uniform look and feel’ across the country.
i) Systems and processes
The operational guidelines may lay down norms for conduct of intended functions in a
hassle-free, transparent and accountable manner. The milk collection centres, where the
small dairy farmers deliver milk every morning and receive their prices based on test values
offer a good example for emulation with necessary changes. It is the bulk coolers of small
size that facilitate collection and onward transfer of milk without spoilage. On similar lines
perishable commodities will require pre-coolers and reefer vans to store & transport
perishable commodities.
ii) Infrastructure:
 boundary wall/fencing;  sitting/selling platform;
 connecting road and internal road;  weighing devices;
 goods transport service (cold & dry);  dry/cold storage;
 electricity;  drying platform;
 Internet connectivity;  washing facility;
 waste disposal system;  cleaning, sorting, grading & packaging;
 passenger transport;  office space.
Nature of PRAMs and Functions
Producer – Consumer markets

The small producers as sellers can avail of the basic facilities at the nearby regular / periodic
markets to sell their produce, particularly perishable commodities, directly to the consumers.
Section 11 of the APLM Act, 2017 provides for such a direct market and shall remain outside
the regulation. All such existing direct markets in some states need to be further systematised
and upgraded in terms of management, transactions and public hygiene. The large number of
70
existing RPMs will offer an easy choice in locating these farmer-consumer markets (PRAMs).
Promotion of such markets is also feasible at semi-urban / per-urban centres by identifying
suitable space.
Aggregation platforms
In order to achieve efficiency of marketing in transacting small lots of farmers, both non-
perishable (grains) and perishable (fruits & vegetables), their aggregation is essential. It would
help to build aggregation platforms in close proximity to farm-gates, and facilitate a formal &
transparent system of aggregation, displacing the village-trader based intermediation that
happens today in rural areas. The existing rural periodical markets (RPMs) can be utilized to
build aggregation platforms, by putting in place the required infrastructure and processes. The
farmers will bring their small lot of marketable surpluses to these markets and the same can be
processed or cleaned, sorted, graded and packaged for further transportation & sale through
auction at regulated markets (APMCs, etc.). Alternately by assaying the aggregated lot at the
same location, it can be traded online via electronic platforms like e-NAM.
This process can be operationalized by mobilising the farmers as well as interested retailing
organisations, into ‘Farm-Produce Marketing Organisations (FPMOs)’ in the form of a
company or a cooperative for the purpose of marketing only. FPMOs can displace village trader
as the intermediary, as well create unhindered channels to networks of organised retail outlets.
Fund Requirement:
Fund required to develop these markets can be mobilized from existing schemes like Rashtriya
Krishi Vikas Yojana (RKVY), Integrated Scheme for Agricultural Marketing (ISAM), Mission
for Integrated Development of Horticulture and MGNREGA. The sharing norms as applicable
between Centre and State may be adopted.
In addition, the markets can be developed under private sector, through PPP mode, creating
SPVs between existing ownership of RPMs and sub-market yards and partner stakeholders.
Agro-processors and food processors that wish to establish a sustained back-wards integration
to secure their raw material can also participate in such organised sourcing through the rural
primary agri-markets.
Other enablers in Agricultural Marketing

A situation analysis immediately brings forth the fact that marketing of produce is hampered
most by the handling size of the farm produce or the marketable lot size. Unless the post-
production volume is of a shared character and of sufficient quantity at the first stage of
handling, the subsequent handling to connect with markets is inefficient.
The fragmented land holding dictates small volume outputs per farm. However, small holdings
are managed more attentively and achieve higher productivity, if the output is aggregated for
marketing.
71
Small farmers, small volumes

In the context of doubling of farmers’ income, the strategy should necessarily be inclusive, as
85 per cent of the farmers of the country are small and marginal. The size of operational
holdings in India is declining continuously with every successive generation. Needless to say
that the small farmers do not have economies of scale and access to market or information.
The country is estimated to have more than 137 million operational farm holdings under
different size groups. The number of smallholders, consisting of marginal and small farmers
(less than 2.0 ha land holding), has increased from 70 per cent of total land holding during
1970-71 to 85 per cent in 2010-11. The average size of land holding has declined from 2.28
hectare in 1970-71 to 1.15 hectare in 2010-11.
Table 5.4 State-wise land holding patterns
Marginal Small Semi-Medium Medium Large All Holdings

State/UT 2000-01 2010-11 2000-01 2010-11 2000-01 2010-11 2000-01 2010-11 2000-01 2010-11 2000-01 2010-11
All Major States
Andhra Pradesh 0.4 0.4 1.4 1.4 2.7 2.6 5.7 5.6 16.3 15.5 1.3 1.1
Bihar 0.3 0.3 1.2 1.3 2.6 2.6 5.2 5.1 15.5 14.5 0.6 0.4
Chhattisgarh 0.4 0.4 1.4 1.4 2.8 2.7 5.9 5.7 12.0 16.3 1.4 1.4
Goa 0.3 0.5 1.3 1.8 2.6 2.9 5.6 6.2 23.8 24.2 0.8 1.1
Gujarat 0.5 0.5 1.5 1.5 2.8 2.8 5.8 5.7 16.9 20.9 2.3 2.0
Haryana 0.5 0.5 1.4 1.5 2.8 2.9 6.0 6.1 16.5 18 2.3 2.3
Himachal Pradesh 0.4 0.4 1.4 1.4 2.7 2.7 5.7 5.7 15.9 15.5 1.1 1.0
Jammu & Kashmir 0.4 0.4 1.4 1.4 2.7 2.7 5.4 5.4 21.1 22.3 0.7 0.6
Jharkhand 0.4 1.4 2.7 5.6 15.4 1.2
Karnataka 0.5 0.5 1.4 1.4 2.7 2.7 5.8 5.7 14.8 14.7 1.7 1.6
Kerala 0.1 0.1 1.3 1.6 2.5 2.8 5.3 5.3 40.9 64.6 0.2 0.2
Madhya Pradesh 0.5 0.5 1.5 1.4 2.8 2.7 5.9 5.8 15.5 15.8 2.2 1.8
Maharashtra 0.5 0.5 1.4 1.4 2.7 2.7 5.6 5.6 15.4 16 1.7 1.4
Odisha 0.5 0.6 1.4 1.6 2.7 3.0 5.6 6 16.5 23.7 1.3 1.0
Punjab 0.6 0.6 1.4 1.4 2.7 2.6 5.8 5.7 15.1 14.8 4.0 3.8
Rajasthan 0.5 0.5 1.4 1.4 2.9 2.8 6.2 6.1 18.2 17.5 3.7 3.1
Tamil Nadu 0.4 0.4 1.4 1.4 2.7 2.7 5.7 5.6 19.5 20.1 0.9 0.8
Uttar Pradesh 0.4 0.4 1.4 1.4 2.7 2.7 5.5 5.5 25.1 15.0 1.0 0.8
Uttarakhand 0.4 0.4 1.4 1.4 2.7 2.7 5.6 5.5 15.1 23.1 0.8 0.9
West Bengal 0.5 0.5 1.6 1.6 2.8 2.7 5.1 4.9 279 316.2 0.8 0.8
North-Eastern/Hill States
Tripura 0.3 0.3 1.4 1.4 2.6 2.5 5.2 5.1 78.8 14.3 0.6 0.5
Arunachal Pradesh 0.5 0.6 1.3 1.3 2.7 2.8 5.8 5.5 16.1 14.9 3.7 3.5
Assam 0.4 0.4 1.3 1.4 2.7 2.7 5.2 5.2 53.0 68.1 1.2 1.1
Manipur 0.5 0.5 1.3 1.3 2.5 2.5 4.9 4.9 11.4 11 1.2 1.1
72
Marginal Small Semi-Medium Medium Large All Holdings

State/UT 2000-01 2010-11 2000-01 2010-11 2000-01 2010-11 2000-01 2010-11 2000-01 2010-11 2000-01 2010-11
Meghalaya 0.6 0.5 1.5 1.3 2.6 2.8 5.4 5.7 13.1 16.5 1.3 1.4
Mizoram 0.6 0.6 1.3 1.3 2.3 2.4 4.8 5.1 13.1 15.1 1.2 1.1
Nagaland 0.5 0.5 1.2 1.1 2.6 2.6 6.2 6.2 15.8 17.6 7.3 6.0
Sikkim 0.4 0.4 1.4 1.2 2.7 2.5 5.8 5.4 20.7 15.8 1.6 1.4
Union Territories
A & N Islands 0.4 0.4 1.4 1.4 2.5 2.6 4.3 4.3 46.8 36.9 2.0 1.9
Chandigarh 0.4 0.5 1.4 1.4 2.7 2.9 5.8 5.7 16.5 11.1 1.6 1.3
Dadar & Nagar
0.5 0.5 1.3 1.4 2.8 2.8 5.8 5.7 16.0 15.5 1.5 1.4
Haveli
Daman & Diu 0.3 0.2 1.4 1.4 2.6 2.6 5.9 6.3 20.3 20.0 0.6 0.4
Delhi 0.4 0.4 1.4 1.3 2.9 2.7 5.8 5.6 15.3 15.1 1.5 1.5
Lakshadweep 0.2 0.2 1.3 1.4 2.6 2.5 5.5 6.1 22.3 24.0 0.3 0.3
Puducherry 0.3 0.4 1.4 1.5 2.7 2.9 5.7 5.7 19.5 16.9 0.7 0.7
Total 0.2 0.4 1.4 1.4 2.4 2.7 4.4 5.8 13.2 17.4 1.3 1.2
Source: Agricultural census, various
Higher income realisation per unit of land is vital for making small land holdings economically
viable. Minimisation of transaction cost and tapping high value market are options to provide
an opportunity to smallholders. This calls for increasing their effective size through various
alternatives available. These include cooperatives, producer’s companies, cluster formation,
etc. so as to reduce the transaction costs to cultivate per hectare and ensure better and collective
participation in the marketing system.
Making farmer producer organisations (FPOs), as cooperatives or companies, has assumed a

critical role in context of today’s land holding structure, and relevant in countering the situation
of small land-holding predominantly populated by land sizes of an average of 0.65 ha.
Farmer producer organisations

Grouping farms together, to operate in collaboration as a large cluster is the concept behind
forming farmer producer organisations. Small Farmers’ Agri-business Consortium (SFAC) is
the nodal agency at the national level for the creation of FPOs.
A cluster approach is necessary to bring about a critical economy of scale at farm-gate, so that
farm inputs can be better managed, the cultivation gets consolidated care and the output from
farms has viable scale for modern post-production handling.
However, for these benefits to accrue, the farmer group creation process, needs to focus on
grouping contiguous tracts of land (as far as practicable) and not just the grouping of
individuals. The end outcome aimed is collaborative farming, where the entire group farms a
common set of crops in farms that adjoin one another.
73
Table 5.5 State-wise number of FPOs promoted by SFAC

No. of Farmers No. of FPOs
SN State Under Regis- Under
Mobilized Total Total
Mobilization tered process
1 Andhra Pradesh 6360 640 7000 5 2 7
2 Arunachal Pradesh 1750 0 1750 2 0 2
3 Bihar 19065 3935 23000 19 5 24
4 Chhattisgarh 20670 5330 26000 10 15 25
5 Delhi 3535 0 3535 4 0 4
6 Goa 1810 0 1810 2 0 2
7 Gujarat 18959 1041 20000 20 1 21
8 Haryana 13240 0 13240 23 4 27
9 Himachal Pradesh 4887 0 4887 5 0 5
10 Jammu 3694 287 3981 1 2 3
11 Srinagar 3120 960 4080 1 3 4
12 Jharkhand 10009 0 10009 8 0 8
13 Karnataka 103904 18596 122500 102 18 120
14 Madhya Pradesh 111010 33990 145000 126 18 144
15 Maharashtra 88348 3152 91500 85 7 92
16 Manipur 2884 4066 6950 4 4 8
17 Meghalaya 2990 760 3750 3 1 4
18 Mizoram 1700 1000 2700 0 3 3
19 Nagaland 1750 0 1750 2 0 2
20 Odisha 28663 10237 38900 30 12 42
21 Punjab 6288 0 6288 7 0 7
22 Rajasthan 47079 3421 50500 38 2 40
23 Sikkim 1876 0 1876 2 0 2
24 Tamil Nadu 10945 55 11000 11 0 11
25 Telangana 24539 0 24539 20 0 20
26 Tripura 2874 0 2874 4 0 4
27 Uttarakhand 6004 0 6004 7 0 7
28 Uttar Pradesh 35746 0 35746 33 2 35
29 West Bengal 61266 8234 69500 62 6 68
Total 6,44,965 95,704 7,40,669 636 105 741
As of 10-July-2017
In addition to the 741 farmer producer organisations promoted through Small Farmers’ Agri-
business Consortium (SFAC), another 339 FPOs have been promoted by other state agencies,
bringing the total to 1,080 in the country. FPOs exist across the country, mainly registered
under statutes such as the Cooperative Laws, and lately under the Companies Act as Producer
Companies. Associations, Trusts and Federations are also formats of organised collaboration
among farmers.
The benefits from grouping together of farms are essentially from generating viable logistics
capacity in the supply of raw inputs (fertilizers, planting material, irrigation, etc.) leading to an
incremental reduction in input costs and for planned sowing and harvest cycles. Similarly,
farming on contiguous land allows for collective functioning, for the viable deployment of farm
mechanisation, optimising labour costs, and for post-harvest activities.
74
Most importantly, such back-end collaboration can shift the control of the value system into
hands of the FPOs for the transactions on both inputs and supply side.
The perceived economy of scale from FPOs, needs to essentially translate into gainful value
on the following principal fronts-
a) Raw Inputs (eg. assured volume of fertilizer and planting material can lead to
incremental reduction in input costs)
b) Farm mechanisation (eg. contiguous farming can lead to viable deployment of
harvesting combines or other farm mechanisation – incremental reduction to labour)
c) Post-harvest Infrastructure (eg. capacity utilisation is justified for pack-houses, grain
silos, transportation, etc – a transformational change in supply chain)
d) Market access & connectivity (eg. control of value chain system shifts into hands of
FPOs once meaningful volumes are available to transact on both supply and inputs)
At the moment, in its first phase of development, FPO formation has primarily focused on
mobilising the interested farmers together, clubbing these individuals to avail options of equity
and credit support. In the second phase, it is recommended that this be matched with allied
efforts to coerce members of FPOs to undertake collaborative farming by the clubbing together
of farm-land and to undertake next level activities such as aggregation and transport to markets.
It is recommended that the FPO development mechanism must henceforth focus on the pooling
of farm land, such that the soil health assessments, inputs (planting material, fertilizer,
irrigation), farm labour and mechanisation, extension works, can be deployed at incrementally
lowered and optimised costs. Similarly, the farming can be planned for a common set of crops,
and the consolidated output would then be of a scale that brings improved viability and leads
to a transformation of the supply chain.
Grouping together of individual farmers with non-contiguous holdings, will not lead to the
desired bringing together of tracts of land nor the desired economy of scale in respect of both
inputs and outputs. It must be kept in mind that negotiation power through collectives is worth
its while, only when the outcome is a common produce type, in large marketable volumes, and
for cross-regional markets.
Collaboration of farmers to collectively cultivate and harvest a common set of produce, is not
sufficient. There is subsequent need to advance efforts to connect the produce with markets
farther afield. Without suitable market connectivity, the output from such collaborative farming
will be directed to near-farm markets only, which will lead to a localised glut, and associated
price repercussions. Therefore, the production from collaborative farming will need to be
linked to multiple demand centres to maximise on the market opportunities.
75
Figure 5.5 FPO model of market connectivity
Developing such an arrangement for FPOs will also lead to long term market linkages for the
selected produce and will make income enhancement of farmers a sustainable program. To
arrange collaborative farming, the procedure for forming FPOs can look at grouping land under
a village, to create village level farm organisations. Such village level collaboration will bring
greater control of the production and post-production activities, to entire village communities.
FPOs can also be created for groups of farmers in close proximity to urban centres. The close
proximity of large demand centre will change the operating model. In such cases, the cluster
size per crop could be smaller, with more diversification in crops. The shorter and more direct
access to urban markets will however offer quick evacuation of produce and faster cash flows.
Figure 5.6 City-proximate farms and marketing operations
76
FPOs are currently not formed on the basis of availability of adjoining farm holdings or on
prior basis of preferred crop types. In the future, development efforts can be undertaken to
support collective or collaborative cultivation of specific crop types for targeted markets.
Need to build FPOs/VPOs

Since initiation in 2012, the country has organised as few as 1080 FPOs. After having accepted
the importance of FPOs in India, it would not be appropriate to remain at the starting line, as
is the case today. Among these FPOs there are several successful cases that offer learnings for
replication in a large scale.
Village producer organisations (VPOs) can also be developed as a joint venture of FPOs, or JV
of a private company and FPO, or with public private participation, such that an entire village
region is developed for a predetermined set of agricultural produce, as well as with post-
production activities. For example, a region having strength in producing fibre crops can be
developed as a VPO to include small handloom, weavers or handicraft units.
Similarly, a village that has appropriate agro-climatic environment for mangoes can also
intercrop tomato and other vegetables and take up post-production management such as
aggregation, packaging, branding and dispatch to markets. An example in grapes around Nasik,
where entire regions around villages are cooperating to expand productivity and in post-
production is already evident.
A VPO would essentially be a cluster of farms in a village region that will function as a
collective for predetermined outputs. Such a mechanism of natural clustering of activities can
be expected to find greater buy-in and alignment with activities of the local population.
Considering the critical need to economise on the cost of production, as also realise efficient
post-production transactions, the scaling up of farmer producer organisations (more
particularly companies) and village producer organisations (VPOs) across the country should
happen quick and fast. In the view of this Committee, a minimum of 7,000 number of FPOs &
VPOs should be targeted by 2022-23 and double that target number in the six years thereafter.
At an average of 1000 hectares of cultivated land under each such organisation, and 1000
farmers per FPO / VPO, the organised number of farmers would be 7 million and pooled land
would be 7 million hectares by 2022-23. This will scale up to an additional 14 million farmers
and 14 million hectares by 2029-2030.
If success is demonstrated over the following years till 2022-23, the scale up thereafter may
acquire greater momentum than targeted. What is, therefore, critical is to work towards creating
a critical mass of successful FPOs / VPOs in the coming 5 years.
In the following section, the constraints and challenges and their negotiation as also the way
forward to achieve the desired scale is discussed.
77
Scale up village level, farmer producer organisations

Ongoing support for FPOs is in mainly in the form of –
- Grant of matching equity (cash infusion of upto Rs. 10 lakhs) to enhance the credit
worthiness of registered FPOs (Farmer Producer Company - FPC).
- Credit Guarantee Cover to Eligible Lending Institution (ELI) to minimise their lending
risks and thereby enable provision of collateral free credit to registered FPOs
(maximum guarantee cover 85% of loans not exceeding Rs. 100.00 lakhs).
FPOs can also avail financial support provided for post-harvest management and processing
under general category, vide-
- Post-harvest Infrastructure support from MIDH (DAC&FW) - central sector scheme

and centrally supported scheme.
- Warehousing financial support through ISAM scheme of DAC&FW.
- Processing Industry infrastructure from MoFPI – central sector scheme.
- Venture Capital Assistance through scheme of SFAC.
- Credit for cooperatives from NCDC
- Projects under RKVY, operated through state governments.
Though there is sufficient focus on financial assistance, there is limited hand-holding

subsequent to formation of a farmer producer company or organisation. This means, that after
mobilisation of farmers into a group, there is very little support in marketing, value added
logistics or in B2B interactions. There is a need for incubation support to FPOs so that they
have a greater clarity of their value chain involvement and can address their concerns better.
Effective and ongoing engagement of FPOs with government, donors and markets is being
done piecemeal and not in a systemic manner.
Banks tend to refuse to lend to FPOs due to disaggregated land holding or lack of other
collateral. Small and marginal farmers, who account for more than half of the total land
holdings, and who may not hold formal land titles, are unable to access institutionalised credit.
The producer companies are not provided the same incentives/grants and are also liable to tax
on their income, unlike cooperatives. Among other constraints in scaling up operations of FPOs
/ VPOs, is the limited access to professionals to meet the statutory compliances of a producer
company. These include book keeping, registration of Board of Directors (who may be
marginal farmers and illiterate).
Agriculture is not only food items and a lot of the produce in fact supports artisans, weavers,
handicrafts, etc. Various online platforms already provide opportunity for such output to link
with a wider market. There is opportunity to promote non-producer companies to create joint
ventures with village enterprises and take their unique products global. Therefore, government
can promote non-producer marketing enterprises to enter into joint venture with FPOs, or
78
conversely allow FPCs to add a limited number of members from non-farmers.
To make further development efforts, on FPOs, to be market linked, the following steps are
recommended –
a. Identify FPOs with contiguous land or with scope for scalable production. This may
also be done at village level to promote village producer organisations (VPOs)
b. Identify target markets - map consumption, crop wise with volumetric demand
c. Evaluate distance from FPO location to target markets and evaluate produce selling
cycle, minimum and maximum. For selling cycle of greater than 48 hours, list the added
support systems needed to access the markets
d. Support FPOs to develop relevant market infrastructure/linkage through capacity
building, value chain analysis and partnerships with external value chains.
e. Fast tracked soil health mapping and crop planning for each FPC. Provide FPC with
scientific and specific crop plans for 3 years.
f. All procurement by government agencies be made through FPOs, preferably.
g. Special incentive to FPCs that are willing to set up infrastructure in mega food parks.
h. Wholesale buyers that develop long term buying arrangement with FPOs be provided
a freight subsidy on the throughput as declared/certified by FPO.
i. Income tax exemption to FPOs for 5 years, similar to that provided to infrastructure
projects of cold-chain and food processing.
j. Provide regular training and business level hand-holding to FPOs for the first three
years – this may include incubation support in initial phase of development, provided
the FPOs take up collaborative farming on contiguous land holding.
k. Besides SFAC, companies from the private sector can be allowed to promote FPOs to
suit their specific market needs while maintaining a stake in the FPO. Non-producer
entity may be allowed to invest stake in a Producer Company, upto maximum 26 per
cent. This will allow to develop financial strength and attract external professional
management. This will need amendment of the Companies Act which currently only
allows farmers to be producer members of an FPC.
This directed approach to linking FPOs with target markets, is expected to result in an
immediate thrust on productivity at farm level. Without appropriate market linkage, farmers
are hesitant to adopt high productivity practices for fear of incurring losses due to low level of
market access. Central government has already advised states to treat Farmer Producer
Companies at par with cooperatives and this may be implemented by all states.
This committee has recommended a Value System Platform (Chapter 8), which may
specifically focus on FPO development. The platform includes a District level structure, and
79
the activities to form and develop FPO and VPO can be conducted at District level with the
respective state government to maintain a bottom up approach and involvement. If the State
and District level value system platform take ownership of FPOs/VPOs, it will fill the existing
structural and organisational gap that exists in their promotion, and also connect the two
organically.
Stable Trade Regime

A quick look at the Agricultural Trade Policy and tariff changes over the last decade, will show
that there have been frequent and short term adjustments. Long term market relations are put
at risk when trade policy is varied in the short term and unstructured in nature. Such frequent
changes are typically triggered by concerns of consumer unease over prices, but cause
disruptions in cultivation patterns at domestic farms. Sudden reduction in import tariffs due to
increase in consumer prices harm the long term interests of our farmers, since cheap imports
tend to offset the commercial welfare of farmers. As far as import policy for agriculture is
concerned, it is often considered as a price support and price stabilisation tool, which is
tilted more towards consumers.
In case of exports too, trade policy is used as an internal price control mechanism, to adjust
tariffs to curtail any increase in consumer prices on an ad hoc basis. The Minimum Export Price
(MEP) is a frequently used tool with the intention to restrict or ban the export of a commodity
in reaction to rising prices in the domestic market.
In either case, the agenda is to control the supply of a commodity to the domestic market, the
oversight being temporary and inconsistent in duration, as a contrived reaction to short term
changed circumstances. The policy does not promote agricultural trade but mainly used to
control prices in the domestic market. The result is that marketing opportunities get disrupted.
The export potential for the produce of India cannot be suitably harvested without policies that
leave open gateways to expand into markets beyond the domestic frontiers. A stable trade
regime will help both farmers and other stakeholders from a long term view in building market
relationships. Detailed discussion is in Chapter 10.
Agricultural Trade Policy to support farmers

In today’s context, the irony is evident in the inverse relationship between agricultural
production and income, which directly indicates a failure in communicating local surplus to
optimal markets. In the face of surplus output, the main cause of economic distress is the limited
marketing opportunity. The marketing opportunity for the produce of India must expand
beyond the domestic frontiers.
Government needs to reconsider agricultural trade policy and structure the mechanism such
that the agricultural economy has more freedom to build external markets, which will benefit
plans for productivity increases. Closure of export windows deprives producers from planning
long term targets for international trade. Export bans result in a short term excess and long term
disruption in building export markets. Exports need to be promoted aggressively and preferably
80
not be used as price control mechanism. Exports can add to demand for domestic produce and
provide an upward lift to the market price, which is advantageous to the farmers.
It is suggested that the agricultural trade policy should be guided by balancing the interest of
both the producers and the consumers, in addition to long term food and nutritional security
concerns of the country. A trade perspective over 5-10 years period is suggested. A mid-term
planned review of agriculture trade policy is another important recommendation, akin to the
mid-term review undertaken for foreign trade policy.
Any export strategy would require to include cluster based development such that FPO or VPO
are able to output sizeable volume of quality produce as desired by the importing markets.
Export oriented production through development of clusters will help to make available
sizeable volumes of identified produce to meet such requirements. There is also the need to
designate specific sea-ports as gateways for export /import of agricultural produce, especially
those that are perishable, such that the necessary phytosanitary clearances are fast-tracked and
do not become a bottleneck to movement.
The subject of Agricultural Trade is discussed further in Chapter 10 of this Volume.
Futures Trading
‘Commodity Futures’ and ‘Derivatives’ have long been recognised as instruments for risk
management through forward pricing. The Futures markets, not only provide an alternate
marketplace for the farmer but most importantly help the farmer address price risk by helping
to lock in a price.
There are two ways by which farmer association can hedge on the Futures platform.
 one, by hedging price on futures platform and delivering goods through exchange
approved warehouses; and
 second, by hedging price on futures platform and later squaring off the position and
selling goods in the spot markets.
However, the Futures markets and exchanges suffer from inefficiencies. Several factors
attribute to the inefficient functioning and retard the growth of futures market like-
- thin volumes and low market depth,
- infrequent trading, lack of effective participation of trading members,
- not having a well-developed spot market in the vicinity of futures market,
- poor physical delivery in many commodity markets,
- absence of well-developed grading and harmonised standards, and
- other market imperfections.
Futures market needs to be developed to provide as an alternative marketing channel for
81
farmers. This requires to link farmers to exchanges through farmer producer organisations
including farmer producer companies. The steps in this direction are:
i. Enable participation in transparent and efficient regulated exchange

Exchange-traded forwards overcome the limitations of futures (time, place, quantity and grade
of produce) and offer farmers direct access to national buyers, with reduced counter-party risk.
As a result, farmers can secure improved income realisation and avoid distress sale by using
the Exchange warehousing and financing infrastructure.
Indian farmers are buffeted by price volatility and in such a situation, options can be the ideal
instrument for insuring their margins. Farmer producer companies and cooperatives can be
encouraged to use options to manage commercial risk in the production, processing and
marketing of agricultural products. Forwards along with options can provide farmers with an
appropriate tool to get good price for their produce and manage price risk efficiently.
ii. Remove entry barriers for farmer participation on exchanges

Farmer participation on futures is limited due to the entry barriers in the form of membership
criteria, stringent KYC norms, margin requirements, etc. By making it easier and simpler for
farmer producer companies to take membership of exchanges, farmers can be encouraged to
formal, regulated, cash-less markets.
By lowering the threshold for membership for FPCs through a special membership category,
simpler KYC and permitting margin financing for farmers, more such companies can be
encouraged to connect to exchanges to lock in prices and cover their risks.
iii. Boost warehouse-based sales and commodity finance

Encouragement of crop inflow into transparent and regulated warehousing network can be
commenced with exemption of the 450 exchange-approved warehouses from Stock Control
Order under the Essential Commodities Act. Additionally, the new WDRA regulated
repository can encourage a pan-India digital network licensed warehouses and provide the legal
and regulatory environment for inventory financing and warehouse receipt lending to
encourage the use of these financing mechanisms.
All e-Negotiable Warehouse Receipt (eNWR) based financing provided to farmers should be
considered as priority sector lending and banks should be mandated to provide credit to the
agri-sector compulsorily through eNWR. A default guarantee structure under WDRA can give
further confidence to banks and boost agri-financing.
iv. Improve competitiveness of small and marginal farmers through aggregation

For small farmers, the advantage of joining a collective are the direct and indirect access to a
market (local, regional, global); a transparent pricing mechanism, that is linked to demand;
scope to shift away from mono-cropping low-value to high-volume crops; avoiding over-
reliance on credit to purchase inputs; leveraging a competitive advantage in production, quality
certifications; and, credibility of the buyer and trust among farmers via regular direct
82
interaction between the buyer and the farmers. There is also the need to invest resources in
capacity building for financial and managerial skills as well as improved corporate governance.
v. Expand the digital Mandi network

By July 2017, as many as 455 markets across 13 States have joined the e-NAM platform
initiated by the government of India. Further, 150 markets have joined the Unified Marketing
Platform (UMP), under Rashtriya e-Market Services Limited (ReMS), a joint venture of
Karnataka Government and NeML. By March 2018, NAM will have 585 markets integrated
via the e-NAM platform, creating inter-operability between these two networks. This will take
the total number of markets that can conduct online trade to almost 750. The Model APLM Act
2017, provides for multiple online platforms.
Inter-operability that will create a network of all these platforms, will be to the farmers benefit
by providing competitive price discovery.
Integrating the physical, derivatives and input markets

There are three types of markets in the ecosystem that a farmer has to deal with. One, for selling
his produce, he needs access to physical or spot markets, and lack of such an access is one of
the major impediments for smallholders. Local rural markets are thin and dominated by agents
whereas trading in distant markets is not remunerative owing to high transportation and
transaction costs. Besides, the farmers also face problems in gaining access to credit, high
quality inputs, improved technology, information and services.
Second aspect relates to the input market. Agricultural inputs and related services are the basic
requirements for agricultural sector. Raising the farm productivity depends on the quality of
farm inputs and services. The steady and timely availability of farm inputs and service is very
much required in order to increase agricultural growth and welfare of farming community.
Third relates to the agricultural derivatives market. Farmers do participate in the futures market,
both indirectly as well as directly. They take advantage of the price signals emanating from a
futures market that helps them to take decision about cropping pattern and the investment
intensity of cultivation. The farmers also benefit by the dissemination of the futures prices of
the Exchange traded products as it improves his bargaining capacity.
The larger lot sizes of futures contracts remains a challenge for smallholders to participate
directly. However, the situation is changing slowly but steadily. With the emergence of FPOs
and their increasing awareness, they are now able to hedge their price risk well in advance of
the start of harvest seasons. With commodity options being available soon, farmers will be
getting another instrument to hedge their risk which is cheaper and more efficient. Options
would give the farmers benefit of price protection in case the price falls below their cost of
production, as well as the benefit of any rise in price. This would be a better instrument for
farmers than futures. All these markets being very critical for smallholders, are required to be
integrated so as to serve the farmers in a holistic manner.
83
There must be a formal institutional mechanism that integrates these three markets with a
concrete intention of making farmers successful and making agriculture sustainable for them.
When derivatives market gets scaled and becomes completely integrated with physical market,
the benefits of derivatives market gets integrated to physical market and in turn to farmers then
it results in real empowerment of farmers.14
The integration of the spot market with the exchange is expected to add value through risk
hedging and capturing better prices. There will be need to develop harmonised set of standards
and quality grades to make such integration fully effective for seamless trade across platforms.
A report by NICR (an NCDEX group company) reports that farmer producer companies and
cooperatives have emerged as viable aggregation vehicles for small and marginal farmers to
participate directly on the NCDEX platform to realize better prices and manage risk through
informed judgement. In the last 18 months, NCDEX has reached out to more than 275,000
farmers belonging to 177 farmer collectives. Farmers have received 15-25% higher net price
realisation. This is in addition to the 3% savings in costs from direct market access. The higher
income was made become possible through a range of multifaceted developmental activities
undertaken by NCDEX to upgrade post-harvest practices and other capacity building. Farmers
were motivated to undertake primary post-production activities to segregate by quality grades
and were able to capture added value. Around 47,000 small and marginal farmers have
successfully hedged their crops on exchanges in the last year or so (2016-17) and 1.29 lakh
farmers have opened account with the exchange. This is indicative of positive response of
farmers to futures trading.
Annotation
The erstwhile architecture of the marketing network does not abet the element of market to
market competition. Farmers within the captive catchment of a market have no choice but to
undergo exchange at prices influenced by supply to the locally determined demand.
The previously understood metric of desired market density was construed to mean having a
market every 5 km of distance. However, the interpretation was derived from a maximum travel
time of one hour from farms to markets. With today’s network of rural roads, the one hour
travel time for farmers can vary from 20 km to 40 km depending on terrain.
The Royal Commission on Agriculture (1926) held view in its report of 1928, that a twelve
mile radius (19 km) represented the limits within which agricultural produce can easily flow to
a market centre, when referring to direct marketing by a cultivator when transporting by own
cart. Emphasis was placed on urgent need to improve roads, in order to facilitate carriage by
cart and, to render great extension of motor transport.
14 NICR- Role of commodity derivatives in doubling farmers’ income, June 2017
84
The current network of markets are advised to upgrade into an architecture that allows
assembly and aggregation of produce, to interconnect with the one-nation, one-market system.
For improved linkage with domestic and international markets, as well for streamlining online
trading, a pre-requisite is to have harmonised standards and quality grades.
Key Extracts
 A new market architecture is recommended to inter-connect the existing locations
and allow for a seamless flow of produce to various demand centres.
 The market density is governed by travel time and not merely the geographical are
covered. The entire country is the market, limited only by logistics connectivity.
 FPO must factor in the grouping together of adjoining farm land and not merely
bringing together of individuals. The ills of fragmented land holding can be countered
by promoting clubbing of contiguous land to take up cluster farming at village level.
 A predictable and stable agriculture trade policy, is recommended to develop long-
term market relationships.
 While imports prevail, particularly in case of deficit items like oilseeds, a more
determined focus to promote exports should be taken up to optimise on commodities
that have large surplus production.
 Futures market can be developed to provide an alternative channel, especially for
village/farmer producer organisations.
85
MSP and Procurement

There are structural constraints in the way agriculture is performed and has been understood in the
country. While an efficient and effective marketing system will benefit the farmers better, given the small
individual quantities of marketable surpluses and less than perfect market conditions in reality, price
and market support will continue to be sine-qua-non. It is critical, that these two are strengthened.
Among various factors, farmers’ welfare is also hinged to their earning optimal and positive
net returns from agriculture. This necessitates realisation of remunerative prices on the
produce. Given that an ideal market situation, particularly in the agricultural sector, is difficult
to achieve, non-market interventions in support of the farmers become inevitable.
Price support, and procurement whenever the prices in the market become less than
remunerative, serve as effective interventions. These are two sides of the same coin –
remunerative price for the farmers’ produce. In a way, while price support indicates the
intention of the government, market support though procurement shows its intention in action.
Price Support in Agriculture

The success of green revolution launched in the second half of the 1960s was predicated upon
the triangular policy of high yielding seed, robust extension service and assured market support.
As well known, green revolution began its journey from the irrigated belts of Punjab, Haryana
and Western Uttar Pradesh and was largely limited to wheat and paddy. Assured procurement
of these two crop-commodities linked to Minimum Support Price was a powerful incentive for
the farmers, who adopted new seed and the associated basket of technology that went with it.
Till the mid-1970s the Government notified two types of price support, namely, (i) Minimum
Support Price (MSP); and (ii) Procurement Price. The MSP was intended to serve as a floor
price and an assurance against risks that could arise from sharp falls in market price. The
procurement price was used to undertake domestic purchases of cereals by public agencies, for
the purpose of the Public Distribution System. Normally, the procurement price was higher
than MSP, but lower than the open market price. This provided the farmer the choice to avail
of either the price in open market, or sell to the public agencies. In fact, MSP was a floor price,
meant to come into play to address the farmers’ risks from any further downside in market.
Subsequently and as in practice today, MSP itself is the Procurement Price and is used as a
market price benchmark. Government notifies MSPs annually for 23 commodities inclusive
of 14 kharif, 7 rabi and 2 calendar year season crops. In addition to these 23 crops, Government
also notifies Fair and Remunerative Prices (FRP) for sugarcane and jute.
The Government notifies MSPs based on the recommendations of an independent body, called
Commission for Agricultural Costs and Prices (CACP). The CACP adopts a scientific
approach to calculation of the cost of cultivation and the data for this is provided by a field
87
survey conducted by the Directorate of Economic and Statistics (DES) in the Ministry of
Agriculture & Farmers’ Welfare. The recommendations of CACP currently take into account
various factors like cost of production, changes in input price, trends in market prices, demand
and supply situation, inter-crop price parity, effect on general price level, effect on cost of
living, international market price situation, etc. In addition, the Commission also studies
expected impact on nutrition and the imputed value of family labour.
The CACP finally considers all paid out costs in respect of the above variables, called A2 and
the imputed value of family labour. Thus, CACP recommendation is a function of:
A2 = Actual expenses in cash and kind, including rent paid for leased-in land.
FL = Imputed value of family labour
Further, CACP adds a certain percentage of the A2 cost as a profit margin and this together is
recommended as MSP to the Government.
Table 6.1 Percentage margin of profit on A2+FL for the year 2016-17
MSP A2+FL Current % Margin (in
S.N. Commodity
Rs./quintal Rs./quintal practice) over A2+FL
Kharif Crops
1 Paddy 1470 1045 40.7
2 Jowar 1625 1501 8.3
3 Bajra 1330 925 43.8
4 Maize 1365 966 41.3
5 Ragi 1725 1733 -0.5
6 Arhar (Tur)^^ 5050 3241 55.8
7 Moong^^ 5225 4065 28.5
8 Urad^^ 5000 3584 39.5
9 Cotton 3860 2889 33.6
10 Groundnut in shell* 4220 3371 25.2
11 Sunflower seed* 3950 3479 13.5
12 Soyabeen* 2775 1852 49.8
13 Sesamum^ 5000 4188 19.4
14 Nigerseed* 3825 3366 13.6
Rabi Crops
15 Wheat 1625 797 103.9
16 Barley 1325 816 62.4
17 Gram^ 4000 2241 78.5
18 Masur (Lentil)! 3950 2174 81.7
19 Rapeseed/Mustard* 3700 1871 97.8
20 Safflower* 3700 3049 21.4
* Including bonus of Rs. 100 per quintal.
^ Including bonus of Rs. 200 per quintal.
^^ Including bonus of Rs. 425 per quintal.
! Including bonus of Rs. 150 per quintal
The Government notifies the MSP after due consideration and makes necessary changes as it
deems appropriate in the interest of the farmers. In the last few years, in order to incentivise
88
the pulse producers and raise the total output in the country, the Government has been providing
attractive bonus over and above the MSP for pulses.
There has been a debate on the pros and cons of considering a different costing method, where
Cost C2 would be the basis for determination of MSP by the CACP. Cost C2 would include
the rent paid for any leased-in land, the imputed rent for the owned land, the interest on owned
fixed capital, and imputed value of wages to family labour, in addition to the Cost A2. There
is also an ongoing debate regarding adding 50 per cent of Cost C2, as the profit component, for
determining the MSP.
Based on the MSPs notified by Government for the year 2016-17, percentage margin of profit
on A2+FL (as is in vogue now) in respect of 14 kharif crops and 6 rabi crops work out as in
column 5 of the Table 6.1. An examination of the table 6.1 shows that profit margin,
 is ≥ 50% in case of 6 crops, namely, arhar, wheat, barley, gram, masur and mustard. In
fact it is much higher in case of wheat (103.9%);
 is ≥ 40% < 50% in case of 4 crops, namely, paddy, bajra, maize and soybean;
 is ≥ 30% < 40% in case of two crops, namely, urad and cotton;
 is ≥ 20% < 30% in case of 3 crops, namely, moong, groundnut in shell and sunflower;
 is < 20% in case of 4 crops, namely jowar, sunflower seed, sesamum and nigerseed; and
 is negative in case of ragi.
Crops for which Minimum Support Price (MSP) is fixed

Kharif crops Rabi crops Calendar year
Paddy Wheat Jute
Jowar Barley Copra
Bajra Gram De-husked coconut
Maize Masur (Lentil)
Ragi Rapeseed/Mustard
Arhar(Tur) Safflower
Moong Toria
Urad
Cotton
Groundnut in shell
Sunflower seed
Soyabeen
Sesamum
Nigerseed
The list of crops for which government recommends MSP does not include toria (rabi season)
and dehusked coconut (calendar year crop). In case of these two, MSP is calculated by linking
toria to rapeseed / mustard and dehusked coconut to copra.
So far, notwithstanding increase in MSP year on year, no assured procurement is observed.

The government may consider at least 50 per cent margin on all paid out costs of production,
89
for the notified commodities, incurred by farmers in cash or kind, including imputed value of
family labour. When combined with assured procurement, for the share of production
government requires to procure, this would be a good income intervention in favour of farmer,
while other market interventions get implemented and lead to more optimal demand linked
value realisations. From perspective of equitability, a universal coverage in terms of geography
and all MSP notified crops, needs to be considered.
Making MSP more effective

NITI Aayog, in its study covering 36 districts in 14 States, found that a low proportion of
farmers (10 per cent) was aware of MSPs before the sowing season; 62 per cent of the farmers
were informed of MSPs after sowing their crops. The pricing policy of MSPs would be
effective only if farmers are aware of it at the time of deciding what crops to grow. Some of
the observations from the study are as follows:
(i) Awareness among the farmers on MSP needs to be increased and the information should
be disseminated timely, till the lowest level, so that the knowledge would increase the
bargaining power of the farmers.
(ii) Delays in MSP payments have negative effects on the farmers and needs to be corrected
to ensure timely payments.
(iii) As intended by the policy makers, MSP should be announced well in advance of the
sowing season so as to enable the farmers to plan their cropping.
(iv) Improved facilities at procurement centres, such as drying yards, weighing bridges,
toilets, etc. should be provided to the farmers. More warehouses/silos should be set up
and maintained properly for better storage and reduction of wastage.
(v) There should be meaningful consultations with the State Government, both on the
methodology of computation of MSP as well as on the implementation mechanism. The
principles for fixing MSP should be current year’s data and based on more meaningful
criteria rather than on historical costs.
(vi) The small and marginal farmers can be provided with some exemption in Fair Average
Quality (FAQ) norms to provide them with a source of income. The Procurement
Centres should be in the village itself, to avoid transportation costs to farmers.
(vii) The MSP scheme requires a complete overhaul in those States where the impact of the
scheme ranges from ‘nil’ to ‘at-best marginal’ to ensure that MSP as an important
instrument of the Government’s agricultural price policy is not undermined. In fact, in
a few selected States in Eastern India (for instance, Assam and West Bengal), the poor
impact of the scheme may be judged by the fact that none of the selected farmers were
even aware of the existence of such a Scheme.
Market Support in Agriculture

It is well established, that the status of procurement linked to MSP has not been secular either
in terms of crops covered or geographic spread. Taking for example, in case of wheat, of the
90
average of 33 per cent of marketed surplus procured, 90 per cent is accounted for in Punjab,
Haryana and Madhya Pradesh. However in case of paddy, due to introduction of decentralised
procurement the geographic coverage has increased to more number of states, beyond Punjab
and Haryana, over the recent years.
The experience so far exhibits that procurement has largely benefited wheat and paddy growers
where almost 33 per cent of the marketed surplus crop is procured. It is only over the last 3
years, that pulses have come to be procured more substantively. The year 2016-17, saw a record
pulse procurement of nearly 2 million tons at MSP. The procurement of other MSP notified
commodities has not been very encouraging. Minimum support prices acquire value only when
they are supplemented by a robust mechanism of procurement, whenever prices are breached
in the market on the negative side.
MSP is clearly intended as a safety net and not be seen as the desired economic outcome for
farmers. Agricultural sector requires interventions beyond MSP so that it is optimised as a
market led activity and is driven by value that is demand led. In the opinion of this Committee
the farmers would eventually gain better from a more robust system of procurement rather than
increase in MSPs. It is recommended, that in addition to strengthening the existing procurement
schemes, more such tools be developed and deployed to enhance the support and its reach
across the country & across crops, besides improving speed of response and effectiveness of
procurement, in cases where prices may drop below MSP.
While this Committee emphasises on the important role of markets in transferring remunerative
prices (that are more than the MSP) to the farmers, by creating an efficient market system (refer
to chapters 4 and 5), it also recognizes that world over, marketing in general and agriculture
marketing in particular cannot be perfect or even near perfect in the classical sense. It would
be impractical to expect ideal market conditions, therefore, farmers’ welfare warrants that
Government demonstrates a more visible commitment for procurement across all MSP notified
crops, and more particularly in case of pulses, oilseeds and nutri-cereals like sorghum, bajra,
etc. This would in a way be a replay of the price & market support that paddy & wheat
benefitted from, for the other crops that are more suited to less endowed production
environments. Because of inefficiencies in market system, a minimum margin of 50 per cent
on the cost of production is recommended for MSP based procurement. At the same time, the
market architecture and marketing system must be improved, to enable farmers to capture the
more optimal share of the market value of their produce. Over time, MSP should be the second
choice for any farmer, with markets being the preferred method of monetising their produce.
Procurement Bouquet
The existing procurement mechanisms by the government are implemented under:
• Price Support Scheme (PSS)

- Applicable in case of MSP notified crops
- Intervention by DAC&FW, GoI whenever market prices fall below MSP.
91
- Initiated at the request of State governments, conditional upon agreeing to abide by

PSS guidelines (waiver of mandi fee; gunny bags; general support).
- Procurement limited to 25 per cent of State production estimates; but can go beyond
the norm with approval of the central government.
- Procurement by central agencies – NAFED, SFAC, FCI.
- Open to all notified crops, but operations have been limited to pulses, oilseeds and
cotton; however other crops can be assigned by government.
• Market Intervention Scheme (MIS)

- To support commodities, for which MSPs are not notified - fruits/vegetables/other
horti-products.
- Owned by GoI (DAC&FW), but operated jointly by Central & State governments, in
the interest of farmers.
- Market intervention made if prevailing market prices less than 10 per cent or
production more than 10 per cent compared to the corresponding figures in the previous
year.
- Initiated at the request of state governments, on they agreeing to bear 50 per cent of
procurement cost.
- GoI bears 50 per cent of procurement price (fixed by it based on cultivation cost
determined by technical committee), and overhead charges.
- Disposal, a responsibility of the State government. Profit, if any allowed to be retained
by the state.
• Price Stabilisation Fund (PSF)

- A scheme to protect consumers from rising prices.
- Owned & operated by the Department of Consumer Affairs (DoCA), GoI.
- The scheme aims at building buffer stock of pulses by purchasing from the domestic
market at prevailing market rate (could be more or less than MSP). Even imports
allowed.
- In the year 2016-17, domestic procurement of 16.46 mmt of pulses at MSP undertaken
in the interest of farmers-producers by a special order of the government.
• Food Corporation of India operations for Central Pool.

- Wheat and paddy is procured
- Procurement is made to meet buffer norms and for meeting targets of the public
distribution system.
- Long experience of nearly 50 years in procurement and buffer stock management to
meet the demands of National Food Security Act; and Open Market operations.
Some observations on the current state of procurement implementation

 FCI intervention for procurement of wheat & paddy through its direct purchases and
through decentralised procurement operations results in substantive benefit to the
farmers, as an average of 33 per cent of the marketed surpluses of these two staple
92
cereals is purchased at MSP.

 PSS operation in case of pulses is beginning to pick up momentum only recently. In
2016-17, total procurement accounted for about 8 per cent of the total production but
works to about 10 per cent of the marketed surplus. However, procurement of oilseeds
at 0.66 per cent of the total production remained still low.
 Procurement of perishables under MIS is still negligible.
It is however, seen that market interventions to procure the produce, do help in creating a more
buoyant price situation in favour of the farmers, even if the spread is limited.
Broad-basing Price and Procurement Interventions - New Initiatives

It is important that procurement interventions are carried out with the key objectives of:
a) ensuring that in spite of market vagaries, the farmers still get minimum remunerative
prices, i.e. at par with MSP; and
b) correcting demand-supply situation so as to impart price equilibrium.
These twin objectives will not only ensure a minimum return to the farmers, but in the long run
minimise the extent of government intervention needed, and hence enable the market forces to
ensure the most remunerative prices on the farmers’ produce. It would thereby also create a
market environment where production would be more aligned with real market demand, and
not merely with government procurement.
Appropriately deployed, most of the price and procurement interventions should have a sunset
clause, where they would be phased out after reaching a predetermined production stage (where
higher production is an objective), on or when a constant or similar pattern in price deficiency
is observed periodically over a fixed period (e.g. three to five harvest seasons). The latter would
be an indicator of unplanned crop planning and production, delinked from demand, and hence
should require other kinds of intervention. If price and procurement interventions are designed
to continue in perpetuity, irrespective of outcomes, they camouflage real market demand,
become part of the cost structure, and thereby prevent farming systems to correct and align
with actual market demand.
Price Deficiency Payment Scheme (PDPS)

Since markets are not in a steady state of demand and supply, the farmers face a fluctuating
farm-gate price for their output. This price variation is further aggravated when other market
abnormalities come into play. To mitigate the farmers from such extreme vagaries, there is an
option to try out a price deficiency payment system. The concept is, that farmers are
compensated for the difference between the government-announced MSPs for select crops and
the actual market prices, the farmer received on selling. The differential paid is not intended
on individual price basis, but against a standard benchmark linked to modal price calculated
for the market over a certain period. In result, the farmer can expect a near MSP return on
produce, one the differential between actual market selling price and the notified MSP is
93
compensated for.
The PDPS is in the nature of an assured income transfer mechanism, and is hassle free in respect
to the transaction including storage. Since the farmer undertakes the transaction or exchange
with existing market channels, the disposal and distribution of the produce remains in the hands
of market actors and the government does not have to undertake distribution responsibilities.
Therefore, since the government is not directly involved in the procurement and handling of
the produce, the associated costs of disposal such as for storage and distribution is not passed
on to the government. This scheme is more relevant for regions and crops where the
government’s MSP procurement is not being reached and where the procurement system is not
geared up to meet the challenges in disposal of the procured stock.
However, the downside of such a scheme is that it does not assure sucking out of all the
surpluses in production, which is essential in times of bumper yields. Inability to evacuate
surpluses and correct the supply-demand position will not result in a desired price equilibrium.
There is also scope for collusion amongst traders, and between traders & farmers, to keep the
market prices low, since the differential will be covered by the government. Such imbalances
will lead to continued market depression and will require continued government support.
The price deficiency payment scheme would be more relevant when spot markets are robust
and well developed, with a well synchronised production program - stepping in on only on
those occasions when yields are extraordinarily higher or demand is temporarily low.
However, where there is a large market deficit, as in case of oilseeds and edible vegetable oil,
this mechanism can help promote production. Since there is already a situation of high demand
and short supply, there may not be a challenge to evacuate large surpluses from farms. This
Committee opines that the price deficiency payment scheme (PDPS) can be adopted as an
intervention for oilseeds.
In the long run, various typed of income assurance schemes (Basic Income Transfers, that are
being advocated) including PDPS may turn out to be a good option. But it is conditional upon
a robust market structure, total market integration, information symmetry across all
stakeholders including farmers, and resultant fair, transparent and competitive price discovery
for agricultural produce in the spot markets. Such a fair system does not exist in the country as
of now, and therefore, PDPS cannot be an omnibus option for all crops.
Market Assurance System (MAS)

Paddy and wheat constitute the dominant cereals produced in the country. Of the total cereals
output of 251 million tons in the year 2016-17, paddy at 109 million tons and wheat at 97
million tons accounted for a total of 206 million tons or 82 per cent of cereals. The public
distribution system that caters to the consumer welfare under National Food Security Act
entails automatic procurement of these two staple cereals.
In respect of other agri-produce, there is no such auto-trigger. The market interventions under
94
PSS and MIS are implemented only on the request of the States/UTs, on the basis of certain
conditionality in market scenario and such intervention may not be timely, since there is a time
lag between the reaction time of the State to the market scenario, sending the request to the
Centre for approval and waiting for the green signal to commence actual procurement. This
time lag itself may create further download pressure in the market and undue advantage to the
traders, who can purchase at low prices & stock it to make a windfall gain later.
There is need for a market intervention scheme which allows quick assessment of the local
market situation and preparedness to enter whenever and as soon as when the prices start
dipping below the MSP. This is possible if both the deciding authority and the procurement
authority is one and the same.
Towards making such farmer-friendly interventions more meaningful, there is the need to ease
certain processes that impede a rapid response mechanism. Therefore, a new instrument called
Market Assurance System (MAS) is proposed, whose main features are:
(a) The scheme will be directly under the State Government who can take immediate
decisions on basis of local conditions, to enter the market and begin procurement
through their own State agencies or any other private agency authorised by State
government. State governments may also request the NAFED to procure directly on
their behalf if other robust arrangements at State level are not available.
(b) Procurement can be initiated from the farmers directly, for MSP notified commodities
(except wheat and paddy), if the prices dip below MSP. States can therefore assure
the farmers of procurement if the prices dip below MSP.
(c) It shall be the responsibility of the State/UT government to procure and liquidate the
procured commodity. The liquidation options would be by release into the PDS,
MDM, ICDS, Hostels and ration for the State police force etc; by sale in markets; or
through exports (in line with extant GoI trade policies). The profits, if generated, can
be retained by the State Governments and ploughed back into a specially created
corpus fund.
(d) The States would create a corpus fund for this purpose and make all logistics
arrangements to handle the procurement. The support of the Central government to
the States/UTs shall be to compensate the operational loss, if any, on value of MSP,
upto a maximum of 30 per cent in general areas and 40 per cent in case of North East
& Himalayan States. The procurement date and MSP notified for the commodities for
the year of procurement will be used to evaluate the support.
(e) Preliminary calculations show that the Central government support of 25 per cent of
MSP would be an adequate incentive for the State Governments to undertake such
procurement. These calculations based on 2015-16 MSP are shown below:
(i) The procurement cost includes the costs of gunny bags, loading and unloading
charges, commission of various agencies and market fee works out to about 8
95
per cent of MSP.

(ii) Assuming that the stock is held for a certain period (normally a wait of 6-9
months would be a good period to realise higher market prices), the carrying
cost per month of the procured stock would be around 1 (one) per cent of MSP.
If the stock is stored for nine months, the average carrying cost would be 9
(nine) per cent.
(iii) Assuming that procured quantity of pulses (for eg.) is sold after nine months at
prices which are 8 per cent below MSP, the total cost of procurement operation
works out to 8+9+8 = 25 per cent of MSP. An additional 5 per cent is suggested
to meet miscellaneous & unforeseen expenses, which takes the indicative
support to 30 per cent as compensation.
(iv) In case of NER and Himalayan States, a further latitude of 10 per cent is
suggested as response to relatively more difficult situations that exist.
Hence, the Central government’s assurance of providing support for a maximum of 30 and 40
per cent of the value of MSP to the State/UT governments (as the case may be) based on actual
procurements seems to be adequate to incentivize the intended decentralised market assured
price & procurement operations. Some of the advantages of such a scheme are:
i. It is a decentralized system operated by the State governments, wherein they have

the flexibility to decide timely response to falling markets and engage different
agencies to undertake quick and timely intervention.
ii. The State Governments will have the flexibility to discharge the procured
commodities in the manner they find it most suitable.
iii. The liability of the Central Government will arise only if the States incur losses. In
all probability the stock is likely to integrate into captive channels like PDS, Mid-
Day Meal Scheme, ICDS programme, ration distribution scheme for Police and
similar other State requirements.
iv. This will be a more broad-based market intervention with the strength of Centre and
State pooled for the needed deployment resulting in coverage of more farmers with
advantage of closely monitored efficiency at implementation level.
v. The scheme holds the potential of favouring the cropping systems that need to be
encouraged in alignment with the local agro-ecological and climatic zone
requirements.
Through this proposed mechanism, the respective State/UT governments will be in an

improved position to take prompt and effective action to manage any market disruption in the
agricultural sector. Procedural delays for approvals will be alleviated. The operational
guidelines for the MAS can be finalised in consultation with State governments and revisited
through a monitoring committee every few years.
96
Private Procurement & Stockist Scheme

All the existing schemes including FCI operations, PSS, MIS and PSF as also the newly
proposed MAS are primarily government owned and driven schemes. The purpose of any non-
market interventions should be to offer not only the price support to the farmers, but also market
support which means intervention by way of procurement in case of price falls, by purchasing
the farmers produce at pre-notified MSP. This should go along with the need to provide the
farmer a safety net of minimum support on his produce. The table below shows the percentage
of procurements against total production for important crops/crop categories:
Table 6.2 Status of production, marketed surplus and procurement for the year 2016-17
Total Procurement Operations Percentage of
Marketed Surplus
SN Crop / production (in procurement
Ration (MSR) for Quantity
Commodity million metric Agency against total
the year 2014-15 (mill MTs)
tonnes) production
1 Paddy/Rice 108.85 84.35 FCI 38.65 35.51
2 Wheat 92.30 73.78 FCI 22.96 24.88
3 All pulses 22.41 85.56 to 94.38 NAFED 17.50 7.79
(vary across (PSS, PSF)
pulses)
4 All Oilseeds 32.52 71.00 to 100 NAFED 0.22 0.66
(vary across (PSS)
oilseeds)
There are no studies that suggest the minimum percentage of the marketed surpluses that should
be procured to ensure market stability. However, it has been experienced that the trends of
falling prices are reversed whenever government makes procurement interventions. It is
suggested that assured procurement for important crop categories should be substantive enough
to influence the market prices. Table 6.2 amplifies the high threshold of procurement achieved
in case of paddy & wheat and in contrast, lower levels in case of pulses & oilseeds as a group.
It is suggested, that the thresholds of procurement for pulses, oilseeds and other cereals (other
than wheat & paddy) should be raised to 15, 10 and 5 per cent of the marketed surpluses, and
not of the production. However, it may be appropriate to conduct a study and determine the
ideal threshold levels that will help stabilise market prices.
In order to achieve such higher percentage of procurement, it is necessary to bring in private

sector players to supplement the government led schemes. Hence, the Committee recommends
that the MSP linked procurement be opened to private sector where the designated / empanelled
enterprises chosen through a transparent bid/empanelment process are allowed to enter the
market for purchase of the farmers’ produce at MSP. The guidelines framed should take care,
that the markets are not manipulated artificially to create a lower than MSP market situation
and purchase at MSP to earn undue profits subsequently. It is hoped, that an efficient marketing
system and information access to the farmers will make them well informed sellers and will,
therefore, exercise the discretion to sell or hold back their produce.
97
Such private enterprises can be selected on the basis of their track record, corporate governance,
management of agricultural produce and their targeted investments in the market procurement.
The criteria need to be developed in such a manner that any number of enterprises are crowded
in to participate, so that no monopoly practices are adopted that can create adverse fluctuations
in the market.
The private sector players will function alongside the ongoing government interventions and
help broad base the procurement operations. A well designed and closely monitored private
sector intervention can be made to serve the cause of consumers’ welfare and farmers’ welfare
without an additional burden on the government exchequer. The government to that extent will
also be released of inventory management as it shall be the responsibility of the designated
agency to dispose of the procured commodities in the manner it wishes to, within of course the
agreed framework. Such an intervention may be particularly required in regions with
production surpluses but there exists no effective demand. In such areas private sector led
procurement operations will create a demand and possibly influence the market positively. In
such areas, the private trader should promote warehouses, processing mill (pulses / oilseeds),
so that it is the processed product that is transported and not just the raw produce. Such private
enterprises can be selected on the basis of their track record, corporate governance,
management of agricultural produce and their targeted investments in the market procurement.
The parameters need to be developed in such a manner that any number of enterprises are
crowded in to participate, so that no monopoly practices that can adversely create fluctuations
in the market, are probable.
Since the engagement of private sector would be conditional upon procurement at MSP, a well-
designed and transparent, incentive and duty framework may be developed. The suggested
contours of the proposed scheme are as follows:
i. Each private sector entity would be free to procure MSP notified commodities from
farmers at prices not below MSP, through a transparent e-market platform, on notifying
the designated authority.
ii. The minimum quantity of procured commodity would be linked to the net worth of each
private entity.
iii. The procured quantity would be maintained under the direct management of the
procuring agency.
iv. To make the operations financially sustainable, the selected entities will need to operate
“for-profit”. In view of this, the determination of storage, time and place for disposal,
and selling prices may solely be that of the private entity at its discretion.
v. The declared quantity procured be free of any control orders, including stocking limits.
There shall be no government interference in holding/disposal of their stocks, except in
accordance with the conditions as laid down in the Agreement.
vi. The quantity procured at MSP by these entities may be considered to be exempted from
import/export restrictions, such as minimum export price (MEP) or import bans. This
98
will enable the entities open up the markets during bumper production and import freely
during shortages. If such an open permission is held not to be feasible, then an annually
agreed import-export structure may be considered.
vii. Once procured, the stocks will be held by the private entity and sold/exported at the full
discretion of the entity. The stock can also be liquidated to FCI or State agencies to
meet public distribution requirements.
viii. To incentivise the private entities, Government may like to consider some percentage
of concession on the income tax. In order to regulate such concession, the private entity
should be required to maintain a transparent and audited statement of gains and losses,
segregated from its other business(es). Another condition that may be required is
eligibility for such a concession, till such time as the profits are retained in the
procurement account.
ix. The procurement entities will be given priority for receiving subsidy for expanding and
creation of agri-infrastructure under any existing schemes of the government.
x. The agencies may be allowed to procure grains, pulses, oilseeds, spices, cotton, potato
and onion.
Government may also consider such other incentives like concessions on freight charges, lower
GST on hired warehouses, etc. The Government may develop suitable guidelines to this effect.
A similar mechanism can be also developed for the more perishable fruits and vegetables
produce. However, the perishable crop segment has a faster selling cycle and shorter holding
periods, and hence procurement of such crops would require farm produce marketing
organisations (FPMOs) to participate, rather than stockists.
Notifying a reserve price

The Committee noted that while government agencies are guided by MSP for undertaking
procurement for public distribution and buffer norms, there is no minimum reserve price for
the private trade that is undertaken at markets. In effect, there is no benchmark price to set the
floor price at the regulated auctions or for other transactions.
DFI Committee felt that the need to consider notifying a reserve price, distinct from the MSP
used by government agencies, to serve as a predetermined floor price for the administered
auctions in the primary and secondary markets. This will allow the farmers a starting point in
their market negotiations. This reserve price could be set so as to cover the primary cost of
cultivation, with market demand dynamics contributing on top of the reserve price.
Keeping in mind that the per unit cost of inputs for each commodity can vary, depending on
the ecology and other conditions in a region, the DFI Committee recommends that this reserve
price be accordingly differentiated by a hardship factor (H). The reserve price would then be
regionally determined on the basis of the average yield per hectare of a crop in a district, the
irrigation status (rainfed or irrigated) of the area, and the farm-gate cost of inputs. In effect, the
99
reserve price would be linked to endowment and support indicators.
The reserve price can be linked to the national average A2 + Fl cost as evaluated by the CACP
and the States would apply a factor ‘H’ at district level (depending on yield gap in districts, the
hardship factor can differ by 1 to 10 points). The factor ‘H’ could thereafter, be used to mark
the endowment level of each district and help set outcome oriented targets for development
interventions in the districts - the districts having a high factor would accordingly target to
close their yield gaps with the aim to reduce factor ‘H’ in their region.
MSP would continue to be used for direct market intervention (executed through MSP linked
procurement by the government and assigned agencies); while trade in all the regulated markets
could be guided by a minimum reserve price (minimum bid price at auctions). The farmers
would thereafter, have option to sell to government and other assigned agencies at MSP rate,
auction at the regulated markets with a floor price protection, and/or sell under contract or at
directly negotiated markets including online markets.
Annotation
The farmer’s welfare hinges on the effectiveness of the market system, as well on the timely
and effective market support by government. Government market support has been substantial,
mainly in case of wheat and rice through the assured public procurement mechanism for the
Central Pool stocks, but typically limited to the benefit of farmers in a few States.
The Committee felt that the procurement based support system can be spread into other regions
and crop types, while not adding to the overall cost to exchequer. Increasing the coverage of
market interventions will appropriately broaden the intended impact, by distributing value to
more farmers and motivate productivity across regions.
Market interventions are also triggered by price linked eventualities. The extent and time of
any market intervention should aim also at normalising the fluctuations in market prices and
more importantly the downslide of prices due to temporal post-harvest gluts.
Accordingly, other ongoing price triggered interventions, need to be strengthened to enable

decentralised and prompt decision making, so as to make their execution effective. Delayed
action to a deteriorating market situation benefits intermediaries instead of farmers, by allowing
initial distress buyers to sell when the intervention finally props up the market price.
The price and procurement based interventions contributed towards higher supply and a supply
driven shift towards rice-wheat consumption and cropping since the launch of green revolution
in the country. The unseen consequence of this calorie-dominant food security approach has
been nutritional deficiency. There is need to revisit the strategy on demand and supply,
including PDS system, for balancing the nutritional security of the population. Such
interventions should therefore have differentiated outcomes and appropriate sunset clauses.
100
The price and procurement support mechanisms should be driven by twin objectives of
ensuring a minimum remuneration to farmers in inclement market situations and for aiming to
bring equilibrium in demand-supply positions so that the farmers’ markets will offer the best
remuneration on agricultural produce.
To maximise the market support and to make the MSP mechanism more accommodating, the
procurement of surpluses by private participants is recommended. Such purchase by private
parties, at MSP, can be incentivised by exempting the procuring party from stock controls and
allowing them to undertake onwards trade of choice. This will not only augment the market
intervention when prices fall below MSP, but will also provide scope to develop secondary
trade channels in the long run.
Key Extracts
 The procurement mechanism functions as an assured market for farmers, and plays a
role to strategically guide the cropping patterns and incentivises production.
 There is need to broad-base the procurement intervention system, to other crops than
wheat and paddy, and to other States than it currently benefits.
 Procurement of MSP notified crops can be assured at 1.5 times of all paid out costs.
However, restructuring market system should continue, as for most crops, in the long
run the market can provide higher margins than 50 per cent on cost.
 A floor price or reserve price for auctions at regulated markets can be implemented.
The national average input cost and a hardship factor (H) can be used to establish a
regionally differentiated reserve price for notified commodities.
 A new Market Assurance Scheme is proposed, that empowers the States to take
immediate and relevant action to buttress a falling market situation.
 Private participation in the MSP linked procurement process is proposed and can be
incentivised by exempting participants from prevailing stock limits and trade limits.
101
Warehousing
For a bulk of agricultural commodities, safe warehousing is an important tool to counter the time-
spread between demand and supply. More so, warehousing as a safe custodian of produce can allow
farmers to avail of immediate exchange or credit to meet their cash flow requirements.
Background
An efficient marketing system alone, is not sufficient and cannot guarantee the desired benefits
to farmers. To make an efficient system effective, in terms of utilisation, particularly for small
and marginal farmers, the sufficiency condition is met by providing a mechanism that will help
them to transact at choice, when they want to. Warehousing provides this opportunity and is an
important tool which improves time utility and enables the farmers to avoid an immediate sale
in the surplus environment that occurs at each harvest period for certain commodities. The
post-harvest period results in a supply glut, in advance of demand and this manifests in a fall
in commodity price. Warehousing, therefore, allows farmers to balance their supply to markets
and in the interim, enables them to avail pledge finance to meet their immediate financial
requirements. Warehousing availability, of suitable type and quality, makes it an important
component of the agricultural marketing system.
After independence, the All India Rural Credit Survey Committee was appointed by the RBI
in 1951, which submitted its report in 1954 and recommended the creation of scientific storage
facilities for the farmers near their door step, not only to avoid storage losses of agricultural
produce, but also to facilitate institutional credit to the farmers.
In the light of the these recommendations, a legislation on warehousing, namely, ‘Agricultural

Produce (Development & Warehousing) Corporations Act, 1956’ was enacted which provided
three tier warehousing system in the country, involving a Central Warehousing Corporation,
State Warehousing Corporations and Cooperatives. In 1962, the Government of India decided
to break up the Warehousing Act, 1956 into two separate Acts, the ‘National Cooperative
Development Corporation Act, 1962’ and the ‘Warehousing Corporations Act, 1962’, which
gave genesis to the present set up Central and State warehousing corporations in the country.
Though substantive development in warehousing took place subsequently, there was not much
improvement in the status of farmers. An Expert Committee appointed by the Ministry of
Agriculture, Govt. of India on 19th December, 2000 looked into the situation and recommended
introduction of a negotiable warehouse receipt system in the country. The negotiable
warehouse receipts were expected to make it more attractive for banks to lend to the agricultural
sector, reduce transaction cost and improve price-risk management. The need for a reliable
regulatory body to create a harmonised and transparent environment for use warehouse
receipts, to instil confidence in financial institutions was also felt. An Inter-ministerial Task
Force on Agriculture Marketing of the Government of India, suggested for establishment of a
Regulatory Authority for Warehousing in its report submitted in May, 2002.
103
This recommendation was further supplemented by the working group of RBI on Warehouse
Receipts and Commodity Futures in 2005, which recommended the introduction of
negotiability in warehouse receipt system, in line with similar instruments in operation in other
countries. These developments led to the enactment of the ‘Warehousing (Development and
Regulation) Act, 2007’ and the establishment of the ‘Warehousing Development and
Regulatory Authority’ (WDRA) with effect from 26-Oct-2010, and the negotiable warehouse
receipt system was introduced in the country.
Today, there are three main agencies in the public sector engaged in building large scale
storage/warehousing capacity viz., Food Corporation of India (FCI), Central warehousing
Corporation (CWC) and State Warehousing Corporation (SWCs). The capacity available with
FCI is used mainly for storage of foodgrains for the Central Pool Stock. FCI owns storage
capacity and also hires storage capacity from other sources like CWC, SWCs and private
owners. The main functions of the CWC and SWC are to acquire and build warehouses at
suitable places and to operate them for storage of agricultural production, fertilizers, and certain
other items including industrial goods.
The government also supports the private sector and Cooperatives in creating warehousing
capacity. The Directorate of Marketing and Inspection (DMI) implements the Agricultural
Marketing Infrastructure sub scheme (erstwhile rural godown scheme) of the Integrated
Scheme for Agricultural marketing (ISAM). The government supports the creation of
warehousing, including modern silos through a mechanism of financial incentives and assured
lease rental agreements by FCI. These are enumerated in Volume-II of the DFI report.
Current warehousing capacity

Total storage capacity available within the country with different organizations is summarised
in the following table:
Table 7.1 Total Warehousing capacity available
Storage in
SN Name of the Organization /Sector
million tonnes
1 Food Corporation of India (FCI) 35.92
2 Central Warehousing Corporation (CWC) 11.72
3 State Warehousing Corporations (SWCs) and State Agencies 45.28
5 Cooperative Sector 15.07
6 Private Sector (ISAM – rural godown scheme) 57.75
Total 165.74
Source: WDRA Annual Report 2015-16 and DMI March, 2017
Additional 19 million tonnes is estimated created independently by private sector. Since there
is no centralised database on warehousing, the storage capacity depicted from different sources
is often debated. The capacity ascertained could have a level of duplication and on the other
hand, some warehousing capacity created without financial support from government agencies
may be unaccounted and additional. A comprehensive warehousing status survey is indicated.
104
The following table lists the storage capacity that has been created under the Agricultural
Marketing Infrastructure sub-scheme (erstwhile Rural Godown Scheme) of the Integrated
Scheme for Agricultural Marketing (ISAM) of the Ministry of Agriculture & Farmers Welfare.
Table 7.2 Warehousing created under ISAM scheme

Total (Sanctioned) Storage capacity
SN State
No. of projects Capacity in tonnes created in tonnes
1 Andhra Pradesh 1,296 51,56,248 51,02,311
2 Arunachal Pradesh 1 945 945
3 Assam 266 7,39,357 7,35,637
4 Bihar 990 4,87,187 4,52,957
5 Chhattisgarh 642 22,27,239 19,15,488
6 Goa 1 299 299
7 Gujarat 11,326 42,89,737 39,69,118
8 Haryana 2,133 57,18,591 72,16,450
9 Himachal Pradesh 78 24,798 24,797
10 Jammu & Kashmir 14 83,027 74,572
11 Jharkhand 24 1,19,316 1,19,316
12 Karnataka 4,459 48,59,174 35,43,207
13 Kerala 205 89,907 82,328
14 Madhya Pradesh 3,758 1,02,50,369 95,52,993
15 Maharashtra 3,469 63,28,513 59,76,150
16 Meghalaya 16 21,012 20,375
17 Mizoram 1 302 302
18 Nagaland 1 814 813
19 Odisha 419 7,81,575 7,70,575
20 Punjab 1,742 67,23,746 61,78,844
21 Rajasthan 1,424 25,72,908 17,36,551
22 Tamilnadu 1,105 13,32,345 10,45,469
23 Uttar Pradesh 1,108 51,93,210 27,66,733
24 Uttarakhand 278 7,52,793 7,34,192
25 West Bengal 2,548 15,70,777 15,59,742
26 Tripura 4 25,756 25,756
27 Telangana 690 41,44,820 41,44,820
28 UTs - - -
Total 37,998 6,34,94,764 5,77,50,740
Source: DMI, as on 30.04.2017
Over the years of post-independence period, the country witnessed significant growth in
warehousing capacity, the emergence of private sector in creation of warehousing
infrastructure in the country and various reforms were initiated by the government for
achieving the objectives. Some of this capacity may have been leased to public sector agencies
105
while some capacity could have moved out of agricultural warehousing.
Warehouses in India were broadly classified based on the sector to which they pertain i.e.
Public Sector Warehouses (CWC, SWCs, State Civil Supply Corporation), Private Sector
Warehouses (Warehouse Service Providers, Collateral Management Companies, Standalone
individual Warehouses), Cooperatives (PACS, LAMPS, Cooperative, Federations, etc.).
Lately, the concepts of silos, cold chains, container freight stations (CFS) and inland container
depots (ICD) have been gaining importance.
Public sector warehousing has been developed with the prime objective of expansion of
institutional credit to farmers through the instrument of warehouse receipt, adding to the
nation’s wealth by reducing wastages and losses in storage, development of storage and
distribution of agricultural commodities in the country for orderly marketing and price
stabilization of agricultural commodities. Better price discovery through the warehousing has
been expected to facilitate commodity trading in the country.
Public warehouses are the most common type of warehouses which may provide any or all of
the following services viz. grading/standardization, issuance of NWR for pledge financing,
scientific preservation and quality control, inventory management, safety and security of goods
kept therein, insurance of stored goods, handling and transportation, door to door delivery, and
C&F documentation.
The growing number of agricultural warehouses in the country has been helpful in
supplementing the existing agricultural marketing infrastructure and to maintain stocks for
public distribution and strategic buffer norms. However, the farmers, particularly the small and
marginal farmers, have not necessarily been able to benefit from these developments due to
deficiencies in the effectiveness of these initiatives.
Studies have indicated that small farm holdings contribute about 54 per cent of marketable
surplus. These farmers, for want of with-holding ability, are compelled to undertake a sale
immediately after harvest, such sales accounting for about 50 per cent of the marketable
surplus. Their inability to hold on to harvested stocks is largely due to financial compulsions.
Another factor assessed is the lack of direct access by farmers to warehouses due to low level
of initial aggregation of produce at the village level, low number of accredited warehouses for
issuance of NWR and low level of post-warehousing market linkages for farmers, having little
capacity to divert attention for transacting sales for small lots at a later date.
Nevertheless, warehousing is an important component of the hub and spoke model and is a
large aggregation point. While the initial aggregation at primary rural agricultural markets
(PRAMs) or at pack-houses is done to create a viable load to transport to markets, the
warehouses are the next stage in consolidating the produce. Such consolidation can enable
larger capacity transport linkages, though rail or ship, to bigger markets. On the other hand,
warehouses also function as a distribution hub to feed a close by market.
106
Brief assessment of warehousing capacity requirements

A proper assessment of warehousing capacity requirement requires relevant information on
current and projected cropping patterns of the storable produce, seasonality in production and
on the consumption demand of the area. Further, with the opening up of the country as a unified
agricultural market, the warehousing network can be expected to shift towards locations and
sizes to suit bulk handling logistics linkages. The storage requirement has to be assessed while
also factoring the holding life of the agricultural produce, market access including export-
import policy, consumption trends, etc. Demand linked information is not readily available
across various consumption points and for that purpose, the Marketed Surplus is used to assess
capacity needs.
Marketed surplus is the "gross quantity of produce actually sold by the farmers" and therefore
may be inferred to have a link with demand and distinct from the marketable surplus in hands
of farmers. The Marketed Surplus Ratio (MSR) is worked out in proportion to the production
(average over last three years) and the quantity marketed. Therefore,
MSR = Quantity of produce actually sold by farmers ÷ Quantity of production
Table 7.3 Marketed Surplus estimated for major crops for storage requirement
SN Description Marketed Surplus

Cereal production (2015-16) 238.81
1
Marketed surplus of cereals in 2015-16 (MSR 74.36%) 177.57
Pulses production (2015-16) 17.62
2
Marketed surplus of pulses in 2015-16 (MSR 89.94%) 15.84
3 Foodgrains total marketed surplus (2015-16) 193.41
Oilseeds production (2015-16) 28.52
4
Marketed surplus of oilseeds in 2015-16 (MSR 82.10%) 23.41
Sugarcane production (2015-16) 355.54
5
Sugar produced (6.34% of sugarcane milled) 22.54
Source: The source of MSR for Cereals (Wheat, Maize, Coarse Cereals) have been estimated on the average basis is Agri-
Statistics at a Glance 2016. Agri-Statistics Division, Directorate of Economics and Statistics
.
The table reveals, that only on the basis of MSR, the annual storage requirement for foodgrains,
oilseeds and sugarcane would be 193.41, 23.41 and 22.54 million tons respectively (about 240
million tons). The surplus is across the year and most of the storage is a shared resource.
Currently, the marketed surplus data is available at the aggregate level and it does not factor in
aspects such as produce movement from one demand centre to another, or from one market
area to other market centres. It would be appropriate, if the surplus data at market level is
assessed. This will help to direct the flow of produce, for balancing supply & demand and
reduce the price volatility that occurs from localised price triggers at certain locations/markets.
107
Table 7.4 MSR of various crop types
SN Group of Crops 2010-11 2011-12 2012-13 2013-14 2014-15

Cereals
1 Rice 80.65 77.20 81.51 82.00 84.35
2 Wheat 73.20 70.00 77.49 73.11 73.78
3 Maize 86.00 83.32 84.32 86.98 88.06
4 Jowar 62.03 53.46 64.14 65.25 66.64
5 Bajra 67.38 67.48 76.77 71.11 68.42
6 Barley 73.81 59.78 67.39 80.63 77.67
7 Ragi 25.73 53.25 29.53 44.11 47.60
Pulses
8 Arhar 73.82 81.45 84.33 86.99 88.21
9 Gram 86.68 85.25 83.67 89.58 91.10
10 Urad 63.61 70.04 77.76 80.71 85.56
11 Moong 81.54 87.32 85.55 92.22 90.65
12 Lentil 77.91 88.14 88.75 90.23 94.38
Oilseeds
13 Groundnut 93.36 90.78 93.54 95.20 91.63
Rapeseed &
14 82.14 82.08 90.41 94.49 90.94
Mustard
15 Soyabean 95.69 94.41 95.32 95.23 71.00
16 Sunflower 99.58 65.62 99.18 65.42 89.14
17 Sesamum 83.18 92.79 89.00 92.91 93.80
18 Safflower 55.12 - - - 100.00
19 Nigerseed 83.66 94.67 97.67 - 38.25
Other Commercial Crops
20 Sugarcane 78.90 78.02 77.84 21.62 18.94
21 Cotton 99.79 98.36 99.41 97.32 98.79
22 Jute 99.43 83.50 100.00 100.00 98.59
Vegetables
23 Onion 97.25 75.36 99.23 99.29 91.29
24 Potato 81.04 77.40 86.17 61.35 71.51
Across crops, though the harvests are not singular events, they are limited to specific time
periods, while consumption is continuous throughout the year. The holding period of each crop
type needs to be evaluated and stocking period need not exceed beyond the subsequent harvest
season. Since the marketed surplus is generated across seasons, the estimations made for
storage requirement need to factor in the seasonality of production and post-storage distribution
to be realistic. A scheduled liquidation of stocks through distribution channels will generally
free up storage space for other crops or the same crop, before the next harvest.
A general analysis is that the bulk of marketed surplus of foodgrains is generated either in
kharif or rabi season. In case of oilseeds, the major commodities are groundnut, rapeseed and
mustard and soybean (nearly 80 per cent of total oilseed production). Mustard is a major rabi
108
crop and harvested during February-March. The harvesting month of soybean is October-
November, i.e. coinciding with the harvest of groundnut in November, and both contribute
about 55 per cent of oilseeds production. The produce normally stays for 4 to 6 months and the
same storage capacity would be capable to stock the rest of the oil seeds production. Therefore,
for oilseeds, the storage requirement can be assessed to be 55 per cent of the total marketed
surplus. Similarly, the sugar harvesting period starts in November and closes in April. This is
also the sugar mills operating period. It means, sugar production is distributed from November
to April, or a 5 month period. Considering that sugar stays for 6 months at the most, then storage
requirement is about 60 per cent of the manufactured sugar.
The marketed surplus of food grains is spread between kharif and rabi season, and the stocks
are distributed all throughout the year. About 50 per cent of the foodgrain marketed surplus,
can be considered as the needed storage capacity.
Therefore, on the broad premise that storage would be properly managed and that inventory is
liquidated into markets at proper times to avoid stock-overruns across next harvest period, the
requirement for warehousing can be assessed to be only about 125 million tonnes.
Table 7.5 Marketed surplus, distribution, warehousing assessment

Ratio of surplus for Storage required
Commodity Marketed surplus
warehousing (million tonnes)
Foodgrains 193.41 50% 96.7
Oil seeds 23.41 55% 12.9
Sugar milled 22.54 60% 13.5
Total capacity needed for dry warehousing 123.1
Source: DMI assessments
As per the estimates given in Table 7.1, the total available storage capacity is 165.74 million
tonnes and about 42 million tonnes (165.74 – 23.74) of storage capacity could be in excess.
This also points to reports of low capacity utilisation of warehousing capacity in the country.
As per the available data about capacity utilisation of available storage in public sector (under
FCI, CWC and SWC, including both owned and hired) in the South, East, North East West and
North regions is 58, 60, 63, 75 and 90 per cent respectively, with average capacity utilisation
across all regions being about 86 per cent. The higher capacity utilisation in northern region is
also attributed to the use by the central agencies to store stocks procured by them in that region.
Inputs from the private sector also indicate that idle warehousing capacity exists in the country.
There are some fundamental factors responsible for low use of warehouses by the farmers. The
majority of farmers are marginal and small and may not consider it worthwhile to store the
produce in a warehouse, or may be finding other alternatives, easier to manage. Further, the
lack of knowledge about the mechanism of negotiable warehousing receipts and associated
pledge loan for the farmers, is also a reason for the very low utilisation of warehouses by
farmers.
109
There is also a distribution asymmetry in the warehouses and these may not have always been
constructed to suit the agricultural patterns or the shift in cropping patterns that can be expected
in the future. Capacity created may not be suited for proper scientific storage which is necessary
for the farmers to entrust their yield into the care of a third party. States are advised to develop
a District level storage plan to evaluate their existing capacity, type of capacity and carry out a
need assessment for upgrading the godowns and warehouses, or to create new capacity.
District level planning

The agricultural produce is categorised into various groups viz. cereals, pulses, oilseeds, tea,
coffee, sugarcane, rubber, fruits, vegetables, cotton, milk and other produce under livestock
sector, etc. These produce types are also subject to differing holding life, short term or long
term. Within these categories, many can be stored in dry warehouses, while others require
specialised post-harvest pre-conditioning before entering refrigerated warehouses. See
Volume-III of this report for these category-wise requirements. Prior storage, all produce
requires sorting or assaying by quality for full advantage in further market connectivity. These
multiple variables need to be evaluated at the decentralised level, and this is recommended as
part of district level planning.
The planning for storage and any associated infrastructure, by every state needs to be based on
the unique agricultural practices, local to each district. Trying to develop all districts in
identical manner can prove to be counter-productive. Any of such planning will depend on the
production and factor in the seasonality and consumption demand of the area and the
connectivity options to the larger national market.
To assess a district plan, the MSR for each produce will give the handling capacity required
during harvest season. If a produce has a holding life that is shorter than the harvest period,
assess capacity needed for the reduced time period. The same capacity will be freed at end of
each inventory cycle. For crops of similar nature, but with a segregated harvest season, the
capacity vacated by the previous crop can be brought into use. This inventory cycling and
cross-storage planning avoid capacity and cost overruns. Adding up all capacity of marketable
surplus, without planning for harvest period differentiation and distribution patterns will not be
efficient planning method.
Warehouse Receipts System (WRS)

The warehouse receipt (WR) is a document in hard or soft form issued by the warehouse
operator to the goods owner and certifies the title to the deposited commodities, its type,
quantity and quality (grades) and facilitates storage, access to credit and futures trade.The basic
principle of warehouse receipt (WR) is to validate the quantity and type of goods stored in a
warehouse. The quantity stored can be used as collateral to avail a loan. For such a financing
system to function, the warehouse receipt needs to be trustworthy and the goods fungible.
A well organised warehouse system can be helpful in improving the efficiency of agricultural
110
marketing through better price discovery by allowing the produce to be traded at a time of
choice. With the help of an online marketing platform, the agricultural produce can also be
traded at a location or with a buyer of choice. The effectiveness is however linked to the
delivery of services by the warehouses, in terms of their assaying facility, the operational
excellence in storing the goods and the system integration for online auction and sale of the
warehoused goods.
Elements of a warehouse receipt system

A warehouse receipt system (WRS) enables farmers to deposit storable goods in exchange for
a warehouse receipt (WR). In order to ensure that the WRS is capable of driving the desired
economic advantages, an enabling legal and regulatory framework with the backup of a
regulatory and supervisory agency is put in place. Warehouses would need to be licensed to
safe-guard the farmers as goods owners and this is supported by insurance and financial
performance guarantees. There is also need for close involvement of the banking system as
stakeholders who would have to honour the warehouse receipts.
Figure 7.1 Components of a Warehouse Receipt System
A well-developed negotiable warehouse receipt finance system benefits the farmers preventing
distress sale by knocking the doors of informal lending sector (that charges hefty interest rates),
banks/financial institutions, insurance companies, commodity exchanges and ultimately to the
rural economy.
Warehouse receipts are commonly issued when goods are stored in care of a warehouse
operator. However, the loan provided against such commonly issued WR, is at normal
commercial bank rates, as applicable. When the WR is in the form of a negotiable warehouse
receipt (NWR), the owner of the goods can avail pledge loan at rates with interest subvention.
The NWR is a fungible instrument and can itself be traded or sold to transfer ownership of
goods, whilst under care of the warehouse operator. To issue an NWR, the warehouse has to
111
be registered with the Warehousing Development and Regulatory Authority (WDRA).
The WDRA implements the Negotiable Warehouse Receipt (NWR) System in the country. A
warehouse can issue NWR once it is accredited and registered with the WDRA. As the
Negotiable Warehouse Receipt (NWR) is issued in token of acceptance of goods, it therefore,
carries a guarantee that the quality and quantity as described in it will be delivered to the holder
of the NWR after the storage period which is also mentioned in the terms and conditions of the
NWR. The NWR also provides an assurance that the goods will remain safe upto the end of
the initial storage period. Obviously this can be possible only if the quality and quantity of the
goods can be preserved during storage adopting scientific techniques of preservation in
warehouse structures meeting the prescribed standards and having a strict supervision and
security arrangements.
Registration of warehouses under the Act is optional/voluntary. Only those warehouses which
intend to issue NWRs have to get registered with WDRA. Further, the registered warehouses
can also issue non-negotiable warehouse receipts. As on 30th June 2017, the Authority has
registered 1436 warehouses in the country.
Table 7.6 Number of warehouses registered with WDRA

Warehouses registered Capacity
SN Agency
with WDRA (million tons)
1 CWC 185 0.68
2 SWCs 185 0.72
3 PACs 260 0.06
4 Private (including cold stores) 806 5.14
Total 1436 6.60
The WDRA has so far notified 123 agricultural commodities including cereals, pulses, oil
seeds, spices, dry fruits, tea, coffee and rubber etc. as per the standards prescribed by the
Agmark, or other approved grading agencies for issuing NWRs. Besides, 26 horticultural
commodities have also been notified for issuance of NWRs by cold storages.
In order to popularize the NWR system and to encourage warehouses to get registered with the
WDRA, the Authority has taken the following steps:
a) Notification of New Registration Rules

The Registration Rules 2010 have been superseded by the Warehousing (Development and
Regulation) Registration of Warehouses Rules, 2017. Salient features of the new
Registration rules are as under:
 No accreditation required before registration. Application for registration is directly
received by WDRA which get the warehouse inspected before deciding registration
 Entire capacity of a warehouse has to be registered
 One application may have more than warehouses of same applicant
112
 A more robust system of inspection of warehouses has been put in place.

 Registration fee ranges from Rs 20,000 to Rs 30,000 and is based on capacity of the
warehouse. For PACS and FPO the Registration fee is Rs 5,000 per application
only. Similarly the total Security Deposit in case the warehouseman is a FPO or a
Cooperative is kept at only Rs 50,000 (fixed) per warehouse to be furnished in the
form of a bank guarantee.
 Period of registration has been enhanced from 3 to 5 years
 Clearly defined norm specified for infrastructure, SoPs, networth and security deposit
 Security deposit norms are more realistic and dynamic in nature depending on the value
of stock covered in NWRs issued by the warehouseman
 A well-defined process of surrender, suspension and cancellation of registration has
been prescribed.
 Performance requirements for a warehouse during registration is now well defined.
 Authority is enabled to take over the stock of defaulting warehouses and manage/
liquidate it to prevent potential loss to NWR holders
 A well-defined ‘Know Your Depositor’ (KYD) process
 Migration to e-NWR and linkage with a repository after a specified date is made
mandatory. Rule 27 (1) of the new Registration Rules, 2017 require that with effect
from such date as may be specified by the Authority, no warehouseman shall issue any
negotiable warehouse receipts in physical form, and shall register with one or more
repositories registered with the Authority for issuing negotiable warehouse receipts in
electronic form.
b) Introduction of Electronic Warehouse Receipt System

The WDRA has taken steps to launch electronic Warehouse Receipts. The Electronic
Warehouse Receipts (eNWRs) provide for faster movement of information and automatic
creation of audit trail. eNWRs can break barriers and promote national market in
agricultural goods to benefit farmers. Rule 27 (1) of the Warehousing (Development and
Regulation) Registration of Warehouses Rules, 2017 requires that with effect from such
date as may be specified by the Authority, no warehouseman shall issue any negotiable
warehouse receipts in physical form, and shall register with one or more repositories
registered with the Authority for issuing negotiable warehouse receipts in electronic form.
The eNWRs come with distinct advantages over the paper based receipts as under,
 help farmers / depositors to have access to a large number of buyers nationwide with
better bargaining powers;
 enable multiple transfers without physical movement of goods and alternate channels
of marketing to farmers and reduce the cost of intermediation for consumers;
 enable consumers (industries, processors, wholesalers, retailers etc.) to procure graded
produce at competitive prices at locations of their choice;
113
 promote an efficient clearing, settlement and delivery system with transparency in

trading of agricultural produce;
 eNWRs can be split with obligation to transfer only a part of the commodity;
 eNWRs can be traded through off-market or exchanges;
 eNWRs can be issued by Repositories and traded in commodity Exchanges. The single
source of information for the eNWR will be the repository;
 eNWR has a time validity that is co-terminus with the validity of the commodity or
withdrawal of the commodity fully from the warehouse, after which it expires; and
 eNWR can be auctioned under certain conditions such as loan not repaid, on expiry and
delivery not taken and on damage or spoilage of the commodity in the warehouse.
c) Notification of e-NWR Regulations

The WDRA, with the prior approval of the Government, has notified the Warehousing
Development and Regulatory Authority (electronic Negotiable Warehouse Receipts)
Regulations, 2017 on June 29, 2017 which provides the processes for creation and further
management of the eNWRs. It is also mandated that eNWR shall include all the information
prescribed under Section 11(1) of the Warehousing Development and Regulation Act, 2007
d) Establishment of Repositories
The WDRA has initiated the process to establish repositories for the creation and
management of electronic NWRs.
e) Enabling Environment to Implement eNWR System in the Country

In order to create an enabling environment for smooth launch of eNWRs, various measures
have been taken up. These include creating online web portal, a monitoring and surveillance
system and organising awareness & training programmes.
 Public content providing general information for stakeholders.
 Applications for warehouse registration, logging of warehouse inspections, quality
control reporting by warehouses & regulatory reporting by repositories, logging
complaints & disputes, etc.
 Online learning & certification content for various stakeholders.
 Provides functionality for analysis of regulatory reporting data to derive insights
related to compliance by regulated entities.
 Training programmes for warehousemen of registered warehouses.
Following are the benefits of using negotiable warehousing receipts:

(i) Enables farmers, as owner of the stored collateral, to access loan from financial
institutions.
(ii) Allows banks to improve the quality of their lending services and enhance their
interest in financing the NWRs.
114
(iii) Minimises risks and transaction costs to intermediaries and farmers in undertaking
commercial operations.
(iv) Increases the liquidity in the rural areas.
(v) Encourages scientific warehousing of agricultural commodities.
(vi) Lowers the cost of financing by the banks.
(vii) Improves buffering of the supply chain.
(viii) Assigns greater value for graded and quality produce.
In order to cover the risk factor, the goods are insured against fire, flood, cyclone, strike/riots,
theft/burglary, misappropriation, fidelity guarantee, etc. if there is any danger of the same.
Barring the fluctuations in price, practically all risks are covered by the warehouses.
Warehousing thus ensures safe return of goods or value thereof to the depositor, thus providing
a value addition to the quality of goods which makes them acceptable to the financing
institutions as a credible item of exchange for pledge financing as they are sure of realising
their money by disposal of underlying goods in the event of any default by the depositor.
The finance against NWR is related not only to warehousing and banking but also to the
agricultural market. The agencies having integration with the market are found better equipped
for disbursement of pledge finance like the collateral management service providers, APMCs
and warehousing corporation. The collateral management service agencies, seem to give
preference to traders over farmers, while marketing facilitating public agencies like APMC
seem to focus more on small holder farmers. This is more a reflection of the business models
involved. At present, majority of the APMC markets are not integrated with warehousing or
cold storage facilities. Foodgrain and oilseed crops have been found to be popular from storage
point of view and maximum benefits on storage have also been observed in these crops.
Strengthening Negotiable Warehouse Receipt System (NWRS)

Crop loan scheme with interest subvention extended to post-harvest on NWRs
The existing scheme provides pledge financing with emphasis on small and marginal farmer
and all the farmers holding KCC against NWRs issued by all the registered warehouses
including cold storages. The current limit for KCC is Rs. 3.0 lakh and automatically enhanced
to 75 per cent of the price of the agricultural goods.
Publicity of the scheme

In order to help the farmers take advantage of the NWR system, sufficient publicity has to be
made, in both print and electronic media, by different agencies, such as CWC, SWCs,
NABARD, Cooperative Departments of the States and Banks etc. The interest subvention
scheme of pledge loan against the NWRs may be advertised by the banks, highlighting the need
for scientific storage, merits of NWRs and the importance for storing the produce in the
WDRA-recognized warehouses/cold storages. Different extension agencies of the agriculture
and allied departments should also allocate funds for such publicity.
115
Bank may set internal targets for lending against negotiable warehouse receipts. This may be
monitored by RBI in case of commercial banks and by NABARD in case of Cooperatives /
RRBs. The progress should be reported to DFS / WDRA by RBI / NABARD with action plan
/ action taken report, for review.
Need for full-fledged infrastructure status to storage structures

For availing benefits of concession in Income Tax, lower rate of interest on loans etc. it is
recommended that agricultural warehousing should be accorded a full-fledged infrastructure
status. This would include integrated pack-houses and cold stores set up at village level.
NWR as Government security under Securities Contracts (Regulation) Act, 1956

The Department of Economic Affairs, Ministry of Finance may consider and declare the
negotiable warehouse receipt as Government security under the Securities Contracts
(Regulation) Act, 1956 as specified in section 2 of Public Debt Act, 1944 so that the entire
regulatory framework applicable to dematerialisation and transfer of “securities by NDSL
would apply to NWR”.
Warehouses to be declared as Mandis

It is recommended that the Government of India may pursue the matter with all the State
Governments for declaring registered warehouses to be notified as Mandis under the relevant
State Marketing Act. This is provided for in the new Model ‘Agricultural Producer and
Livestock Market Act, 2017. The State of Karnataka has taken initiative on this issue. In
Punjab, the State Government has declared some silos as Mandis. Other States may also notify
warehouses registered with the WDRA as Mandis to facilitate trade.
PPP for promoting assaying of agriculture produce

As on today, there exist number of NABL accredited laboratories are there in the private sector
which are undertaking the assaying activity for export purpose. These laboratories have been
approved by the APEDA. These private NABL accredited laboratories may be roped in for
undertaking assaying of various agricultural commodities in the e-NAM mandis on a PPP mode
or exclusively in the private sector.
Pledge Loan Scheme

The pledge loan scheme was formulated by some state governments to protect farmers against
sharp fall in farm prices. The mechanism of pledge finance to the farmers is to enable them to
avail credit, when the prices are low and to sell their produce, when the prices are favourable.
The aim of pledge loan scheme is to protect the interests of the farmers against distress sale of
agricultural produce by providing short term loan against the pledge of the produce at zero/low
interest rates. The idea is to provide access to both easy credit and safe and scientific storage.
Initially, pledge loan scheme was extended by the financing banks against the State and Central
Warehousing Corporations’ warehouse receipts to facilitate the farmers with short term credit,
when the prices of agricultural commodities are low.
116
However, since the godowns of State and Central Warehousing Corporations were limited and
located at divisional or district level involving transportation charges, the facility was not
available to all the farmers.
Subsequently, the Agricultural Marketing Departments/Boards of various States started

implementing the pledge loan scheme, through their APMCs. However, due to limited storage
infrastructure available with APMCs and their dependence on SWC/CWC godowns, the
situation was not suitably changed by the involvement of the Agricultural Marketing
Departments/Boards.
Meanwhile, the banks extending post-harvest loans under pledge finance were facing the
problems of assessment of the quality of agricultural produce stored and security of the stored
produce that could be pledged even at farmers’ sites.
This gave rise to the emergence of Collateral Management Service providers like National
Collateral Management Services Ltd. (NCMSL), National Bulk Handling Corporation Ltd.
(NBHC), etc., which are being promoted by a consortium of banks and other related
organisations. These Collateral Management Service Providers assay the quality of the
produce, maintain and manage the produce, issue warehousing receipts and offer collateral
security of the produce stored to the banks on behalf of the farmers who store the produce.
They in turn charge their margin for the services provided. The banks extend pledge finance to
the farmers against these warehouse receipts issued.
There is no pledge finance scheme being implemented by any agency in the States of Bihar,
Jharkhand, Himachal Pradesh, Uttar Pradesh, West Bengal, Orissa, Assam, Arunachal Pradesh,
Manipur, Mizoram, Meghalaya, Nagaland, Sikkim, Tripura, and Delhi.
Pledge loan scheme implemented by different banks

Pledge loan facility is available from commercial banks against the produce stored. The rate of
interest varies across banks. The repayment period is normally up to six months, which can be
extended upto one year depending upon the quality condition of the produce with the
revalidation done once in three months. Some cases are discussed below.
BANK OF INDIA provides pledge loan to the extent of 70 to 60 per cent of market value of
farm produce (max. Rs.50 lakh) to its non-defaulting individual farmers (owner/ tenant farmer
& share cropper), group of farmers (JLGs), engaged in production of crops suitable for storage
in warehouse/ godown/ cold storage/ regulated market yards, etc. at rate of interest of 1 per
cent over base rate upto Rs.3 lakh, 1.5 per cent over base rate for loans over Rs.3 lakh to Rs.10
lakh and 2 per cent over base rate for loans over Rs.10 lakh to Rs.50 lakh for other than small
& marginal farmers. Small/ Marginal Farmers having KCC facility get interest subvention for
maximum period of 6 months up to a limit of Rs.3 lakh. The loan has to be liquidated within
12 months from the date of disbursement.
117
SYNDICATE BANK extends 75 per cent of the value of the produce as Pledge/Produce
Marketing loan. No mortgage is required up to a loan amount of Rs.1.00 lakh. For loans above
Rs.1.00 lakh, security as applicable to agricultural loans is required. However, loans up to
Rs.10 lakh issued against bonds/warehouse receipts by cold storages/warehouses registered
with WDRA, are extended certain relaxation in security norms and concessions in interest.
VIJAYA BANK provides loans up to Rs.10 lakh to farmers, repayable in 12 months against
hypothecation/pledge of agricultural produce, including warehouse receipt.
INDIAN BANK provides loans utpo 70 per cent of the wholesale market price of the produce
stored in CWC/SWC or authorised or approved private godowns, with a maximum of Rs.10.00
lakh, repayable within 12 months.
IDBI BANK extends financial assistance against pledge of agricultural commodities, to

farmers (min. Rs. 25,000 and max. Rs. 10 lakh), traders (min. Rs. 25,000 and max. Rs. 5 crore)
and processors (min. Rs. 10 lakh and max. Rs. 100 crore) for a maximum of 12 months from
the date lodging commodities or shelf life of the product.
Table 7.7 Pledge finance against produce stored in State Warehouse Corporations in different states
Karnataka Andhra Pradesh Tamil Nadu Kerala Madhya Pradesh
Year Amount Amount Amount Amount Amount
No No No No No
(Rs Lakh) (Rs Lakh) (Rs Lakh) (Rs Lakh) (Rs Lakh)
2009-10 55341.84 18780 Nil Nil 2021.26 130 3395.57 1628
2010-11 51944.01 18048 Nil Nil 19100 3599 2444.40 116 2024.87 1124
2011-12 34114.54 12072 Nil Nil 19100 3529 2251.82 234 916.76 380
2012-13 44726.41 12986 Nil Nil 9300 1479 3956.49 190 605.79 233
2013-14 NA NA 291.80 145 13900 1975 4949.97 188 2469.25 509
Table 7.8 Pledge finance against produce stored in Central Warehouse Corporations in different states
Andhra Pradesh Tamil Nadu Kerala Gujarat Maharashtra
No No No No No
(Rs Lakh) (Rs Lakh) (Rs Lakh) (Rs Lakh) (Rs.Lakh)
2009-10 46911.46 7199 Nil Nil 3554 136 288.93 57 538 139
2010-11 9764.47 7211 Nil Nil 10639 664 126.13 17 684 171
2011-12 2082.33 1032 3212.43 346 4295 376 36.58 07 898 199
2012-13 3648.32 2409 3089.05 543 2543 102 517.63 46 1470 336
2013-14 2143.37 1439 6264.58 795 704 1328 2019.67 62 1644 390
Pledge loan by State Agricultural Marketing Departments/Boards

Andhra Pradesh Agricultural Marketing Department implements pledge finance scheme viz.,
Rythu Bandhu Pathakam, since 1999. The advances are limited to 75 per cent of the value of
agricultural produce pledged subject to a ceiling of Rs.1,00,000/- per farmer. Interest is not
charged on the loans sanctioned under Rythu Bandhu Pathakam for the first 90 days. Interest
at 3 per cent p.a. is charged from 91st day onwards if they lift the produce within a period of
180 days. If not, a penal interest of 12 per cent is charged on loan from 91st day onwards up to
118
270 days; after 270 days, the APMCs have the right to dispose of the produce and recover the
loan from the sale proceeds.
Wherever Agricultural Produce Market Committees do not have their own godowns or have
inadequate space, pledge loan is sanctioned against the produce stored in the godowns of
State/Central Warehousing Corporation. The Warehousing Corporations concerned give an
undertaking to the Agricultural Market Committee that they will not allow the farmers to
remove or sell the stocks without the specific and prior approval of the concerned Agricultural
Market Committee.
The Karnataka Agricultural Producer Marketing (Regulation) Act provides for sanction of such
short-term advances by the market committee to the producer cum seller on pledge of his
produce with the market committee. This scheme is in force since 15-8-1995 in 132 regulated
markets of the state. Loans up to a maximum of Rs. 2 lakhs or 60 per cent of the value of the
agricultural produce, whichever is less, may be advanced to the farmers against the pledge of
their commodities for a maximum of 180 days. No interest is charged for the first 90 days.
Beyond 90 days, interest is charged at four per cent for amount up to Rs. 25,000; six per cent
for amount between Rs. 25,000 and Rs. 50,000; eight per cent for the amount between Rs.
50,000 and Rs. 1 lakh and 10 per cent if for loans between Rs. 1 to 2 lakhs.
The Directorate of Agricultural Marketing & Agri-business in Tamil Nadu has been
implementing pledge loan scheme to farmers through their regulated markets. Under the
scheme, farmers can store their agricultural produce in the godowns of regulated markets for a
maximum period of six months and can avail pledge loan up to a maximum of Rs. 2.00 lakhs.
For the first 15 days, no interest is charged and beyond 15 days interest is charged at 5 per cent.
The farmers can store their produce in the regulated market for a maximum period of 6 months.
APMCs in Rajasthan are implementing a pledge loan scheme since 1995. The pledge finance
upto maximum Rs. 20,000/- per beneficiary is at interest of 6 per cent p.a. with repayment
period of up to 9 months. Pledge finance up to Rs. 1.00 lakh per beneficiary is at 12.50 per cent
interest p.a., for a period of 180 days. The pledge finance scheme is being implemented by
Rajasthan State Warehousing Corporation. However, no pledge finance was extended for the
period from 2009-10 to 2013-14. No warehouse receipts are being issued by Central
Warehousing Corporation in Rajasthan for availing pledge finance from banks.
The Maharashtra State Agricultural Marketing Board is also implementing pledge finance
scheme through their APMCs for the benefit of farmers. The advances range from 50 to 75
per cent of the market value of agricultural produce pledged. The rate of interest is 6 per cent
for a period of 180 days. If the pledge loan is repaid within 180 days, interest subsidy at 3 per
cent is extended to the farmers. Beyond six months, interest rate is 8 per cent; between 12 to
18 months, it is 12 per cent. Maximum period of pledge is 18 months.
119
Table 7.9 Pledge finance provided by APMCs in different states

Karnataka Andhra Pradesh Tamil Nadu Rajasthan Maharashtra
No. No. No. No. No.
2009-10 145.77 101 2254.04 5404 2196.01 3157 1.20 6 1727.48 NA
2010-11 207.95 150 1296.79 3024 20134.86 2817 Nil Nil 1009.37 NA
2011-12 246.03 128 973.77 1564 1859.59 2246 Nil Nil 895.44 NA
2012-13 503.38 193 1576.7 2815 2685.09 2381 Nil Nil 2233.03 NA
2013-14 296.33 121 1578.63 2363 3936.56 2995 Nil Nil Nil NA
Pledge finance by collateral security management agencies

The collateral security management agencies such as National Bulk Handling Corporation and
National Collateral Management Services Limited in Andhra Pradesh, Haryana, Punjab,
Rajasthan, Madhya Pradesh, Orissa and West Bengal are issuing warehouse receipts against
which the banks are extending pledge loan. In some states like Karnataka, National Bulk
Handling Corporation, Multi Commodity Analysts and Independent Inspection Agency etc. are
providing scientific storage services at the door steps of farmers, which is being used as
collateral security by the bankers for pledge loan.
Table 7.10 Pledge finance provided by collateral manager NBHC
Haryana Andhra Pradesh Punjab Rajasthan Madhya Pradesh
No. No. No. No. No.
2009-10 81333 151 66448 2774 89771 191 92762 571 25944 432
2010-11 56872 97 66796 2484 79088 158 74527 524 19543 233
2011-12 91593 106 51873 2708 90830 163 83052 573 16464 198
2012-13 138843 133 31954 1244 159343 192 95255 559 21737 307
2013-14 1419 157 31074 1022 176446 217 116850 612 28704 386
Pledge finance by the National Bulk Handling Corporation in different states
Schemes for pledge financing against electronic warehouse receipts

Electronic Warehouse Receipts represent certain quantity of a particular grade of a commodity
credited in the depositor’s electronic account maintained with NCDEX SPOT/approved
Trading cum Clearing Member (TCM). However, for the financing bank, NSPOT is to be the
single point contact agency for communication and facilitation. Each commodity deposit of a
particular grade is identified with the client’s ID and lot number. When a particular commodity
is deposited in an accredited warehouse of NCDEX SPOT by a depositor, corresponding credit
of quantity deposited is given against a particular lot number in depositor’s electronic WR
account. Commodities deposited in the NCDEX SPOT accredited warehouse have a validity
and re-validity period. Individual account for each e-pledge shall be opened in Demand Loan
segment giving full details of account like name of borrower, nature and value of security,
address of warehouse where goods have been stored, insurance particulars, date of inspection
etc. Separate register is maintained to depict the total outstanding against any party at any given
time. Minimum amount provided is Rs.50,000 and maximum is need based. However,
maximum amount will be Rs.50.00 lakh for individual farmers including SHG/JLGs and
Rs.25.00 crore for sole proprietorship concerns. Rapeseed and mustard seed, soyabean,
guarseed, chana, pepper, sugar and other commodities as notified by NCDEX SPOT from time
to time are considered for financing. The value of the commodity as security is determined at
120
by taking the previous day’s closing spot price on the respective exchanges, at the
city/town/place where the godown is located.
Interest subvention scheme

Government provides interest subvention to different banks and cooperatives for short term
crop loan extended to farmers at a concessional interest rate of 7 per cent per annum. An
additional incentive of 3 per cent reduction in interest is provided to the farmers who repay the
loan on or before the due date. Therefore, the overall interest on crop loans is available at 4 per
cent per annum to farmers who make timely re-payment. The crop loan is offered to primarily
address the credit requirement for the cultivation phase of activities. For further relief to
farmers affected by natural calamities, an interest subvention of 2 per cent is made available to
banks for the first year of restructured amount of crop loans.
While achieving high productivity and overall production in the agricultural sector has its
importance, equal importance is required to prevent inopportune or distress sales. For this
purpose, there is also provision for concessional post-harvest loan to small and marginal
farmers against negotiable warehouse receipts (NWRs). The post-harvest loan, on the value of
agricultural produce kept under pledge terms in storage, is eligible for the interest subvention
of 2 per cent (same as for crop loans) for upto a period of 6 months.
This is offered only to small and marginal farmers holding Kisan Credit Card (KCC). Small
and marginal farmers who have not availed crop loans through banking system, are not eligible
for the concessional interest on the post-harvest loan. The Committee recommends that such
farmers also be allowed a post-harvest loan on concessional rate against NWR.
It is felt that even though a small and marginal farmer may not have availed a crop loan from
the banking system, either because there was no need or was earlier a loan defaulter, which
situation could have changed. A change may also occur in the market circumstance after
harvest, which may necessitate the need for a post-harvest loan at concessional rates.
Critical Assessment
The above data on pledge loans by banks and non-banking (APMC/Collateral managers) sector
makes it evident that the reach of the facility is very insignificant. The factors responsible for
low popularity of credit flow under post-harvest loan are:
i. Poor awareness level of the facility among farmers

ii. Physical availability of warehouses accessible to farmers
iii. Small lots in hands of small farmers, having minimal facility for aggregation
iv. Complicated procedure for getting the pledge loan
v. Negotiability restriction under the NWR required to obtain the pledge loan.
vi. Lack of confidence among bankers about the management at the warehouses
There is an obvious need to make farmers more aware of the pre-requisites and to extend more
favourable terms for the pledge loans. As the collateral is the produce itself, suitable assaying
121
of quality and quantity is also necessary. For this purpose, the registration of warehouse under
WDRA is a preferred option.
In the current agricultural marketing system, most of the market functionaries can access
financing against negotiable warehouse receipt (NWR), issued by WDRA registered
warehouses. The warehouse receipt system (WRS) has the potential to improve the access to
institutional credit of farming community. Moreover, requisite number of agencies have not
been identified for disbursement of pledge finance. The APMCs, State Agriculture Marketing
Board can take a bigger role in addition to the banks and collateral agencies.
Strengthening Warehousing and the Pledge Loan Scheme

The pledge loan mechanism plays an important role in mitigating the ill effects of distress sale.
However, though the program has been in existence for long, the effectiveness in helping the
farming community has been far from satisfactory. In this context certain strategies can be
prescribed as follows:
i. The number of farmers availing pledge loan is insignificant. Efforts need to be made to
enhance awareness among the farmers about the concept of pledge loan. Agro-
processing industries stock produce for processing needs, and they can be involved as
channels to facilitate pledge loans to farmers.
ii. Since scientific storage of the produce is a pre-condition for the advance of the loan by
regulated markets / banks, creation of scientific storage facility in rural areas, where
farmers can store the produce and get warehouse receipts is essential.
iii. There are instances of bank tie-up with private sector collateral security providers, who
ensure scientific storage of the produce at farmers’ door steps and provide collateral
security to the bankers for the advance of loan. However, such tie-ups are seen only
between the banks and collateral security agencies. Thus, it is necessary to have similar
tie-ups between regulated markets and such agencies as pledge loan from market
committees is more economical in terms of the rate of interest.
iv. It is a complaint of market committee officials that they do not have adequate staff to
effectively implement pledge loan scheme. It is thus required, that market committees
recruit staff to exclusively deal with the scheme.
v. The amount of pledge loan advanced by the regulated markets is generally less than the
amount advanced by the banks. Thus, it is advisable that provisions are made by the
respective state governments to enhance the quantum of pledge loan advanced by the
regulated markets.
vi. The regulated markets in some states like Karnataka lack scientific storage facility. As
such, they depend on storage available mainly with SWC and CWC godowns. For the
promotion and development of pledge loan system, it is essential that the market
committees have their well-developed scientific storage infrastructure.
vii. Small storage facilities may also be developed at village level, as proposed under the
122
new market architecture, involving upgradation of sub-market yards and at proposed

assembly points (PRAMs).
viii. Develop harmonised tradable standards for use of warehousing, post-harvest pledge
loans and on e-NAM.
ix. A Credit Guarantee Fund for availing the pledge loan facility may be created by the
Banks, Cooperative Departments of the States, KVKs and Marketing Boards/Market
Committees. Banks may be mandated to pledge finance commodity loans upto Rs.2-3
lakhs provided it is against eNWR issued by a WDRA registered warehouse.
i. WDRA may conduct a baseline survey of all agricultural warehousing, available for
public use and categorise by technology and utility. The information on the storage
capacity in various states (with FCI, CWC, SWC, cooperative sector and private sector)
is not monitored or made available under one agency. In the absence of unified
monitoring agency, District Level Storage Plans cannot be developed as per
requirements. It is recommended to have a Single Monitoring Agency and as repository
of database of warehousing capacity in the country.
Annotation
The Committee is of opinion that the government should develop comprehensive guidelines to
promote and popularise warehousing as the fulcrum of the pledge loan system and electronic
trading. This alone will fulfil the condition of sufficiency and make for an efficient agricultural
marketing system.
It is learnt that substantive capacity of storage infrastructure built under the ISAM has been
diverted for commercial use unrelated to agriculture.
In preparing the District Storage Plan, the status of existing infrastructure may be examined.
Further, emphasis should be bringing adherence to the standards of WDRA, so that the storage
godowns can be certified as warehouses. This necessitates, restructuring of the existing
godowns to meet the desired WDRA standards and ensuring, that new constructions are in
strict conformity with the standard.
Key Extracts
 Warehousing is the key to providing post-harvest pledge loans to farmers and for
participating in electronic trading
 Modernisation of warehousing capacity in compliance with WDRA standards is felt
necessary and new requirement is to be suitably assessed in District Storage Plan
 The seasonal nature of storage demand and commodity-specific requirements need to
be delineated when preparing District Storage Plans.
123
Value System Partnership Platform

Market linkage means correlating of various commercial activities with the aspects that define the
market value of the output. The value is made accessible through a ‘farm-to-fork’ supply, which is made
efficient only when it is guided by the ‘fork-to-farm’ flow of demand and the associated value.
The farm income based approach to practicing agricultural marketing demands a ‘fork-to-farm’
route in preference to the commonly advocated ‘farm-to-fork’ option. If the purpose is to
transfer optimal monetary returns on his produce, the farmer would then need to grow what
can sell, and reach out to the end-use point without loss of quantity and comprise on quality.
Hence, the need to transit from production led agriculture to market-led agriculture.
A value system contains a permutation of organically linked value chains, integrated into a
supply chain. The value system platform would be one that helps to on-board and integrate the
sub-systems of multi-stakeholders from government, non-government and private sectors as
working partners to meet the desired objective. The primary objective would be to strengthen
market linkages of farmers, alongside the development of market yards / alternate markets,
cold chains and food processing units.
For enhancing income of farmers there is a need to reduce risk, encourage investment and
strengthen the supply chain. This gives opportunity to create partnership between independent
value chains of the farmer's group and market players, input suppliers, financial institutions
and research bodies. An important transformation is effected through integrating these value
chains, with a bottom up approach from village level coordination to national level.
Given the importance of supporting the integration of value chains into holistic value systems,
the Government of India had issued the framework for supporting Public Private Partnership
for Integrated Agriculture Development (PPPIAD), operated under the Rashtriya Krishi Vikas
Yojna (RKVY). PPPIAD is conceived as an alternative mode of implementation, which
facilitates bringing in the technical and managerial capabilities of the private sector in
combination with public funding, to achieve sustainable outcomes, by achieving system-wide
value chain integration and attracting additional private investment in agriculture. The program
is implemented under the direct supervision of State Governments. The main features and
objectives at the time of conception are in the annexures.
Many state level interventions to integrate agri value chains, are supported in synergy with the
PPPIAD program. World Economic Forum, under its global initiative ‘New Vision for
Agriculture’ (NVA), is working with three states, Andhra Pradesh, Karnataka and Maharashtra,
to catalyse partnerships with private professional agencies, using the PPIAD program, for such
integration of disconnected value-chains into a value system that benefits the farmers.
In Maharashtra, beginning with 11 projects in 2012-13, the partnership grew to include 33

projects with more than 60 participating companies. Within three years the programme could
125
scale up to five lakh farmers and also brought in income improvements by 10-30 per cent. For
example, in maize, farmers saved on inputs (3-5 per cent of overall cultivation costs due to
direct supply of fertilizer from the private partner), saw increased yields (on average, a 35 per
cent increase in yield) and received higher prices through direct sale to purchaser (minimum of
3-5 per cent higher effective sales price).
In Andhra Pradesh, the partnership platform (launched in 2016) aims to achieve double-digit
inclusive agriculture growth. The state has identified 25 growth sectors – including agriculture,
horticulture, animal husbandry and fishery – to support involved value-chain projects.
In Karnataka recently, the state government launched a Public-Private Partnership for

Integrated Horticulture Development (PPPIHD) to improve the horticultural supply
chain through technology interventions and marketing solutions. Seven projects are operational
with additional five in the pipeline. The state is expanding the project beyond horticulture.
It is understood that other states including Telangana, West Bengal, Madhya Pradesh,
Meghalaya and Tamil Nadu are evincing interest in this PPP model to strengthen collaboration
and investment in the value chains.
Another recent example is the ‘Green Innovation Centre’ (GIC), an initiative in cooperation
with governments of India and Germany. DAC&FW and Deutsche Gesellschaft für
Internationale Zusammenarbeit (GIZ) have entered into an agreement, where the GIC will
intervene for two crops in select regions in Karnataka and Maharashtra. This program
integrates plans to intervene in various market linked value chain segments, starting from farm
management to post-production delivery. The project indicators include enhancing of farmers’
income, farm productivity and employment generation in the value chains addressed.
Figure 8.1 Synergising value chain interventions with GOI priorities
126
Various localised initiatives to address the inefficiencies in the value chains involved in
agriculture, are in play. Interventions in the agricultural value chain system, of similar nature,
are also undertaken by NGOs, foundations, international donor agencies and by commercial
enterprises themselves.
A key success factor for such models has been strong leadership and co-creation, with the
government setting the vision and enabling policy framework; the private sector helping to
deliver on that vision through scalable and inclusive market-based activity; and key
stakeholders such as farmer organisations, civil society and international organisations
combining their resources and expertise. Agricultural marketing is becoming increasingly
cross-geographical and needs to address the demand and supply at the unified market level. To
support a transformation of the food system in India, in partnership with private sector
enterprises, a national level platform will bring about concerted gains to farmers, in tandem
with other recent initiatives that allow for the one-nation market to flourish.
National Agri-Value System Partnership Platform

It is recommended that at the central level, a National Agri-Value System Partnership Platform
be established, to bring together the collective power of all the stakeholders in the agricultural
ecosystem - the government, private companies, educational, NGOs and from research and
development - to transform the sector at multiple levels.
The partnership platform will target to prioritise activities that improve farmers’ income and at
the same time provide food and nutritional security by enabling healthy and affordable choices
across the food value chain. With the government providing and co-financing the back-end of
the value chain, and the private sector and farmer contributions doing the rest, the agricultural
sector can still remain as a primary engine of rural growth and poverty reduction in India.
127
Objectives and Scope

The objective of the Agri-Value System Partnership Platform will be to support
transformation of food system development in India. The desired outcome of
implementation of sustainable and inclusive value chain partnerships, are:
• Support the Government’s vision and priorities for doubling farmers’ income
through improved productivity and market linkages.
• Provide food and nutritional security while enabling healthy and affordable choices
across the food value chain.
• Enhance the environmental sustainability of agriculture and meet the challenges of
a changing climate.
The scope of such a Platform will be to support both the National and State governments to
catalyse investments and collaborations on projects that have multiple value chain partners, to
unlock bottlenecks in implementation and scaling of such projects, and providing the enabling
policy support to strengthen the agricultural marketing environment. The proposed activities at
the national and state level will include:
• Brokering of new value chain partnerships at state and national levels for integration
into a system-wide value chain.
• Initiation of new produce-specific cross-sectoral projects at the national level.
• Strengthening and scaling up of existing partnerships at the state level, and their
collaboration across states.
• Provide an enabling policy environment through the convergence and dovetailing of
various schemes and initiatives.
• Share learnings, develop capacities and promote best practice exchanges amongst
states and countries.
• Develop and roll out a results based framework to monitor the overall impact on
markets / trade development and take corrective action as necessary.
The platform would function under the model of public private partnership, distanced however
from day-to-day functioning of the government. The PPP mode of function has potential to
bring the much needed synergy in knowledge, experience and finances for triggering greater
competitiveness in agribusiness. Previously mentioned, localised models through the World
Economic Forum, GIZ and others, can be provided national level scale and impetus through a
national level platform. The proposed platform would take up activities that will bring about:
• Greater adoption and scaling up of partnership model among states (“pull” factor).
• Assist in the allocation of adequate resources to support the state governments.
• More timely and systematic monitoring and sharing of learnings and best
practices.
• Convergence and alignment in relevant policies that will enable development of
larger value chain systems.
128
• Market linked, prioritised identification of opportunities for crops across states.

• Attract new investment partners and create more collaboration and accountability
among them.
In order to guide and mentor this partnership, a steering committee comprising government,
farmer organisations, NGOs, research/academic institutions, national and international
development bodies, private sector and think tanks may be constituted at the level of Central
Government, to be managed by a Chairman and by a Managing Director heading a secretariat.
At State Level, there should be a local coordination committee again under the control of a
Chairman and a CEO heading a state level executing body.
The projects taken up under this platform would aim at strategically, opening the marketing
base of select crops and other produce, so as to promote the one-nation, one-market concept.
Selection of projects will be done at District and Block level depending on surplus in these
regions and target large cities across the country. Some examples are, marketing of fruits from
North East into South India, expanding apple movement and trade from Himalayan states into
other regions, opening northern Indian market for fish and marine produce from coastal
regions, etc.
Governance Structure
The value system partnership platform would be effected through a national level executive
committee, and guided by an advisory council.
The Advisory Council can be a high-level body that will provide advisory support and
strategic guidance on activities of the National and State Level Platforms, including input into
the strategy, take decisions on matters referred to by the Steering Committee and champion
and support the activities of the national platform. The Advisory Council can include:
 Government – Under Chair of Secretary, Ministry of Agriculture & Farmers Welfare,
comprising Secretaries from the ministries of rural development, commerce, food
processing and others, to provide direction to participating State governments.
 Private sector – Representatives from production, processing, cold-chain, retail and
financial services/tech provider, industry associations like CII.
 Think tanks such as NITI Aayog and Insitutes / Centres fo Excellence from across the
country.
 Multinational donor agencies and agriculture linked foundations.
 Representatives from NGOs and Farmer Producer Organisations (FPOs).
National Executive Committee: An inter-ministerial steering committee headed by an

Additional Secretary of DAC&FW and senior representatives from agriculture, rural
development, commerce, food processing and others and to assist in converging of government
policies. The steering committee would be guided by the multi-stakeholders Advisory Council.
129
The Committee will provide strategic leadership, hold consultation with national and
international organisations and provide guidance for new initiatives and partnerships for
programmes which have potential for better returns to farmers. The Committee will also make
provision for budgetary allocation for the activities and pass on to national Secretariat for
execution of partnership activities.
National Executive Committee Advisory Council

• Inter-ministerial government representatives, civil society, farmer groups.
• To transition agriculture to agri-business at individual farmer’s level.
National Value System Secretariat

• National Institutes, representatives of private sector, civil society, farmer
groups, NGOs, national/international supporting organisations.
• To coordinate operational and knowledge support, and contribute to
governance and monitoring of activities.
State Program Support Unit Advisory Board

• State Directorate of Agricultural Marketing, guided by the Chief Secretary
• To analyse potential value chain partnership, formulating partnerships and
putting up an implementation framework
District Task Force

• SAU, KVK, NABARD with inclusion of farmers, community, partnership with
NGO, SHG and entrepreneurs
• To implement the identified value chain system
Block Level Management unit

• Gram Panchayat and ATMA, FPO, village level societies, SHG, NGO and
other groups
• To identify of grassroots innovation & entrepreneurs and build
collaboration in the the business chain.
National Agri-Value System (NAVS) Secretariat: The NAVS Secretariat will be the main
executive body and support the coordination and implementation of activities undertaken. The
Secretariat would provide leadership to implement the mandate passed on by Steering
committee by coordination with various States of the country. It will be engaged in knowledge
management activities and undertake monitoring of value chain partnerships, provide feedback
to steering committee for any mid-course correction. The secretariat will act as a repository of
case studies of integrated value chains, research and documents. The Secretariat will be housed
with the facilitation of the Dept. of Agriculture & Farmers’ Welfare. The executive head would
130
be a professional with private sector experience of at least 20 years in areas such as agricultural
marketing/project management/logistics/market analytics. A support staff of at least 5
individuals with appropriate professional experience from private sector in knowledge
management activities would be provided.
To bring about a convergence and dovetailing of Central schemes, the NAVS shall place
recommendations to the Steering Committee for specific projects, so as to minimise delays and
to take full advantage of extant government support mechanisms.
State level Program Support Unit (PSU): The State level coordinating executive housed
under the Directorate of Agricultural Marketing to support the partnership activities in each
State. A State level Advisory Board, under the chairmanship of the Chief Secretary of the State,
would guide the executive. The Advisory Board would nominate a Chief Executive to the PSU.
The PSU will be an independent professional agency led by the Chief Executive Officer and a
team of specialists and support staff in various areas such as agricultural marketing; production
technologies; capacity development; private sector development; project management etc. It
will analyse potential value chain partnerships provided by district level coordinators, manage
projects, broker and formalize partnerships agreements, and put in place a framework for
implementation and impact study documentation. In addition to leading the project
management activities and connect to National Value System Secretariat, the State
coordinators will support district level coordinator for implementation. In effect the State level
coordinators will implement one-nation, one-market through the partnership.
The PSU may call for the Expression of Interest (EoI) from corporates, SME and agri-startups
/ individuals / FPO to establish a commodity based value chain, big or small, cross regional or
local with the integration of existing government interventions in the field of production, post-
production, marketing and finance taken together.
The State level support to projects, through ongoing schemes, including the PPPIAD/PPPIHD
program under RKVY can be coordinated through this executive body. Depending on the
unique objectives and ground situation of each state, the State may opt for various interventions
across produce sectors, in commercial projects. The sectors would cover animal husbandry,
fisheries, horticulture, agriculture and agro-forestry.
District Task Force (DTF): The district level Task Force for project coordination can be done
by experts of KVK, Agriculture Technology and Management Agency (ATMA) and
NABARD (or other lead banks), to hold consultation with stakeholders, entrepreneurs,
community and local governance people. The Task Force would identify and forward gaps in
the value chains to the state PSU, and implement the interventions with partners. District
Collector/Deputy Commissioner would be the chair of the DTF and would act as a project
incubation unit. It is recommended that DTF will nominate produce specific experts as
specialist coordinators and for day-to-day interface with private corporates including farmer
groups as partners. DTF can do preliminary evaluation of PPP proposals and forward to the
131
State Level Approval Committee for further coordination by the State PSU. The DTF should
also coordinate timely flow of funds from schemes to approved projects and monitor
implementation timelines, deliverables and evaluation of completed projects.
Block Level Management unit (BLM): The block level coordination of activities with
partnering farmers will be done by experts of KVK and ATMA and Block Development
Officers. The block level coordination is required to identify potential value chains at
grassroots level, identifying innovations which need to be scaled up, identifying entrepreneurs
who require support. Such value chains can be earmarked to be further developed, integrated
and implemented. This partnership has to be inclusive of informal groups, societies, NGO and
SHG at village level. Existing interventions through various parties can also be selected for
scaling up.
Begin with 100 districts

The selection of the initial 100 districts should be based on free volition. A national level
interaction session may be organised with leading public & private sector corporate & trade
houses, to enable consensus on their participation in the national initiative. Commodity specific
value systems that encompass multiple regions can also be targeted.
The participants shall be free to choose one or more districts and adopt them as mentors. The
mentors will then be responsible to work in partnership with the District Platform and shoulder
comprehensive responsibility, inclusive of creating awareness, building capacities, customised
training programmes, identifying products for priority integration into value and supply chain
systems, delineating the total pathway, identifying the manpower & infrastructure gaps and
resolving the same, advising farmers on production decisions & ‘production specifications &
standards’ for profitable integration with the platforms, mobilisation of farmers etc.
Funding the Platforms

Funds will be required to set up, operate & manage the platforms at central, state & district
levels, besides meeting the expenses on actual implementation. It would be possible to dovetail
various ongoing schemes of different Ministries/Departments to meet the needed expenses.
RKVY can be the primary source of funding at different levels. In addition, the
Corporate/Trade bodies opting to become volunteers can be allowed to build revenue models
for the activities they identify in the monitoring district as priorities for promoting them to
integrate the value chains on a supply chain basis.
Operational Guidelines
The Department of Agriculture, Corporation and Farmers’ Welfare (DAC&FW), as the owner
department, of this initiative should adopt & share operational guidelines covering all aspects,
including organisational, financial, project/platform management, etc.
132
Outcomes from value chain integration

It is felt that agricultural projects have inherently moved from a phase of intensive cultivation
and production, towards one that requires greater integration with market demand. While the
government has various supporting schemes, incentives and programs to promote holistic
development in agricultural marketing system, the actual integration needs to manifest within
individual projects. It is important to have a mechanism that directs such support to specific
projects, in a sector agnostic manner, such that the overall value chain system has opportunity
across sectors and is developed at a national level, creating cross regional connections.
The proposed National Agri-Value System (NAVS) platform is envisaged to have a systems
approach and target integration of individual value chains to bring about the following benefits:
a. Move away from disjointed sectoral schemes & programs in agriculture to well
designed, commodity based integrated value chains that connect all the farmers, big or
small, to their consumers - wholesalers, retailers, processors & exporters.
b. Prepare an ecosystem of value chain systems that integrate market demand with
production, post-production & finance in a seamless manner, to ensure that the planned
reforms in agricultural marketing, land leasing, contract farming and farmer producer
organisations, have a base in commercial enterprises.
c. Promote greater private investment through adoption of Public Private Partnership
framework across the system wide value chain for linking farmers to the market in an
efficient & effective manner.
d. For each value chain, strengthen existing extension & agricultural advisory services by
promoting relevant best practices like soil management, raised bed planting, ridge and
furrow method of sowing, sub-surface irrigation, precision farming, post-harvest
handling, commercial negotiations, market linkages, as well as credit and insurance
facilitation.
e. Diversify the portfolio of integrated value chain systems from crops to animal
husbandry, dairy, fisheries, horticulture, pisciculture, sericulture, aqua culture,
mushroom cultivation to enhance the farmers’ income.
f. Develop strong institutions of farmers to get them integrated into the larger supply
chains through promotion of FPOs/ VPOs / cooperatives / SHG / JLG / Trusts / NGOs
and get them federated along regional or commodity based market linked enterprises.
Key Extracts
 The implementation of sustainable approach to agriculture requires a ‘fork-to-farm’
approach, in order to form the appropriate market linkages in agriculture.
 A national level platform to support system-wide value chain partnerships is
recommended
133
Supply, Demand and Price Forecasting

Forecasting of prices of farm commodities to augment predictability and stability of farmers’ income
is discussed. Pricing dynamics also stem from assessment of demand and accordingly adjusting supply.
Introduction
The instability in production due to over dependence on rainfall and climatic factors coupled
with high volatility in prices have been eroding the predictability and stability of income
earning capacity of farmers. Due to seasonality of production, derived nature of the supply and
comparatively inelastic demand for farm products, there is a natural price variability by default
in farm produce. Prices of farm produce are not only determined by local supply and demand
situations but also influenced by global and exogenous socio-political factors that further
exacerbate the volatility in agriculture. No country is an exception, and government
intervention works alongside the free operation of market forces (i.e. supply and demand), in
price discovery mechanisms of agricultural commodities.
As agricultural marketing is also characterised by policy interventions, the cost effectiveness

of such interventions to minimise burden on government exchequer is crucial. What is vital is
to sustain agriculture and improve the farmers’ income earning capacity, including risk bearing
ability in the wake of climate change on one hand volatility in the market on the other.
In this backdrop, market intelligence to strengthen the ‘preparedness of farmers’ to

effectively face market volatility has assumed great significance.
Relevant information on future demand, price and production scenario not only assists the
government but also helps the farmers, as useful Decision Support System to minimise risk
and to augment their income. Forecasting of agricultural demand, prices and production is
incorporates demand from agribusiness industries also. Such industries also establish decision
support mechanisms for agri-products, which in turn translated into demand for the correlated
agricultural produce. Correlating the demand with supply, also helps to optimise upon the use
of ecological resources, the logistics and energy deployed, and the input costs. It thereby, also
results in making agriculture greener, less wasteful and more profitable.
Hence, a framework for precise forecasting of agricultural prices, supply and demand, by
developing proper mechanisms for collection, compilation, analysis of the appropriate data and
the dissemination of the information has become a key objective for academicians and policy
makers in India.
Theoretical Underpinnings
Forecasting is the art of predicting the likelihood of future events based on past and present
information using econometric methods and models. Forecasts being quantitative estimate are
frequently used as guide to public policy formulation and private decision making processes.
135
The crucial purpose of agricultural commodity price forecasting is to allow farmers and policy
makers to make better-informed decisions and to manage various risks including price risk.
Time series analysis is usually carried out for forecasting future values. Time series data is
recording on variables, like prices, rainfall, sales, etc., at regular intervals. Analysing time
series data begins with an understanding of the four time series components, viz., Trend,
Seasonality, Cyclical and Random variation. The trend decides the secular movements;
increasing, decreasing or constant, of the series over time. The seasonal variation captures the
season induced effects, the cyclical variation is the long term movement of a series similar to
business cycles. The random variation in agriculture prices are due to stresses and shocks
emanating from outside the system.
Auto Regressive Integrated Moving Average (ARIMA) models are class of models widely
used to forecast complex data series. This model uses the past time series data of price to project
the likely mean price and the volatility (range or standard deviation) for a period in future. The
popularity of ARIMA model is due to its statistical properties as well as use of well-known
Box-Jenkins methodology in the model building process. The technical details are in Annexure.
There are several other ways through which agriculture prices can be forecasted. Two such
common methods are described briefly below:
(a) Demand and Supply Analysis: Here, by analysing demand and supply for a
commodity, the end stock over the forecasting period is projected. Then changes in end-
stock is related with likely changes in prices for the forecasting period. For each
commodity, the end-stock is arrived at by differencing the total demand (domestic
consumption + export) from total supply (opening stock + production + import). The same
data is updated once in quarterly and even monthly wise. For each crop, production is
estimated state-wise based on the acreage and yield. Consumption is estimated based on
past trends as observed in the National Sample Survey Organisation (NSSO).
There is a strong relation between changes in end-stock and the changes in future prices.
From the historic relationships between the two variables, change in price for future period
is projected based on the change in end-stock. As the method is elaborate and on a
continuous basis, it can capture large changes in acreage as well as in yield (due to weather
or other reasons) at the state as well as the country levels. Thus, the method has potential
to throw-up data which can be used to initiate remedial actions on a dynamic basis.
(b) Use of Commodity Futures: This method involves using commodities futures market
to understand the forward price curve, discontinuities in price structure and interpret them
with reference to the cash or ready-delivery market. This in a way deciphering futures’
price and developing a view on the markets. Commodity derivatives market is in its
thirteenth year in India. Several agricultural commodities – maize, soybean, soy oil,
turmeric, potato, cotton, rapeseed, wheat, channa, cardamom, etc. are actively traded in
136
the commodity exchanges. Till now, futures contracts of above mentioned commodities
are traded in these exchanges. Futures contracts indicate the most likely future spot prices
on the day of expiry. Well-participated and liquid futures contracts are excellent indicators
of most likely future price. Such contracts give clear trends and discontinuity in the
prevailing trends.
The various methods are best suited for produce that can be safely stocked for extended
durations and would not apply similarly to short life commodities, like milk, tomato, mango,
etc. These commodity types will rely more on projected production instead of stock in hand,
for taking up a directed supply against demand projected for optimal price discovery.
Current Status of Price Forecasting

Over the years, though the Government of India has developed an elaborate system of
estimation of crop sown area, yield and production of different crops, quality and timeliness of
the data poses a big challenge in precise and error free forecasting and projections. Although
multiple organisations are involved in compilation, monitoring and release of prices/price
indices, currently no department is involved in forecasting prices/demand officially at the
national level. A few attempts under ‘project mode’ are being attempted. They are:
Agricultural outlook & situation analysis for food security

National Council of Applied Economic Research (NCAER) has been implementing this project
commissioned by Ministry of Agriculture & Farmers’ Welfare. The NCAER forecasts prices
of key commodities for short and medium term. NCAER has been using ARIMA method to
project monthly Wholesale Price Index (WPI) based on the past data series taken from the
Office of Economic Advisor. Price forecast covers 17 commodities and sub-groups namely
rice, wheat, jowar, bajra, maize, pulses, gram, tur, onion, potato, groundnut seeds, rapeseed &
mustard, soyabean, edible oil, and food products. The NCAER also forecasts medium term
prices based on Harmonic Method for major 12 agricultural commodities. Except for soybean
oil, palm oil and milk for which retail prices are used in the absence of wholesale prices.
Medium term forecast covers wheat, rice, tur dal, chana dal, urad dal, masoor dal, mung dal,
potato, onion, sugar, soy oil and milk. The indicative Delhi wholesale price data is used for the
analysis.
Network Project on Market Intelligence

Initiated by Indian Council of Agriculture Research (ICAR), under the National Agricultural
Innovation Project, this project was for establishing & networking of Agricultural Market
Intelligence Centres in India. The project was in progress for a period of five years from 2013
to 17. The aim of the project was to help farmers in taking sowing and marketing decisions
based on scientific information and to get better prices for their produce ultimately. Two types
of price forecasts on agriculture commodities were generated and disseminated. ‘Pre-sowing
forecasts’ are released to help farmers on sowing and area allocation decisions and ‘pre-
harvest-forecast’ to take decisions on whether to sell the produce immediately or store for some
period for price advantage in the future.
137
To generate price forecast and market intelligence advisories for 34 mandatory crops,
responsibilities were assigned to consortium partners in different states on the basis of share of
the crops in the country’s area and production. Mandatory crops of the project included paddy,
wheat, maize, sorghum, cumbu, ragi, blackgram, greengram, bengalgram, redgram, soybean,
groundnut, sunflower, sesamum, mustard, copra, castor, rapeseed, cotton, potato, tomato,
onion, small onion, brinjal, green peas, coriander, ginger, pepper, turmeric, red chillies,
cardamom, coconut and arecanut. The National Institute for Agriculture Economics and Policy
(NIAP) was the lead centre along with KAU, Vellanikara; UAS, Dharwad; UAS, Bangalore;
ANGRAU, Tirupati; PDKV, Akola; JAU, Junagadh; MPUAT, Udaipur; CCSHAU, Hissar;
PAU, Ludhiana and GBPUAT, Pantnagar as well as a few ICAR institutes as collaborating
centres.
Time series data on the commodity arrivals and prices of the mandatory crops were collected
from the regulated markets identified in each state to represent the crop. The data were
subjected to statistical and econometric analysis using appropriate software packages. Price
forecasting tools such as Moving Averages, Seasonal Indices, Single Exponential Smoothing,
Double Exponential Smoothing, Co-integration analysis and models like ARIMA, ANN,
SARIMA, ARFIMA, ARCH, GARCH to the real time market data were used in the project.
Among them ARIMA model was found to be the best fit for most of the mandatory crops
followed by SARIMA and Exponential smoothing in occasional cases. The price forecasts
generated were validated by interacting with traders, farmers, other commodity specific
websites and also in futures platform. In Karnataka, the responsibility to forecast prices of rice,
maize, groundnut, sunflower, onion, potato, pepper, coconut, arecanut, turmeric and ragi was
assigned to UAS Bangalore, the outcome was presented briefly below:
(a) During the project period of five years UAS Bangalore has generated 101 price
forecasts in the state. The predicted price was compared with actual price prevailed in the
market and the validity percentage was worked out. The validity percentages ranged
between 85 and 96 per cent, reflecting the robustness of the predictability. The
development of information technology had positive impact on knowledge sharing.
Various dissemination methods including newspaper publications, local magazines, hard
copies, e-mails, websites, text SMS and voice SMS were adopted to take the information
to beneficiary farmers. The impact of the forecast advisory given by the centre for selected
crops was assessed. The results showed that the income of the adopters of market advisory
was higher compared to the non-adopters.
(b) Besides the mandatory objectives, commodity reports on selected crops like,
sunflower, arecanut, and brinjal were also prepared. Baseline survey was done to create
bench mark information on key project indicators, which supported monitoring and
evaluation of the project. The objectives were; (i) to understand the current knowledge on
market information and market intelligence, (ii) to know their current source of market
information, (iii) to establishing baseline statistics to adjust and validate the project’s
138
planned objectives and strategies focusing on the dissemination of marketing

information/market intelligence problems within the targeted domain. Four stage simple
random sampling method was adopted to accomplish the above objectives. Primary data
from 100 respondents were collected for the years 2008-2009 and 2009-2010.
(c) Major findings of the study were that there was not much change in the cropping
pattern among the farmers in the study period. However labour shortage, institutional
arrangements, deficit irrigation, anticipation of better price have enabled 35 per cent
farmers to modify their cropping pattern. Better price was the single largest factor that
influenced the farmer’s planting/sowing decisions followed by soil and land suitability,
input availability and motivation from input dealers. Regarding market and price
information, newspapers and private traders were the major sources to the farmers and
internet searching was not used by them. Friends and relatives, radio, TV and regulated
markets were occasional sources in getting market information.
(d) All the farmers required training on market information as they lacked experience in
gaining that information. Most of the farmers sold their produce at farm-gate itself to the
wholesaler and near farm markets. Most were using individual mini truck or van for
transportation of small lot commodities to the sale point. Farmers sell their produce
through brokers and commission agents mainly in distress, due to lack of further market
connectivity. Marketing cost incurred by the farmers varied among crops and the major
cost involved was on their transport. Very few farmers (3 per cent) were taking on any
post-production activity on the produce in the form of grading, polishing and drying. These
activities allowed them to capture greater value for their produce.
Data from the respondents who were provided regular information on price forecasts of the
crops assigned to UAS-B were contacted to know their opinion on market intelligence and
utility of the same. Perceptions of farmers at varying degree, on the effectiveness of the price
forecast in a few selected crops are summarized below:
i) Maize: Among the respondents 82 per cent agreed that price forecast positively influenced
their income while 18 per cent opined that the benefit realisation was good. About 68 per cent
were highly satisfied with the market intelligence, while 32 per cent were satisfied and
expressed their willingness to make use of such information in future. About 82 per cent were
satisfied with the quality of forecast while 14 per cent of respondents were satisfied with the
type of forecast provided. Regarding their decision to follow price forecast to sell the products,
it was revealed that 57 per cent would definitely follow and 43 per cent of respondents remained
undecided. About 82 per cent of respondents have strongly agreed to recommend to the fellow
farmers the price forecasts they obtained. Majority (57 per cent) of respondents opined that
both pre-harvest and pre sowing forecast were most useful, 29 per cent opined that pre-harvest
forecast alone was useful, whereas, 14 per cent of the respondents expressed that pre-sowing
forecast was most useful.
139
ii) Ragi: Nearly 63 per cent agreed that price forecast positively influenced their income while
38 per cent agreed strongly regarding the benefit realisation. About 87 per cent were highly
satisfied with the market intelligence while 13 per cent were just satisfied and expressed their
willingness to make use of such information in future. About 63 per cent were satisfied with
the quality of forecast while 37 per cent of respondents highly satisfied with the type of forecast
provided. Regarding their decision to follow price forecast for selling decisions, it was revealed
that 25 per cent would definitely follow and 75 per cent of respondents agreed to follow the
advocacy. About 75 per cent and 25 per cent of respondents ‘strongly agreed’ and ‘just agreed’
respectively to recommend to the fellow farmers the price forecasts of the centre. Majority (62
per cent) of the respondents opined that pre-sowing forecast was the most useful and 38 per
cent opined that both pre-sowing and pre-harvest forecasts were useful.
iii) Red gram: Almost 79 per cent agreed that price forecast positively influenced their income
while 21 per cent agreed strongly agreed that the benefit realisation was good. About 48 per
cent were highly satisfied with the market intelligence while 52 per cent were ‘just satisfied’
and expressed their willingness to make use of such information in future. About 69 per cent
were satisfied with the quality of forecast while 31 per cent of respondents highly satisfied with
the type of forecast provided. Regarding their decision to follow price forecast for selling
decisions it was revealed that 69 per cent would definitely follow and 31 per cent of respondents
agreed to follow the advocacy. About 79 per cent and 21 per cent of respondents ‘strongly
agreed’ and ’just agreed’ respectively to recommend to the fellow farmers the price forecasts
of the centre. About 40 per cent of respondents opined that both pre-harvest and pre-sowing
forecasts were most useful, 35 per cent opined that pre-harvest forecast was useful, whereas,
25 per cent of the respondents expressed that pre-sowing forecast was the most useful.
iv) Banana: Similarly, 82 per cent agreed that price forecast positively influenced their income
while 18 per cent agreed strongly that the benefit realisation was good. About 75 per cent were
’highly satisfied’ with the market intelligence while 25 per cent were ’just satisfied’ and
expressed their willingness to make use of such information in future. About 90 per cent were
satisfied with the quality of forecast while 10 per cent of respondents highly satisfied with the
type of forecast provided. Regarding their decision to follow price forecast for selling the
produce, it was revealed that 85 per cent would ’definitely follow’ and 15 per cent of
respondents agreed to ’just follow’ the advocacy. About 82 per cent and 18 per cent of
respondents strongly agreed and agreed respectively to recommend the price forecasts of the
centre to the fellow farmers. Since the centre is giving weekly forecast, majority of farmers (75
per cent) were highly satisfied with the price forecasts received and the remaining 25 per cent
opined that they would follow after ascertaining the quality and reliability of the forecasts.
v) Potato: Around 75 per cent of the beneficiary farmers agreed that the price forecast has
marginally helped in getting better prices in the markets. Almost 89 per cent of the farmers
were highly satisfied with the market intelligence while 11 per cent were satisfied and
expressed that due to delayed rain they have shifted the area from potato to ginger. Nearly 82
per cent were ’just satisfied’ with the quality of forecast while 18 per cent of respondents were
140
’highly satisfied’ with the type of forecast provided. Regarding their decision to follow the
price forecast for selling of commodities, it was revealed that 57 per cent would definitely
follow and 43 per cent agreed to follow. About 82 per cent and 18 per cent of respondents
’strongly agreed’ and ’just agreed’ respectively to recommend to the fellow farmers the price
forecasts of the centre. Majority (75 per cent) of respondents opined that both pre harvest and
pre sowing forecasts were most useful, 20 per cent agreed that pre harvest forecast was useful,
whereas very few (5 per cent) found that pre-sowing were also useful.
Indian Institute of Horticulture Research (IIHR), Bangalore was also a partner in the Network
Project to generate and disseminate Market Intelligence for few horticultural commodities.
Through the project, arrivals and prices of tomato were analysed using econometric methods
such as ARIMA. The predicted prices were provided every season to farmers of Kolara, in
Karnataka prior to sowing and harvest. These predicted prices were found be accurate to the
extent of 90 per cent in comparison with the actual market prices discovered later on and
thereby benefitted both farmers and traders in taking informed marketing decisions in the
region. In addition to tomato other horticultural crops such as onion, grapes and pomegranate
were also covered under the program. The researchers have opined that simple ARIMA
methods may not give accurate forecasts. In spite of difficulties in getting the data in required
form it is advocated to include exogenous variables like weather parameters to enhance the
adequacy of the model. Similar results were found in other network centres where ever the
forecasts were done appropriately. The NIAP project ended in March, 2015.
Project to forecast prices of major 19 agricultural commodities

This network project was initiated during 2015-16 in Karnataka with financial assistance from
Karnataka State Agriculture Marketing Board, Bangalore. The responsibility was assigned to
3 Agriculture Universities located at Bangalore, Dharwad and Raichur. The commodities
selected were paddy, sorghum, maize and ragi under cereals; bengal gram, red gram, green
gram and black gram under pulses; groundnut, sunflower and soybean under oilseeds; dry
chillies, cotton, coconut, arecanut and turmeric under commercial crops; and tomato, potato
and onion under vegetable crops.
Rigorous time series econometric models like, Moving Averages, Single exponential
Smoothing function, Double exponential Smoothing function, Halt-Winters Model, Auto
Regressive Integrated Moving Averages (ARIMA) and Artificial Neural Network (ANN)
models were used. Depending of the lowest Mean Absolute Per Cent Error (MAPE) values,
the best suited models were selected for determining the price forecasts. The results of the
models were taken as the base for further post-analysis diagnosis.
Apart from forecasting, traders’ survey, consideration of future market prices, changes in the
government policies, weather changes, import and export situation, prices of competitive
commodities and a shift in the crop area at district, state and country levels were considered in
the Post-analysis diagnosis. In this way study further fine-tuned the methodology to encompass
several markets for individual crops.
141
The price forecasts were released during the 1st week of every month for the next eight weeks.
After the release of the price forecasts, dissemination of market intelligence were also carried
out through television and FM Radio. Publications through print media in two periodicals
related to agriculture; Krishi Munnade and Vyavahaara Jagattu was also made regularly. The
validity of the forecasts were done through comparing the price differentials between the
predicted and actual price range in the course of time. The validity of the forecasts were worked
out which indicate a near prediction in crops like paddy (75-100 per cent), redgram (73-96 per
cent), groundnut (83-100 per cent) cotton (92-100 per cent ) and bengal gram (94-100 per cent)
while the forecasts were weak in the case of black gram for Mysuru market. The market
intelligence in the form of price forecast was preferred by a number of farmers and used while
deciding cultivation of commercial crops such as oilseeds, pulses and vegetables. A number of
enquiries were received soon after the telecast of the price forecasts over Doordarshan TV.
Besides prices, the farmers also were eager to know the area under the crop and the expected
production. Farmers had expressed their willingness to receive the messages even on their
phones in case it was provided as they were already receiving the SMS on current prices in
selected markets.
Case Study - initiatives by KAPC

The Government of Karnataka constituted the Karnataka Agriculture Prices Commission
(KAPC) as an advisory body to deal with aspects of scientific costing and pricing of farm
produces, competitive market structure and all other issues related to farmers’, income and
welfare in the state. In order to accomplish the major mandate of timely dissemination of
market intelligence and information to policy makers as well as to farmers a project was
assigned to School of Food Business, Diary Sciences College Hebbal Campus, Bengaluru
coming under Veterinary University (KVAFSU) Bider, to construct an Interactive Dashboard
for real-time prices forecast for principle agriculture and horticultural commodities of
Karnataka. Accordingly the dashboard was designed & developed as ‘Decision Support System
(DSS)’ with the active support a Bengaluru based software company.
Other objectives were to design statistical learning models for analysis of available agriculture
& horticulture prices & arrivals data and to facilitate comparison of the crop forecast prices
with cost of production, market prices as well as minimum support price (MSP) for selected
25 crops, to begin with.
Monthly price data was obtained from government of Karnataka website: Krishimaratavahini
and AgMarkNet of government of India for twenty-five selected crops from the 1st January
2002 to 12th April 2017. As the quality of the data was a concern, manual data cleaning and
pre-processing to required format were performed. Designing of univariate statistical methods
through ARIMA, artificial neural networks, and technical analysis for crop prices and
seasonality index for arrivals were undertaken. The mean absolute per cent error (MAPE) was
kept minimum thereby leading to accurate crop prices forecast trends. And finally, automation
of the methods for selected crops and the interactive dashboard for better and ease of
142
visualization of the results were developed.
The model provided accurate forecast of price trends compared with current market data.
Figures below obtained from the dashboard depict the price trends of actual and predicted data.
Figure 9.1 Price Forecast Training Using Historic Data
Dash board so envisaged serves twin purposes of predicting the future prices as well
understanding behaviour of the market for any government intervention programs. As a first
step, as shown in Fig 17 forecasted values are superimposed on actual data which are almost
moving in unison depicting the accuracy of the model.
Figure 9.2 Price Forecast, MSP, and Cost
In Fig 18 forecasted price of Tur in Kalabuargi market is compared with the prevailing MSP
and cost of cultivation of that crop. The forecasted price was much higher than the cost of
production actually borne by the farmers plus imputed value of family labour (called Cost A1
143
+ FL under CACP parlance) during forecasting period.
There was no likelihood of prices catching up with MSP notified by Government, let alone
covering the total cost of production (C3) that includes rental value of own land and
managerial cost. This indicated a shortfall in the market intervention.
Such forecasts are not only a precautionary to farmers but also a pointer to government to
undertake procurement operations till market price picks up. Accordingly, the government of
Karnataka procured record 32 lakhs quintal Tur from farmers in the current year. Despite the
intervention, the prices are yet to be stabilised owing to other exogenous factors.
Figures 20 & 21 indicate seasonality of arrivals along with price trends which help in
understanding critical time periods for close watch on market behaviour for necessary action..
Figure 9.3 Arrival Seasonality Index
Figure 9.4 Price, Costs, MSP and Arrival Seasonal Index Superimposed
144
In this way, the dash board becomes an effective Decision Support System (DSS) tool for
policy makers to keep a watch on the market situations to take necessary interventions and
policy measures to stabilize the price as well as income earning capacity of farmers.
Collaboration with Experts

At present, forecasting prices of a commodity is based mostly on the historical price data of
the same commodity. However, need of the day is to project likely production along with
forecast the price of an agriculture commodity using a dynamic models that incorporate all
possible explanatory factors. In addition to historical prices, array of factors such as yield,
rainfall, temperature, stocks, trade (imports and exports), unforeseen factors like political
uncertainty, strikes, etc. influence future price and production of a commodity which need to
be considered while designing Multivariate Models.
Indian Institute of Management- Bengaluru (IIM-B), has envisioned to lay the foundation for
a long-term collaboration with Karnataka Agriculture Price Commission (KAPC) in this
regard. The key objectives envisaged are:
 Development of Supply Projection Model using all relevant variables as a critical tool
for governmental agencies to plan interventions to ensure proper pricing and adequate
supply and execute futures contracts for crop prices, crop import and export at a state-level.
 Price Forecasting Model to help farmers in determining the right choice of crops and to
take corrective measures mid-season if the choice of crops cultivated doesn’t work out.
 Area Estimation Model both for the supply projections and price forecasting models.
Currently, the techniques used to estimate area under cultivation are manual and inaccurate.
 Demand Projection by making use of Advance estimates that the Directorate of

Economics & Statistics publishes periodically relating to production of agricultural
commodities along with the historical data on production and prices of different agricultural
commodities.
The KAPC has initiated a project in association with Microsoft India limited in this regard. It
is proposed to involve all relevant institutions including SAUs and IIM-B to develop
multivariate models that will cumulatively form a tool that can be integrated into the existing
KAPC dashboard. The models are thematically presented in the diagram below:
An initiative by establishing network of premier institutes like IIMs, IITs, ICAR centres,
SAUs and other public sector bodies is needed in all states as well as in the Centre that
would go a long way in further systematizing farm commodity price forecasting and
supply projection endeavours in India.
145
Collaboration with private sector

Karnataka State Department of Agriculture entered into an MoU with Microsoft India Ltd to
undertake an ambitious project, under the overall supervision of KAPC, for projection of
supply and forecasting of prices of important farm commodities by developing Multivariate
Models. The model proposes to incorporate apart from prices, other exogenous variable like
weather, rainfall, trade and so on mentioned above. The output that emerge from the above
collaboration will be displayed through KAPC dashboard.
Major challenge in this endeavour effort is to collate realistic information on above mentioned
multiple variables on both spatial and temporal spread, defining the likely impact of these
factors to adopt them for machine learning so that synthesised likely scenario or outlook for a
given commodity is arrived at.
This effort calls for use of Information and Communications Technology (ICT) and more
specifically Cloud-Based Technologies that are relevant to build robust platform services
leveraging Machine Learning based Models.
Web and Android based software

The KAPC is also attempting to develop web and android based software for online as well as
offline collection and analysis of field data pertaining to cost of cultivation and marketing of
major agricultural and horticultural crops of Karnataka. This initiative involves five
Agriculture and Horticulture universities in Karnataka along with a Bengaluru based private
software company. The structured data that is collected can be utilised to compute accurate
costs, production and return estimates for agricultural and horticultural crops automatically
without any manual intervention.
The results will be used online for supply projection and price forecasting under envisioned
multivariate models. This way, over the course of time, it is intended to have the software
customised to capture relevant data that can generate reports for farm planning and budgeting
analysis, inventory analysis, cost and return analysis with traceability metrics while identifying
and spreading best farming practices with price forecasting so as to address the issue of
enhancement of farmers income in a most precise way.
Limitations and Remedies

There are limitations to such analysis and assessments depending on quality, type and
harmonisation of data
Quality of Time Series data

The Committee for Forecasting Prices, headed by Chief Economic Adviser that submitted its
report in November 2016, pointed out several lacunae pertaining to the quality of the data
related to arrivals and prices of farm commodities generated by the Directorate of Economics
and Statistics, and other agencies in India. The key issues raised are:
146
a) At present multiple agencies are collecting arrivals and prices data at the centre and
state levels resulting in duplication of efforts.
b) Data from different sources can’t be compared for want of uniformity in concepts,
commodity description and grading.
c) Absence of uniform FAQ and grading standards, as substantial number of transactions
are reported under ‘others’ variety category.
d) Arrivals and prices data have inherent gaps and the flow of data also suffer from issues
like irregular reporting, non-response, reporting of unreliable data.
e) Lack of proper monitoring mechanism for recording accurate data and errors at data
entry level due to lack of proper training as data entry operators, in many cases, are
not regular employees.
f) Lack of transparency in price discovery, especially in wholesale prices due to urgent
need for computerized auction system.
g) No uniform reporting system to AGMARKET portal and non-reporting from many
markets.
h) Lack of uniformity in wholesale prices collected by the Department of Consumer
Affairs and there is no clarity on variety and specifications.
Considering the above limitations in current agriculture data generation system, the Committee
made several important recommendations that need to be implemented immediately.
Adequacy of the Data: The magnitude of unaccounted sale and illegal transactions of farm
commodities outside the preview of the regulated market (APMC) and other formal systems
that is rampant across the country, hence a real cause for concern. This lacuna limits adequacy
in the volume of the data generated and hence greatly affects precise prediction of prices of
farm commodities.
For instance, in Karnataka, as per the report by KAPC, out of total production from fifteen
major agriculture and horticulture crops only 41 per cent was bought and sold in various
Regulated Markets (APMC yards) of State during crop year 2014-15. Formal transaction with
in the APMCs is abysmally low in the cases of jowar (just 5 per cent), ragi (7 per cent), soybean
(21 per cent), tomato (24 per cent), bengal gram (26 per cent) and cotton (28 per cent). Time
involved in transportation, pre-harvest contract with the local money lenders and traders,
quality constraints are the main reasons for selling produce outside the APMC purview.
A comprehensive strategy encompassing legal enforcement coupled with incentives to sell with
in the regulated and formal market preview, extending the scope of formal transaction to village
level etc. should be a top priority.
Multiple Agencies: At present four agencies are involved in generating data on market arrivals
and prices of farm products at Centre and State levels. This not only results in duplicity of
147
efforts, but also create divergence in the data provided.
A strong and unified institutional arrangement at the centre, and its arms at the state to generate
and timely dissemination of quality data on crop area, production, prices, marketing etc. at the
disaggregate level should be thought of immediately.
Univariate Models: The ARIMA model, currently used universally for price forecasting
employs single variable i.e. past price thus leaving other important exogenous variables such
as weather, rainfall, and so on that affect the predictability significantly. There is ample scope
to employ multivariate models such as Transfer function, Intervention analysis, and Vector
Autoregressive (VAR) models discussed earlier.
These models have to be built after isolating the independent variables that have a significant
bearing on the variable being studied. The main problem with the exogenous variable is that
their effect could be stochastic and not deterministic in which case its effect cannot be captured
in the model appropriately. Since the data is high velocity in nature, the independent variables
should have the same frequency or else a proxy variable or a dummy variable should be
included to capture its effect.
Most of the multivariate models in the ARIMA framework use errors of the ARIMA model as
the dependent variable and add exogenous variables to explain the variation in it. And this
forms the basis for a multivariate model. However problems in employing multivariate models
while forecasting the prices are:
i. They have a greater requirement of data than univariate models. Every additional
variable has to be estimated that brings in an additional source of error due to sampling
variation.
ii. Model selection is therefore more complex and lengthier and more susceptible to errors,
which can affect predictions later on.
iii. It is difficult to generalize nonlinear procedures to the multivariate case. Generally,
multivariate models must have a simpler structure than univariate ones so as to
overcome the additional complexity that is imposed by being multivariate. Then,
multivariate models will miss the nonlinearities that are handled properly by the
univariate models
iv. Outliers can have a more serious effect on multivariate than one univariate forecasts.
Moreover, it is easier to spot and control outliers in the univariate context.
v. Identifying the lag structure of leading variables may be challenging at times.
vi. The quality of the data has to be very good and data on causal variables have to have
the same velocity as the prices.
Notwithstanding various constraints, concerted efforts should be made to develop and use
148
Multivariate Models to project Crop Supply, Price Forecast and Crop Area estimation for
strategically important crops by generating data through modern predictive analytics developed
with satellite data, ancillary data, ground truth and machine learning algorithms.
Measures to implement Market Intelligence

Market Intelligence will also require strengthening the data collection and collation mechanism
for crop forecasting. The modern scientific tools and techniques, of the Mahalanobis Centre
and other related central and state level agencies need to be developed at the production level.
At the same time, complete mapping and updating of soil health analysis and water resource
management will be needed.
On the output marketing front, a dedicated agency for analysing demand, supply and related
price discovery requires to be established. Necessary analytical tools and will be needed to
evaluate the following, across various agriculture sectors:
a) Trends correlated across seasons for harvested quantity – crops, fish, livestock produce
b) Trends on demand for each sector – food, non-food – crops, fish, livestock produce
c) Projections of demand for all major markets.
d) Analyse demand versus market price on the basis of supply variations.
e) Forecasting prices and analysing international price trends vis-à-vis trends in India.
f) Switch to online auctions in all markets including APMCs across India in a phased way.
g) Set up a Harmonized Market Information System covering all the wholesale markets.
h) Target a monthly, semi-annual and annual demand and price forecast bulletins in initial
5 years. Progress to issue decadal forecasts and projections.
The existing web, mobile and mass media modes of communication can be used to disseminate
the information to farmers and the agri-logistics sector.
Tap into existing experience of state level organisations like the Karnataka Agriculture Prices
Commission to undertake pilots to develop a national network of price analysis. Active
involvement of private IT sector and civil society in “Generation and Dissemination of
Forecasts and Projections” can be planned. A national Value System Platform can be
simultaneously launched to take advantage of the market intelligence and develop operations
that use such information as exemplifiers.
Restructuring DMI
There exists a Directorate of Marketing & Inspection (DMI) that is functioning since pre-
independence under Ministry of Agriculture. A large number of its mandated roles are now
anachronistic. This Directorate has a number of field units across the country.
149
The Committee is of the view, that the DMI can be restructured with respect to its roles and
responsibilities, manpower, and field unit reorganisation to meet the current demand of price
supply and demand forecast.
Since there already exists a large number of resources with particular qualifications recruited
to meet the past mandate, they can be retrained and reoriented and positioned appropriately to
undertake market intelligence functions. Into a fully equipped and empowered Directorate of
Marketing & Intelligence.
The Directorate of Marketing and Inspection (DMI), an attached Office of the Department of
Agriculture, Cooperation and Farmers Welfare under Ministry of Agriculture & Farmers
Welfare, was set up in the year 1935 to implement the agricultural marketing policies and
programmes for the integrated development of marketing of agricultural and other allied
produce in the country with a view to safeguard the interests of farmers as well as the
consumers.
The mandate of the DMI has undergone several changes over a period of time depending on
the policies and programmes of the Government.
A restructured DMI can take on some of these following functions:
i. Strengthen Agmarknet portal and collect and collate real time data on market arrivals
and prices for all commodities from across the markets in both private and public sector
ii. Collect and collate data on production of all produce (agricultural, horticultural,
plantation, livestock, etc.) and maintain time series data in this regards.
iii. Monitor global commodity prices and production estimates for major commodities
from price leading countries and maintain time series data.
iv. Promote standardisation and grading of agricultural and allied produce under the
Agricultural Produce (Grading and Marketing) Act, 1937.
v. Promote harmonisation of standards for all produce by working closely with other
standardisation authorities, like BIS, FSSAI, etc.
vi. Identify various sources of data on prices, demand and production, such as Directorate
of Economics Statistics (DES), Agrimarknet, Dept. of Consumer Affairs (DoCA),
NSSO, National Accounting system, etc.
vii. Develop mad adopt a suitable model for forecasting prices for select produce and
develop potential to forecast supply and demand subsequently.
Deployment of forecast data: The primary objective of a forecast well ahead of the production
season, is to enable the farmers themselves to undertake an informed decision on their
production with a view to earning optimal returns. Such a forecast would also help other
stakeholders in the supply system (like traders, processors, exporters, importers, etc.), as also
150
the government concerned with consumer interests to plan for their activities and initiatives.
However, the accuracy of the forecast particularly when univariate model is adopted, will
depend upon the credibility and robustness of the data collated.
In the opinion of this committee it will be appropriate to commission a forecast system but
limit its use to government initially. Price forecast by trend analysis is not sufficient and
requires demand and supply analytics to arrive at the apropos price forecast. The government
over a period of three to five years can watch the correlation between the forecast and actual
price, and make necessary corrections to the model before opening for public use.
Key Extracts
 The government of India has developed an elaborate system of estimation of crop sown
area, yield and production of different crops, but quality and timeliness of the data
poses a big challenge in precise and error free forecasting and projections.
 Although multiple organisations are involved in compilation, monitoring and release
of prices/price indices, currently no department is involved in forecasting
prices/demand officially at the national level.
 Restructuring of Directorate of Marketing Inspection into the Directorate of Marketing
Intelligence will provide a solution at national level for reliable and timely price
forecasting in a sustainable way. Focus should be on monitoring demand and supply
situations to arrive at associated price forecast.
151
Post-production interventions: Agricultural MarketingPost-production interventions: Agricultural Marketing
Agricultural Trade Policy

In the strategy for doubling farmers’ income, monetisation of their produce assumes a critical role with
an efficient marketing structure as its core.. A new market architecture, that recognises exports as a
market expansion initiative is the need of the hour. A concerted effort is required in delineating the
multiple stakeholders, who are key to the success of this initiative. Their roles need to be clearly defined
and facilitated by a comprehensive policy for converting high production potential of Indian agriculture
into exports. Parallelly, the emphasis has to be on creating an efficient agri-value system (AVS) so as
to let the benefits of enhanced export earnings trickle down to the ultimate producer.
Introduction
Thanks to science, facilitative policy support and adoption of new practices by the farmers,
higher productivity and production across the agricultural sector have created a happy situation
of surpluses. Government’s response is seen in the form of market reforms. Efforts being made
to create a unified national agricultural market is a classical approach, to help farmers evacuate
local surpluses to distant consumption centres. It is, however, getting clearer by the day, that
even a large market size that India offers may not be able to absorb the marketable surpluses
in a number of crop/commodities. By necessity, the horizon of market has to transcend the
national boundaries and tap export markets.
This would help maintain demand supply balance in the domestic market (necessary to avoid
price falls adversely impaction the farmers’ income) and also enable the farmers to be extract
greater value as a part of the interconnected Global Value Chain (GVC). Thanks to
globalisation, a strong trend is witnessed towards the international dispersion of various linked
activities such as production, marketing, distribution, etc. The term global value chain (GVC)
includes all of the people and activities involved in the production of a good or service and its
global level supply, distribution and post sales activities (also known as the supply chain). In a
globalised world, companies can restructure their operations internationally through
outsourcing and offshoring of activities. The production, trade and investments are increasingly
organised within the so-called global value chains (GVCs) where the different stages of the
production process are located across different countries15. The farmers as producers, when
exercising the export option will achieve higher selling volumes, possibly realising more
remunerative prices, particularly when domestic market is full.
In India, agricultural export has not been a strong point both at macro-economic (state and
nation) and micro-economic (farmers) levels. It has at best been seen as an ‘add-on’
opportunity, notwithstanding the initiatives in the past. In the opinion of the DFI Committee,
the Export Market deserves to be treated as the final evacuation window building on retail
agricultural markets (PRAM/GrAM) and domestic wholesale markets (APMCs/APLMCs).
These are the three corner stones of the new market architecture propounded in chapter 5. The
new market architecture provides a platform that facilitates the integration of farmers in the
15 OECD – Industry & globalisation: Global Value Chain
153
regional value chain (RVC) and the global value chain (GVC).
To fully harvest the export potential, specific focus areas need to be worked upon. An export
focused policy should aim at:
 Adding to demand for produce of India – enhance marketed quantity.

 Providing an upward lift to the value captured – optimal market price.
 Enabling farmers to be a part of RVC/GVC – integrate with cross-border supply chains.
 Improved remuneration to all stakeholders in the supply chain including farmers –
transparent and equitable sharing of the wealth created.
Such an agenda will automatically increase opportunity for the nation to earn foreign exchange,
while also adding to the country’s economic wellbeing.
Hence, at a time when India is in the process of integrating its agriculture with the global market
in the WTO regime, an enhanced focus on working upon the rules of trade in favour of Indian
farmers by means of export promotion in case of agro-commodities that have comparatively
higher advantage and import prohibition in sectors witnessing high production advantages
becomes critical. Enhanced exports clubbed with effective Supply Chain Management (SCM)
would pass on two immediate benefits to the farmers; namely, improvement in marketed
volumes and the price differential (if any). The latter, will be possible when market architecture
minimises the intermediary actors between farm-gate and markets.
Production versus Exports: a Status Check

It needs to be recognised, that Indian agro-commodities are goods that are in demand globally,
but the failure to reach out is due to absence of professional management.
Despite ranking first or within the top bracket as producer of many fruits and vegetables, milk,
major spices, select fresh meats, select fibrous crops such as jute, several staples such as wheat,
rice, millets and castor oil seed, the output does not find way into export markets. This is not
always due to a large domestic consumption base and quality concerns, but also because the
production is not necessarily planned for international consumption. The lack of export market
intelligence does not facilitate relevant market linkages, and therefore, the crop planning and
production are neither informed in their decisions, nor market-led.
India is also the world's second or third largest producer of several dry fruits, agriculture-based
textile raw materials, roots and tuber crops, pulses, farmed fish, eggs, coconut, sugarcane and
numerous vegetables. India ranked within the world's five largest producers of over 80 per cent
of agricultural produce items, including many cash crops such as coffee and cotton. India is
also one of the world's five largest producers of livestock and poultry meat, registering one of
the fastest growth rates.
154
Table 10.1 India global status in production

Production figures in million tons
World India India share in
Product Production production production Major producing countries in order of ranking
2014 2014-15 global (%)
Cereals:
Rice 711.99 157.20 22.1 China, India, Indonesia, Bangladesh, Vietnam,
Thailand
Wheat 653.99 95.85 14.7 China, India, Russia, France, Canada
Maize 657.29 23.67 3.6 China, Brazil, Argentina, Ukraine, India
Sorghum 56.90 5.39 9.0 Mexico, Nigeria, Sudan India, Ethiopia
Millets 27.68 11.42 41.3% India, Niger, China, Mali, Nigeria
Animal Products:
Hen Eggs 1191.00 79.94 7.0 China, India, Mexico, Brazil , Japan
Buffalo meat 3.70 1.62 43.8 India, Pakistan, Egypt, China, Nepal
Goat meat 5.28 2.10 39.8 China, India, Pakistan, Nigeria, Bangladesh
Processed fruits and vegetables:
Cucumber & China, Russia, Turkey, Ukraine, Spain (India-
7.17 0.17 0.24
Gherkins 25th)
Groundnut 39.40 6.55 17 China, India, Nigeria, Sudan, Argentina
Fresh fruits & vegetables:
Banana 108.35 29.72 27 India, China, Philippines, Brazil, Indonesia
Papaya 11.56 5.63 49 India, Brazil, Nigeria, Indonesia, Mexico
Mango, Guava,
44.27 18.43 42 India, China, Thailand, Indonesia, Mexico
Mangosteen,
Apple 75.60 2.49 3 China, Poland, India, Turkey, Italy
Grapes 63.92 2.59 4 China, Italy, Spain, France, Turkey, Argentina,
India
Oranges 61.28 7.31 12 Brazil, China, India, Mexico, Spain
Pineapple 23.72 1.37 6 Costa Rica, Brazil, Philippines, Thailand,
China, Indonesia, India
Citrus 12.08 0.74 6 China, Nigeria, India, Columbia, Angola
Tomatoes 147.90 18.74 13 China, India, Turkey, Egypt, Italy
Potatoes 349.93 46.39 13 China, India, Russia, Ukraine, Germany
Peas Green 17.03 3.86 23 China, India, France, Egypt, UK
Eggplant 49.06 13.58 28 China, India, Egypt, Turkey, Indonesia
Source: UNCTAD, 2017
Recent trends already point to higher productivity achievements, ending up in a consequent

bulge in production and more robust supply at farm-gate. High production, when saturating the
domestic market, results in depressed prices and as a backlash deters further growth in
production and even productivity. For further productivity led growth in production, the
marketable surpluses should be optimally converting into enhanced presence of these products
in the global markets.
155
The paradox between production and exports is substantiated by a comparative rank analysis
presented in the following table.
Table 10.2 Production versus Exports: India’s status versus World

India’s Share Rank in World
Agri Products Production Exports
In World Exports (%)
Coffee & Spices 4.4 5 5
Tea 4.1 2 5
Sugars 1.9 2 10
Fish 2.6 2 12
Oil seed 1.5 1 12
Cereals 1.4 3 14
Tobacco 1.7 3 15
Edible vegetables 1.5 2 17
Edible fruit 1 1 25
Dairy product 0.2 1 47
Source: DFI’s compilation from various sources
Current export status

Though among the top producers globally, India also has a large population base and hence
domestic demand is also equally large. However, as productivity levels and post-production
activities and connectivity improve, there is scope for Indian agricultural produce to benefit
from increased exports. On the whole, India is a net exporter of agricultural products as of now.
The table below breaks this out.
Table 10.3 Trade balance in APEDA monitored products during 2016-17

Figures in $ million
Product Group Export Value Import Value Trade Surplus
Cereals 6074 1343 4731
Animal Products 4416 69 4347
Processed Fruits & Vegetables 1070 3741 -2671
Other Processed Foods 3005 1241 1764
Fruits & Vegetables 1552 881 671
Floriculture & Seeds 161 118 43
Total 16,278 7,392 8886
The Agricultural & Processed Food Products Export Development Authority (APEDA)
reported exports at US$ 16.28 billion in 2016-17 for the products it monitors, which account
for roughly 50 per cent of the total agri-exports of the country.
Further, of these exports, cereals and animal products have a major share; and within these,
basmati rice and meat are the main items. It connotes, that India’s agri-exports are not yet
156
broad-based, viewed particularly in the context of wide array of domestic produce. It

simultaneously implies that there exists large scope to pare up the quantum of exports and
enhance the horizon of market opportunities for the farmer-producer.
India’s share in global export of agricultural commodities is about 2.2 per cent and the country
is ranked 9th globally. The export of APEDA monitored products in last three years is as under:
Table 10.4 Export of APEDA products

Qty: ‘000 tons, Val: Rs crore
2013-14 2014-15 2015-16 2016-17 CAGR
Product Qty Val Qty Val Qty Val Qty Val (%)Value
Cereals 21,065 63,452 18,414 58,280 11,945 40,433 11,825 40,624 (5.02)
Animal Products 2,112 32,289 2,163 33,128 2,075 30,137 1,895 29,533 7.29
Processed Fruits
1,082 6,484 1,007 6,670 970 7,213 880 7,152 6.91
and Vegetables
Other Processed
2,784 25,068 3,013 24,893 2,513 18,855 2,586 20,112 (9.45)
Foods
Fresh Fruits &
2,917 8,761 2,500 7,474 2,405 8,391 4,116 10,370 11.61
Vegetables
Floriculture &
40 866 35 888 33 973 33 1,076 6.89
Seeds
Total 30,001 136,920 27,133 131,333 19,942 106,002 21,337 108,867 (1.64)
$ billion value 22.70 21.49 16.20 16.27
Source: APEDA
The recent trends indicate a plateauing out of exports in cereals and processed food products
in terms of both volume and value, and demand for fresh fruits and vegetable growing in both
quantity and value. For exports, the pre-requisites are surplus production, quality compliance
with market parameters of residues of pesticides, matching large viable quantity with uniform
maturity index and quality for the purpose of aggregation, sturdy and appealing packaging,
good multi-modal logistics connectivity to exit ports, etc.
Today Indian agriculture faces various new challenges such as stringent and ever changing
global sanitary and phyto-sanitary standards, lack of adequate post-harvest infrastructure and
logistics connectivity, etc. Due to small land holdings, the produce from even a single village
has significant variation in terms of varieties cultivated, size and other physical parameters and
stage of maturity at the time of harvest. In view of this, it is difficult for the exporters to source
requisite volume of a particular fruit or vegetables.
In order to meet all these requirements, there is need for farmer awareness about pre-harvest
intervals (PHI) of various crops, judicious use of permitted and registered pesticides, harvesting
at right maturity, appropriate post-harvest infrastructure facilities such as modern pack-houses,
reefer transportation, processing facilities where needed, certified packaging, etc.
India’s share in global markets

An assessment of the market demand at global level, indicates that India has little presence in
many of the top importing countries. The situation for some select products is represented in
157
the following table to substantiate this.
Table 10.5 India’s share in global Imports

Global India’s
Product import share Top importing countries Top exporting countries
- $ bn - $ bn
Cereals:
Sorghum 0.03 0 Mozambique (66.66%); Barbados Zimbabwe, USA, South
(33.33%) Africa
Maize 31.90 0.18 Korea Republic (13.87%); Japan ÙSA, France, Brazil,
(10.10%); Mexico (7.57%); Czech Argentina, Poland, Ukraine
Republic (7.12%); Egypt (5.60%)
Animal Products:
Poultry 2.5 0.013 Saudi Arabia (9.55%): UK (7.78%); Brazil, Netherlands,
meat Japan (7.19%); Hong Kong Germany, USA, Belgium
(6.55%); France (5.11%)
Milk 5.00 0.030 China (12.11%); Hong Kong SAR Netherlands, France, New
Powder (10.85%); Algeria (8.04%); Mexico Zealand, Germany,
(5.12%) Denmark; Sweden, USA
Cheese 16.18 0.003 Germany (17.39%); USA (7.04%) France, Germany, Italy,
UK (6.33%); Italy (5.73%); France New Zealand, Netherlands,
(5.25%) Belgium, UK
Processed Fruits & Vegetables
Cucumbers 0.43 0.18 Canada (9.2%); USA (9.2%); USAQ, India, UK,
& Gherkins Germany (8.52%); France (8.30%) Germany, Turkey, Vietnam
Other Processed Foods
Sweet 7.19 0.103 USA (13.15%); France (7.39%); Canada, Mexico, Germany,
Biscuits UK (6.26%); Germany (6.01%); UK, Belgium, Netherlands,
China (4.24%) Poland
Wine 2.57 0.003 USA (16.82%); UK (13.57%); Italy, France, New Zealand,
Germany (8.23%); China (6.10%); Spain, USA, Chile
Canada (5.98%)
Infant food 8.99 0.010 China (28%); Saudi Arabia Germany, Netherlands,
(7.25%); UK (6.03%); China Ireland, Thailand,
Macao SAR (3.54%); Germany Singapore, USA
(3.52%)
Cassava 0.08 0.002 USA (21.95%); Korea Republic Thailand, China, Indonesia,
(8.54%); China (8.45%); France Other Asia, USA
(6%); Czech Republic (4.88%)
Starch 3.65 0.07 China (22.95%); Indonesia Vietnam, China, Germany,
(9.70%); USA (6.08%); Other Asia France, Thailand,
(5.09%); Korea Republic (4.88%) Denmark, Netherlands
Fruits & Vegetables
Tomatoes 6.4 0.07 USA (24%); Germany (15.27%); Mexico, Netherlands,
Russia (8.01%); UK (7.60%); Japan, Italy, Spain
France (7.30%)
Potatoes 2.75 0.069 Netherlands (9.28%); Belgium France, Netherland, Egypt,
(8.40%); Russia (8.39%) Germany Germany, Spain, China,
(5.44%); Spain (5.26%)
Bananas 11.60 0.020 USA (17.28%); Belgium (8.08%); Ecuador, Philippines, Costa
Germany (6.95%); Russia (6.52%); Rice, Guatemala, Columbia
Japan (6.04%)
158
Global India’s
Product import share Top importing countries Top exporting countries
- $ bn - $ bn
Grapes 8.36 0.17 USA (18.26%); UK (8.05%); Chile, USA, Italy,
Germany (7.89%); Netherlands Netherlands, Spain, South
(7.55%); China (7.01%) Africa, India
Mandarins 4.21 0 Russia (14.54%); France (9.85%) Spain, Turkey, Morocco,
Germany (9.84%); USA (9.53%); Chile, South Africa
UK (9.08%)
Mango, 2.41 0.48 U SA (22.50%); China (10.76%); Thailand, Brazil, India,
mangosteen Netherlands (9.64%); Germany Pakistan, Peru, Philippines,
and guava (7.03%); UK (6.74%) Indonesia
Pineapple 2.41 0.004 USA (27.95%); Netherlands Costa Rica, Netherlands,
(6.35%), Germany (5.77%); UK Mexico, Other Asia
(5.73%); Belgium (5.15%)
Source: UNCOMTRADE (Update as on 15.01.2017)
Table 10.6 Global position of India’s agro exports

India's share
Produce Major Exporting Countries (competing suppliers) in world
Exports (%)
Tea Sri Lanka (23.3), Kenya (18.6), China (15.3), United Kingdom (4.1) 8.7
Rice Thailand (35.2), Vietnam (12.5), USA (11.3), Pakistan (11.1) 4.1
Sugarcane Brazil (43.6), Thailand (10.6), France (5.2), Mexico (3.5), Germany (2.4) 2.3
Brazil (22.3), Vietnam (7.8), Germany (7.7), Colombia (7.4), Switzerland
Coffee 2
(4.8)
Tobacco Germany (14.3), Netherlands (14.2), Brazil (7.5), Poland (4.6), USA (4.3) 1.7
Mangoes Mexico (15.9), Netherlands (12.8), Brazil (10.9), Peru (8.9), Thailand (7.4) 1.1
Potatoes Netherlands (22.3), France (15.5), Germany (8.8), Egypt (5.8), Canada (5.2) 1
Tomatoes Mexico (25.2), Netherlands (18.4), Spain (14.1), Morocco (5.4), Turkey (5.2) 0.9
Grapes Chile (19.4), USA (15.2), Italy (9.3), Netherlands (7.9), Turkey (7.9) 0.8
Wheat USA (23.7), France (14.4), Australia (13.4), Canada (12.2) 0.1
Rapeseed Canada (43.2), Australia (10.2), France (10.1), Ukraine (5.9), UK (3.9) 0
Cocoa Côte d'Ivoire (29.2), Ghana (25.5), Nigeria (8.7), Netherlands (6.6) 0
Apples Italy (14.2), USA (13.6), China (13.1), France (10.6), Chile (9.7) 0
Bananas Ecuador (24.2), Belgium (14.3), Colombia (8.8), Costa Rica (7.8) 0
Cucumbers Spain (28.3), Netherlands (20.5), Mexico (13.1), Canada (6.9), Jordan (6.3) 0
Poultry Brazil (28.4), USA (17.7), Netherlands (8.9), France (5.8), Poland (4.7) 0
Fish China (11.5), Norway (9.4), USA (5.3), Viet Nam (4.4), Canada (3.9) 2.6
Eggs Netherlands (21.6), USA (9.1), Turkey (8.9), Germany (7.4), Poland (6.3) 0.2
Note: Figure in brackets is percent share in total world export of respective countries i.e India’s major competing suppliers.
159
An aggressive export strategy would require to include cluster based development, such that
Farmer Producer Organisations (FPOs) or Village Producer Organisations (VPOs) are able to
output sizeable volume of quality produce as desired by the importing markets in an efficient
manner. Availability of a particular fruit or vegetable in significant quantity with similar
physical parameters and stage of maturity at the time of harvest is critical, especially when the
produce is required to undergo some post-harvest pre-conditioning, like vapour heat treatment
or hot water treatment in compliance of the importing country’s requirements. Export oriented
production through development of clusters will help to make available sizeable volumes of
identified produce to meet such requirements.
Agricultural and Processed Food Products Export Development Authority (APEDA) in the
Ministry of Commerce has in association with the Department of Agriculture, Cooperation &
Farmers’ Welfare, initiated a cluster approach, by identifying contiguous geographical
farmlands and developing the farmers to address the issues raised in cultivation (quality
planting material, integrated pest and nutrient management, etc.), pre-harvest (maturity indices,
permissible residue levels, etc.) through agencies of the state governments. The concerns in the
post-harvest handling and export linkage can be addressed through support of Central
government agencies.
There is also the need to designate specific sea-ports as gateways for export/import of
agricultural produce, especially those that are perishable, such that the necessary phytosanitary
clearances are fast-tracked and do not become a bottleneck to movement.
State level data on exports

Currently, the export data compiled by DGCIS (Directorate General of Commercial
Intelligence & Statistics) is at an aggregate country level which does not indicate the exact
origin of the export consignments. In order to identify state level export promising clusters, it
is essential to have state level data on exports. Compilation of data at state level will also be
instrumental in making state export promotion policies, future cluster identification and priority
intervention for quality upgradation, testing laboratories, investments for export infrastructure
and subsequent focused interventions in terms of QC (Quality Control), SPS (Sanitary and
Phyto Sanitary) / TBT (Technical Barriers to Trade) training and traceability, etc. based on
rejections or response of market. The modus operandi could be similar to the state level export
data maintained by the USA, and can be maintained at GrAM/PRAM levels, from where
purchases for exports are initiated. All grameen rural markets should be inter-connected to
prepare a national network of the business generated to introduce and prioritise government
interventions. Online trade using platforms like eNAM (electronic National Agriculture
Market) or any other can also be promoted at GrAMs/PRAMs.
Agri-exports not Commensurate with Production: Cause and Effect

The dissonance between India’s global ranking between production and exports may be
categorised into supply side as well as demand side constraints. On the supply side, the
concerns arise from inefficiencies in terms of regulatory restrictions, production related issues
160
and post-harvest losses. Poor reach of agri-logistics disallows appropriate connectivity and
leaves the supply conduit narrow. Resolution of these primary these issues is only a necessary
condition. The sufficiency condition for achieving a robust export status warrants that all
demand side issues are also addressed.
Figure 10.1 Supply and demand side issues
Cost
Supply side Quality

problems
Market Intelligence
Poor Export
Competitiveness Why?? Where??
Tariff barriers
Current Status
Demand side
Non-tariff barriers
problems
Trade agreements
Supply side constraints

As indicated in the Figure 10.1, Indian agro-exports are primarily hit at three levels,
(i) higher landed cost as compared to other competing players;

(ii) poor quality not in sync with the standards of the importing countries; and
(iii) absence of market information and global market linkages.
Instances of very high final landing price as compared to other competing suppliers can be
witnessed in case of mangoes in the USA, which is one of the biggest importers of mangoes
and tea. All other competing suppliers of mangoes in USA market including Thailand (5798
USD/ton), Brazil (1277 USD/ton), Peru (1255 USD/ton) & Mexico (840 USD/ton) are able to
reach US port at much cheaper price than India (alphonso mango reaches at 6462 USD/ton).
Similar situation prevails in case of tea in US; rice in UK, refined sugar in Australia and in
most other cases. While in some instances the difference is due to mode of transport used,
distance and travel time, on occasions the cause is also due higher inputs costs or lower
productivity and factors such as added cost of losses arising from poor post-harvest
management at source. In result, India is losing out on export opportunity in foreign markets.
The reason for poor price competitiveness of Indian agri-exports is an outcome of inefficient
economies of scale arising from lack of initial aggregation at farm-gate or village level. Since
the average size of a land holding in India is small, the consequent marketable surpluses from
individual farmers are small. As such, the first mile aggregation of produce is an important
requirement, so that output from individual farms can be pooled into exportable container
loads. The collaboration among farmers to produce the same (uniform) quality and variety of
produce is also important, requiring a cluster approach by FPOs or VPOs.
161
This Indian yield levels are lower than even some smaller ASEAN (Association of South East
Asian Nations) and African countries. Apart from large farming communities of USA and EU
(European Union), even smaller countries surprisingly are surpassing India in the productivity
levels. Some of these countries include Cape Verde (mango), Cyprus (Okra), Turkey
(soybean), Jordan (eggs) and Nicaragua (groundnuts). According to the World Bank, India’s
rice yields are one-third of China’s and about half of those in Vietnam and Indonesia. With the
exception of sugarcane, potato and tea, the same is true for most other agricultural
commodities. China, with higher land fragmentation than India also surpasses in productivity
levels, due to a cluster approach in production, and by using appropriate supply chain
management systems, starting at farm gate.
The link roads from farms to the main road are underdeveloped in most of the states, though
positive change is occurring as an outcome of investments by the Department of Rural
Development under two of its flagship schemes – MGNREGA and Prime Minister’s Gram
Sadak Yojana (PMKSY). Rural electrification which is an important focus of the government
is yet to focus on supplying uninterrupted power to village level post-harvest management uses.
Congestion at the ports is due to high waiting periods of shipment and is another major issue.
The issue of delayed connectivity becomes critical in case of perishable exports. In such cases,
availability of reefer containers at the optimum time becomes crucial. Exporters face volatile
freight rates in the peak season. Inadequate number of trolleys at the airport hubs adds on to
the issue.
Figure 10.2 Circle of inefficiencies hurting agri-export potential
Small land -Issues of small land

holding holdings get aggravated by
inefficient primary level
aggregation, resulting in
High tariff & Absent
multiple intermediaries
non tariff technology
barriers interventions along the supply chain.
-Poor education levels of
farmers on knowhow and
Vicious circle of absence of relevant
inefficiencies at each technology interventions,
level, making Indian agri- result in poor yield levels.
exports uncompetitive in -Problems get exacerbated
Inefficient
logistics
export markets Poor yields due to poor supply chain
management and lack of
market intelligence.
-Low level logistics
connectivity of hinterland
Missing Absence of production areas with port
market aggregation terminals adds to overall
linkage platforms challenges.
Poor economies of scale, stem from a very limited presence of village level primary
162
aggregation of the production, that aid evacuation. This shortfall in the produce collection and
evacuation mechanism, leaves farmers to their own devices to market the surplus produce, and
does not promote them to undertake collective or cluster farming. The lack of aggregation
facilities result in small export consignments and without viable scale it leaves Indian exporters
with little negotiating power to obtain suitable Incoterms (International Commercial Terms)
and international freight rates.
All these inefficiencies add up to a much higher landed cost of Indian exports at the destination
port. Related requirements dealing with logistics and agri-marketing have been examined in
Volume III and chapter 5 in this Volume. Poor market intelligence, in terms of consumer
preference, dynamic monitoring of market share, qualitative feedback, developing
opportunities, etc. in the target export market are also a constraint.
Demand side constraints (Trade Barriers)

The destination markets, including the European Union (EU), Japan, and the United States
(US) use protection tools, to varying degrees, such as low but highly dispersed ad valorem
tariffs, specific duties, seasonal tariffs, tariff escalation, and preferential access along with
tariff-rate quotas. These add to existing supply side constraints, building costs and making
Indian exports less competitive. There are also instruments such as non-tariff measures (NTMs)
- these are policy measures, other than ordinary customs tariffs, that can potentially have an
economic effect on international trade in goods, changing quantities traded, or prices or both”.
(UNCTAD, 2010).
10.3.2.1. Tariff barriers

Tariffs for a specific range of products depend on numerous factors, including the date of entry
(seasonality factor), the degree of processing (escalation phenomenon), and the relationships
with exporting countries (preferential agreements and regional and bilateral free trade
agreements - FTAs). The EU's highly complex import tariff regime aims to protect domestic
production of fruit and vegetables during the growing season. For this reason, the regime's key
features are as follows: (i) relatively low tariffs on imports of tropical fruit, for example 5.8 per
cent on pineapples and zero per cent on papayas and mangoes; (ii) differentiated tariffs for
temperate and semi-tropical fruits, so that tariffs are higher during the season for European
producers and lower out-of-season; and (iii) generally higher overall tariffs for vegetables, with
no seasonal differentiation.
High tariff peaks and dispersions

Indian agro-products bearing high export potential have been facing high import duties in some
premier importing countries.
Table 10.7 Examples of Indian exports facing high tariff peaks
Country Major items with import duty higher than 50 per cent
Prepared F&V (20), Fish & Fish products (11), Fruits and vegetables (10), Dairy
EU
products (10)
163
Food industry products (24), prepared F&V (20), Dairy products (18) and
Japan
Cereal and Cereal products (12)
Dairy products (42), Food industry products (16) and Sugar and cocoa
USA
preparations (12)
Dairy products (23), F&V (16), Cereals & Cereals preparation (13) & Food
Canada
industry products (13)
Figures denote number of product lines on which the import duty has been more than 50% Source: IIFT
In other examples, Sri Lanka and Philippines imposed as high as 35 per cent and 40 per cent
tariff respectively on Indian wheat. There is no duty on India’s cotton exports to major
destinations except China, which imposes a high duty of 54 per cent. Bangladesh, imposes a
tariff of 37.5 per cent on milk imports. Similarly, India’s rice export attracted 50 per cent duty
rate in Philippines and a Rupiah 430 per kg is specified in Indonesia.
Tariff rate quotas

A tariff-rate quota system allows to fix a two tier structure of import duty. A Tariff Rate Quota
(TRQ) fixes the volume of imports at a lower tariff. After the quota is reached, a higher tariff
is applied on additional volume - in principle, TRQ provides continued market access.
However, in practice, over-quota tariffs can be prohibitive when in excess of the quota.
Import quota limitation in markets like China (for wheat, corn, soybean oil, rapeseed oil, sugar
etc., and Thailand (instant coffee, rice, pepper, maize, green tea, copra, etc.) are examples of
restrictions on Indian exports.
Tariff escalation: a challenge for value added exports

Certain niche sectors in India’s processed food industry, including milled products, cereal
preparation, jaggery and confectionery, guar gum, etc. have had opportunity to grow.
However, due to existence of tariff escalation, import duty in the importing countries like EU,
Japan and the USA increases with the level of processing.
Table 10.8 Tariff escalation in major importing regions

Product Tariff (%) Product Tariff (%)
European Union
Milk 113 Cheese 120
Grapes 18 Grape Juice 215
Apples 11 Apple Juice 63
Japan
Milk 280 Yoghurt 370
Pineapple 17 Pineapple Juice 30
Grapes 12 Grape Juice 30
Apples 17 Apple Juice 34
USA
Milk 66 Milk Powder 179
Oranges 4 Orange Juice 31
Pineapple 3 Pineapple Juice 12
Source: IIFT
164
Seen in table 10.8, import duty on milk in EU, Japan and USA, already high at 113, 280 and
66 per cent respectively shoots up 120 per cent (cheese-EU), 370 per cent (yoghurt-Japan) and
179 per cent (milk powder-USA). Tariff escalation as above ensures that most imports to the
EU are raw produce or products like coffee, cocoa or pineapple which cannot be cultivated in
Europe. It also ensures that value added products are made less cost competitive. For example,
while import duties for unprocessed cocoa beans is low, the EU charges 30 per cent for
processed cocoa products like chocolate bars or cocoa powder, and 60 per cent for some other
refined products containing cocoa.
10.3.2.2. Non-tariff measures

Looking beyond global push for tariff liberalisation, it is observed that policy orientations have
progressively been turning towards non-tariff measures. There exist instruments, other than
custom tariffs, that are effective in restricting access into importing markets. Such policy
measures include quality control (QC) measures; para-tariff measures such as anti-dumping
and safeguards measures; technical barriers to trade (TBTs) for manufactured goods; and
sanitary and phytosanitary (SPS) measures for food products, plants and animals.
The non-tariff measures to control imports are typically categorised into technical and non-
technical measures as picturised below.
• Pre-shipment inspections- PSI

Technical
• Sanitary & Phytosanitary- SPS
measures
• Technical Barriers to Trade- TBT
• Contingent trade-protective measures

• Licensing, quotas, prohibitions, quantity
control, other than SPS or TBT
• Price-control measures
• Finance measures
• Competition affecting measures
Non-technical • Trade-related investment measures
measures
• Distribution restrictions
• Post-sales service restrictions
• Subsidies
• Government procurement restrictions
• Intellectual Property
• Rules of origin
UNCTAD
Compliance to non-tariff measures such as TBT and SPS requires meeting stated process
benchmarks and certifications, which add to costs, thus wearing out the competitive advantage
due to low labour costs or enhanced market access acquired through tariff cuts during
165
negotiations. India’s agri-produce and agro-products are also subject to a series of non-tariff
measures in top consuming markets. Examples of market denials are ban on rice imports by
Iran and green pepper by Saudi Arabia. Vietnam refuses to allow Indian peanuts, and China
does not buy non-basmati rice from India but sources the same from Pakistan as well as
Cambodia, Myanmar, Vietnam and Thailand. US legislation requiring agriculture imports to
be mandatorily inspected and audited by USFDA (US Food & Drug Administration) will
increase the cost of compliance and hurt India’s farm exports.
Prevalence of non-tariff measures are important in view of WTO commitments. There is

widespread use of NTMs by both developed and developing countries. In major importing
countries, NTM coverage is 100 per cent across commodity groups. It is estimated that over 50
per cent of Indian exports to EU, less than 33 percent of exports to US, and 45 per cent of
exports to Japan are subject to NTMs. In Argentina, Brazil, Chile and Romania non-tariff
measures are applied widely in case of food drink and tobacco products. The non-tariff
measures applied in these countries are predominantly for the protection of human, animal and
plant health; while in China measures most frequently applied is import inspection.
It is generally believed that sanitary and phyto-sanitary measures when seemingly applied in
in an indiscriminate manner lacking transparency, are done in order to keep a check on exports.
There are several rejections of basmati and non-basmati rice shipments to the US on the
grounds of low hygiene standards. The US regulations require the manual sorting of rice and
the treatment for weevils. The issue of pesticides residues is frequently raised by the EU and
Japan. Pesticide residues are also a concern in the case of tea exports to the EU. These concerns
need to be rightfully addressed through suitable interventions in production and post-
production phases, especially where focus clusters are being developed.
In developed countries frequent revisions of TBTs and SPS standards occur, demonstrating a
‘goalpost change syndrome’, making compliance more difficult for the exporting partner,
which is generally a developing country. India has participated in non-tariff measure regimen
through specifying the labelling requirements, registration procedures, certifications and test,
quarantined requirements, and measures for food products. About 14 per cent of Indian
agricultural exports are subjected to only NTMs (Non-Tariff Measures) and 79 per cent are
subjected to both NTMs and tariff measures.
Negotiating for tariff cuts with other countries is not sufficient, unless non-tariff measures are
also attended to in trade agreements.
10.3.2.3. International trade agreements

International trade agreements allow partnering nations to arrive at mutually agreed terms to
promote trade in a free and fair manner. These are designed to promote the increased flow of
goods, and when applied holistically, provide many opportunities for the participating
countries to achieve higher gross domestic product, encouraging specialisation based on
comparative advantage. However, if loosely applied, it can lead to one-sided market capture.
166
International trade agreements can be bilateral or plurilateral, regional or cross regional. The
term Regional Trade Agreement (RTA), is a broad term that refers to a reciprocal arrangement
between two or more countries to apply lower trade policy barriers to goods and services
imported from the members, than to those imported from third countries. Modern RTAs go
beyond tariff-cuts and traditional trade policy administration, but include mechanisms on
investment, environment, labour and competition.
Other international trade arrangements take the shape of preferential grants (PTA), either
unilateral concessions (Preferential Trade Arrangement) or on reciprocal basis (Preferential
Trade Area). A free trade area (FTA) is a PTA in which barriers on trade between members are
reduced or eliminated, usually including common tariffs and other policy measures such as
eased custom controls.
Countries or regions can go beyond FTAs and collaborate for a greater degree of economic
integration resulting in comprehensive economic partnerships or cooperation agreements.
These include Comprehensive Economic Cooperation Agreement (CECA), Comprehensive
Economic Partnership Agreement (CEPA and Regional Comprehensive Economic Partnership
(RECP). A common market is a trade bloc where there is free flow of goods, services, capital
and human resources.
India has signed on to various RTAs, both on bilateral basis like in case of Afghanistan and Sri
Lanka (FTA); Chile (PTA); Singapore and Malaysia (CECA), Korea and Japan (CEPA), etc.,
and also with regional grouping for instance ASEAN-FTA, MERCOSUR-PTA and under
negotiation are EU-BITA and the RCEP (Regional CEP).
From the perspective of farmers’ income enhancement, the RTA strategy bears an important
role, keeping in view the following:
a. It should offer the potential to widen the farmers market, thereby allowing to develop
targeted economies of scale to achieve improved resource use efficiency.
b. Farmers may take advantage of complementarities that exist among countries in the
RTA. Processing units in these countries can source raw material produced in large
scale in India.
c. Farmers can achieve sustainable productivity gains as they capture and create larger
markets for their outputs. This also improvise capital use efficiency for the investments
in logistics and other infrastructure.
Various RTAs need to be designed and applied appropriately to the overall advantage of
farmers. The advantageous outcomes are many, and include changes in production processes
and in the produce basket of exports, thus promoting market led innovation and diversification
in all agricultural sub-sectors.
167
Trade agreements offer possibilities to enter into new markets or expand existing market
presence, and at the same time, however, it also opens up the possibility of surge in imports for
those agro- products for which India commits to reduce its tariff rates. This surge in imports
due to import duty reductions clubbed with high domestic production of the concerned crop
leads to drastic fall in the prices of agro-commodities in local markets. The ugly side is a hit
on the expected income of the farmers.
One of the protective measures preventing import duty reductions of crops of livelihood
concerns of the country as trading partner in RTAs, is to announce a special, negative and
sensitive list during its trade negotiation. For instance, India has managed to safeguard the
interests of both its farmers and industry through a large ‘Negative and Exclusion16’ list of 489
items, which includes 303 items of agriculture sector. This would mean on one hand protection
of Indian farmers against import surge from ASEAN, but at the same time similar list from
ASEAN would mean no business opportunity for Indian agro-exports.
On account of AIFTA (ASEAN-India Free Trade Area) under the Framework Agreement on
Comprehensive Economic Cooperation with the Association of Southeast Asian Nations
(ASEAN), India is to reduce tariffs on special products comprising crude & refined palm oil,
pepper, black tea and coffee by December 2019. Such arrangements are typically negotiated
so that India also finds reciprocal access to ASEAN markets. For example, to promote oilseed
production, future negotiations could include that a share of imports would use oilseeds
produced in India as feedstock for the extraction plants, especially where an associated capacity
in oil extraction plants is pending.
Better information and market intelligence on these aspects will build ability to take full
advantage of the trade agreements, which should normally lead to growth through repeat
orders. The global market should not be viewed solely from the perspective of exporting value
added products, but is also as destination for the raw agricultural produce of India.
Framework to Promote Exports

A comprehensive and dynamic agricultural export promotion mechanism is recommended.
While shift and growth in consumer demand in a particular period may necessitate supply
through imports, where ecologically feasible, Indian agriculture steps up to meet the growth in
demand. This increase in production is made more relevant, when the farmers also find
associated demand through exports. Active management of the export supply chain is needed.
Any connect with foreign markets is made more pertinent, if those markets are studied and
consumer preferences are better mapped. Currently, most of the export promotion activities are
seen to pursue a push into foreign markets. The government supports participation in
exhibitions, but basically these are an exploratory display of goods from India.
16 Negative list in a trade agreement means that the commodities listed under this category will not face any import duty exemption as a result
of signing the RTA. The exports however would be allowed at MFN rate itself.
168
Figure 10.3 Managing the export supply chain
o Consumer preference o Reciprocal trade

o Traded Volumes o GI recognition
o Assess Competition o Reduce tariff
o Logistics options o Mitigate NTMs
Export Market Trade

Intelligence agreements
Trade Domestic Cluster

management development
o Evacuation & Ports o Agri-export zones

o Marketing, Branding o Technology support
o Monitor market share o Infrastructure support
o Feedback to clusters o PHM support
To make export promotion activities focused and outcome oriented, there is need to provision
support through market intelligence which will include monitoring variations in market
dynamics at each importing partner nation. Transitioning export promotion from a push
mode into one that is responsive to market pull is recommended by the DFI Committee.
Market intelligence
The poor presence of Indian agri-produce and agro-products in global retail shelves, can be
attributed to lack of appreciation of the variation in consumer preference (taste and quality)
from the domestic consumer. What sells in India, may not be suitable to foreign buyers. For
example, though the AIFTA was instrumental for reducing tariff on Indian rice, there was no
commensurate growth in exports, since the ASEAN population prefers sticky small grained
rice and not the long grained type produced for Indian consumers. Similarly, the higher level
of sweetness in mangoes promoted from India, is not necessarily the demand in many countries
where the consumer prefers green unripe mango.
Export growth ambitions cannot be fulfilled merely by pushing what is produced in India, but
by producing what is asked for by the world.
Exports growth must be driven with the agenda to scale up the market share in existing import
markets and by capturing new markets. In existing trade partners, India’s market share can be
increased by meeting price and quality standards of a particular produce or product, or by
diversifying into supplying new produce or product types. In new markets, hitherto untapped
by India, the trade can be captured by spearheading initial supply. In both cases, the chance of
success is increased by situational analysis of the cross-border market demand and preferences.
169
The trade intelligence exercise would also require monitoring of other trade agreements,
changes in buying patterns, regulations and certification requirements (pesticides, MRLs,
labelling, additives, etc.)
The analysis should include regular assessment of competition from other exporters, ease of
doing trade, market acceptability and lead to a cost benefit analysis for export promotion in the
target country.
Trade management
Trade, once commenced, will need to be monitored for efficient management. Domestic
bottlenecks for easing evacuation from ports will be important. Dedicating certain capacity or
entire port zones for agri-export and import will also build an enabling atmosphere for
agricultural trade. As part of trade management, regular monitoring of status of India’s market
share in a target country will be important. Any dip in trade volume will need to be evaluated.
If it is because of a competing variety or product, the information should serve as feedback to
producers. Where another exporting country bites into trade already executed by India, the
same will need to be flagged and investigated. Marketing and branding in foreign shores would
normally be by individual exporting enterprises, but an India brand image mechanism can be
guided by the government.
The responsiveness of producers and exporters to changed dynamics in the importing country
would also be monitored and guided. State departments, agricultural universities and other
support agencies would also be able to sharpen their interventions with an outcome as target.
Production cluster
The Ministry of Agriculture, Cooperation and Farmers’ Welfare and APEDA have already
identified 10 clusters for export based production. Another ten can be identified and developed.
However, these clusters or producing zones will require prioritised technology support to
supply varieties and qualities as per aforementioned demand assessment. A cluster approach
brings various advantages to farmers. As producers of common quality and variety, they have
economy of scale, better support in post-harvest logistics and more assured market acceptance.
The support would naturally be market-linked SPS compliance, bringing in suitable
traceability, quality, variety, packaging and labelling, etc. to the production clusters.
The consumers of the output from such clusters will be of two types. The domestic processor
of export products and the international consumer for primary produce. Therefore, such clusters
will generate raw material for processors and preconditioned produce for export markets. The
export promotion policy would therefore need to promote, equally, finished products as well
as fresh whole produce. The finished products are such as silk products, cotton textiles, leather
goods, milled food items, potato chips, mango pulp, jams, pickles and processed meats and
more. The whole food produce from India would include items such as potato, mango, litchi,
various vegetables, fresh meats, flowers, raw spices, etc. There is a tendency to ignore exports
of farmers’ agri-produce, in favour of manufactured agro-products, whereas both outputs have
170
demand and the first actually brings more immediate benefits in form of market capture and
creates scale at farm-gate. The exported produce would require appropriate post-harvest
management support, to prepare and package the produce for travel to foreign shores.
Trade agreements
International trade agreements have an important role to play in guiding agricultural trade. On
the other hand, they need to be guided by market analytics and in convergence with ongoing
development activities in agriculture. It is obvious that trade cannot be a one-sided affair. One
way traffic only results in costs the entire chain of activities. Therefore, the need to plan for
reciprocal traffic, buy-back or cross-product arrangements. An agreement, originally made to
secure a supply of specific goods would benefit from re-assessment in light of new
developments in agricultural production. Geographical Indication (GI) recognition and
removing of trade barriers (price and non-price) will also help make Indian agriculture more
competitive.
Impact of WTO
The World Trade Organisation (WTO) provides a common institutional framework for conduct
of trade relations among its members. The agreement allows governments to support their rural
economies, but preferably through policies that cause minimal distortion in trade. Among other
obligations, member countries commit to cut and ‘bind’ their custom duty rates on imports of
goods. The tariff rates on a number of goods are “bound” (committed and difficult to increase)
and this rate is effectively a ceiling rate.
The WTO Agreement on Agriculture (AoA) has been adopted with the objective of reforming
trade in the sector and to make policies more market-oriented. The rules and commitments
under AoA apply to:
• Market access - various trade restrictions confronting imports

• Domestic support - subsidies and other programmes, including those that raise or
guarantee farmgate prices and farmers’ incomes
• Export subsidies – limits on spending and quantities, and other methods used to make
exports artificially competitive.
The rule for market access in agricultural products is “tariffs only” and the tariffs on all
agricultural products are now “bound”17. Almost all import restrictions that did not take the
form of tariffs, such as quotas, have been converted to tariffs - a process known as
“tariffication”. This has made markets substantially more predictable for agriculture.
Previously more than 30 per cent of agricultural produce had faced quotas or import restrictions
(cotton is a typical case, for example). The first step in “tariffication” was to replace such
restrictions with tariffs that represented about the same level of protection. Then, over six years
from 1995-2000, these tariffs were gradually reduced (the reduction period for developing
17 www.WTO.org “Tariffs: more binding and closing to zero”
171
countries ended in 2005).

Ceiling
The applied tariff rate, and those negotiated with

other countries as most favoured nation (MFN rate) Bound
or preferential rate, is capped as defined by the rate Applied Preferential rate
bound rate. The rates vary from country to country rate
and commodity to commodity.
The ability of a country to use tariff to restrict imports is also effectively “bound”. Like other
countries, the applied tariff rate is less than the maximum bound rate. Annexure A11 lists the
difference between India’s bound rate and applied rate. On the surface, the gap gives
opportunity for India to increase applied tariffs rates. However, there are other considerations
in international trade, besides an immediate transactional advantage, and in the long term it is
better to build equitable trading relations, based on competitive advantage. In the short term,
where a gap exists and the situation so demands, the gap in bound rate and applied rate can be
narrowed.
The AoA classifies government support to farmers into two basic types – those measures with
no, or minimal, trade distortion effect (called “Green Box” measures); and those that distort
trade (called “Amber Box” measures). For example, government provided agricultural
research or training is considered to be of the former type, while government buying-in at a
guaranteed price (“market price support”) falls into the latter category. Support under Amber
Box requires reduction commitments from member countries.
Green Box measures are exempt from such commitments. These cover many government
service programs, including research, pest & disease control, agricultural training - extension
and advisory, marketing and promotion service, infrastructural services (including market, port
and water facilities), etc. Various recent initiatives taken by Government of India,
especially the investment ‘in’ and ‘for’ agriculture, come under this exempt category of
measures. Also allowed under Green Box are direct payments that are decoupled from
influencing the type and volume of agricultural production. Others include income insurance,
structural adjustment assistance programs, disaster relief, etc. In the case of developing
countries, special treatment is provided in respect of governmental stockholding
programmes for food security purposes and subsidised food prices for urban and rural
poor.
In addition to measures exempted in Green Box, certain other domestic support (called “Blue
Box”) measures are exempt and only allowed to developing countries. They refer to certain
developmental measures and certain direct payments under production limiting programs.
These include input subsidies to resource poor or low-income producers, investment subsidies
generally available to agriculture in developing countries and support to encourage
diversification from growing illicit narcotic crops.
172
All domestic support measures in favour of agricultural producers that do not fit in other
exempt categories (Green or Blue boxes) come in the Amber Box and are subject to reduction
commitments. However, there is provision, that, if in any year the aggregate value of the
product-specific support does not exceed a specified (de minimus ceiling) share of the total
value of production of the agricultural product in question, then there is no requirement to
reduce such trade-distorting measure. The de minimus ceiling for developed countries is
specified at 5 per cent and this threshold in case of developing countries is 10 per cent.
India is in compliance with its WTO commitments and the input subsidies (seed, fertilizer,
power, credit, etc.) generally amount to around 7 per cent of the total value of agricultural
output. This actually indicates that the bulk of agricultural value created, relies on market
linkage for economic growth. India is also moving fast towards developed nation status,
and de minimus ceiling will one day come down to 5 per cent. Therefore, it is imperative
that developmental efforts should focus, on priority, on market reforms, access to new markets
and optimal value capture. The current exemption under Blue Box measures should also be
applied strategically apply and aim to slowly shift from input support towards investment
support. This should form the long term goal.
In relation to Green Box, India is already implementing various comprehensive measures.

Examples of some similar measures by other countries are in the following table.
Table 10.9 Examples of green box measures

Green box measures in China
Research Allocations for research programs and activities at agricultural institutes.
programs
Pest and disease Expenditures on early-warning, quarantine, prevention and cure of plant and
control animal pest and disease
Training Expenditures on the training of technical and administrative personnel in the
field of agriculture
Extension and Expenditures on the extension of new technologies and breeds and related
advisory services advisory services
Inspection Outlays on inspection and quarantine of agricultural products, animal feed,
services veterinary medicines and farm machinery, etc.
Marketing & Expenditures on market information, advice and promotion relating to particular
promotion products
Services
agricultural Outlays on infrastructure services, including the Agricultural Comprehensive
Infrastructural Development Programmes, flood control engineering, drainage and irrigation
services facilities, rural roads, rural electricity reticulation, small scale watering facilities
on farmland, as well as soil and water conservation
Green box measures in Thailand
Infrastructural Services include: construction of dam and drainage systems, maintenance of the
services facilities throughout country in order to have sufficient water resources for the
cultivated areas, river-bank wall to prevent floods, consolidation of land-use in
irrigation area, construction of roads and bridges and other means of
transportation in rural areas.
Inspection Inspection services are undertaken to ensure safety and quality of agricultural
Services products as well as the quality of feedstuffs.
173
Promotion of Assistance in terms of advice on market information and management of

Farmers’ farmers’ organisation to help marketing of their products efficiently.
Organisation
National Knowledge transfer from research to producers, advice on viable options to
Extension and increase income, know-how concerning seeds, plants and livestock, provision
Advisory of knowledge on new technology to increase agricultural productivity.
Services
Green box measures in Vietnam
Pest and disease Budgetary expenditures in activities related to plant and animal health
control, protection; sanitary and phytosanitary defence and alertness; pest and disease
inspection surveillance, prevention and control; provision of vaccines, etc.
services
Regional Priority investments to develop 1,500 communes under harsh and especially
assistance disadvantaged conditions in remote and distant areas etc.
programmes
Subsidy to low Short-term soft loans; Budget allocations for freight subsidies to offset the cost
income resource of transportation and production inputs to mountainous, remote regions, etc.
poor farmers
Restructuring of Agricultural Trade Development

Agri-trade development efforts by the government, need to include a strong Trade Analytics
Cell. On the basis of regular studies of export markets, trade facilitation arrangements and
responsiveness of production clusters, this analytics cell would guide the promotion and
development activities. Without such intelligence and inputs, promotion activities will remain
a shot-in-the-dark. The practice of government supporting products on display stalls in
exhibitions, should take a back-seat and it should focus on organising and facilitating regular
business meetings, partnerships, negotiations and securing of delivery systems.
The analysis will also form an important input for policy makers and during trade negotiations.
A harmonised set of criteria and assessment tools should be brought into use, so that nodal
users are not subject to interpretations of random and independently conceived metrics.
The export promotion bodies should prioritise efforts on production clusters, and preferably to
educate on regulatory compliance, traceability, packaging and labelling, and as a focus
feedback mechanism to producers. The technical requirements can be guided through the local
SAUs/KVKs and infrastructure support through the state government. Taking advantage of
Geographical Indication, and super food focused production are important attention areas (see
Annexure A10).
Pro-active involvement of Indian embassies/high commissions to promote agri-trade is needed.

Embassies can be strengthened with a dedicated agricultural trade officer, with specific
mandate to develop agri-trade. The officer would also closely monitor and mentor any new
entrant from India into that market. Facilitation with host authorities would also be required to
address issues. Any bottleneck(s) faced, should be communicated back to India for suitable
remedial action, wherever possible.
174
The Ministry of Agriculture and Farmers’ Welfare should engage actively with the Ministry of
External Affairs and seek their partnership and support in promoting exports. An aggressive
trade strategy is recommended, keeping the perspective of Doubling Farmers’ Income.
Strategy for Aggressive Trade

Government of India is in the process of unveiling its first Agriculture Export Policy (AEP)
with the objective of increasing the nation’s agricultural exports and integrating Indian farmers
and agricultural products into global value chains. It is to be borne in mind that there is
increased focus on productivity gains across sub-sectors, that will result in a higher output, and
this will need to be connected with new markets, within and outside the country.
Hence, aggressive strategy on agricultural exports is important. The aim should be to raise
agricultural exports about three times by 2022-23, to reach a target of USS 100 billion in
exports. Further the basket of commodities exported should be broad-based and reach beyond
cereals and meat, which today account for the bulk of the exports.
As explained earlier, export promotion, apart from market intelligence on the potentials that
exist in foreign markets, should encompass inputs on the regulatory changes in potential
markets abroad and resolving market access issues by taking them up with relevant bodies in
host countries, as a part of an aggressive Agriculture Trade strategy.
For this purpose:

• The India Embassy system needs to be strengthened and oriented towards enabling
increased agriculture exports from India. Countries such as United States have
dedicated Foreign Agriculture Service (FAS) and thus have presence in all the
important countries wherein their agriculture exports are strong (93 offices covering
171 countries). FAS of US Department of Agriculture looks after areas such as Trade
Policy (resolving market access in host countries), Market Development (conducting
market development programs with US agri exporters), Export Assistance (helping US
exporters understand export potentials abroad and various export promotion programs),
Market Intelligence (Data and Analysis on foreign market conditions, production forecasts,
track changes in policies affecting US exporters of agricultural produce). Similarly, all
other major agricultural exporting countries have their representatives/offices in
important destination markets. Though India has emerged as a net exporter of
agriculture and allied produce, similar systems are not in place.
• As of now, India has only one post of Agriculture Advisor in Brussels who coordinates
with the Ministry of Commerce and Ministry of Agriculture on matters of agriculture &
allied exports to entire Europe; a post of Resident Director, MPEDA at New York who has
now been asked to look after all agriculture & allied sector exports to USA. Apart from
these two, one post of Minister (Agriculture) in Indian embassy at Rome exists, but is
largely related to interactions with FAO and not mandated to promote Indian exports.
175
• Hence, there is a need for strengthening this system by expanding the presence in all the
top 15 export destinations of India such as USA, Saudi Arabia, UAE, China, Vietnam,
Bangladesh, Malaysia, Sri Lanka and covering important destinations like Africa. The posts
could be at different seniority levels depending upon the importance of these markets.
These specific posts may be filled by domain experts/experienced development
administrators/policy makers in agriculture and allied areas. These trade experts would be
tasked to monitor the market conditions in their host countries, interact with traders &
exporters in India and resolve their market access issues by interacting with the relevant
bodies in the host countries, explore market opportunities for new products, inform the
relevant Ministry based home about standards and regulatory requirements including
periodic changes in those countries.
• There have to be periodic meetings with these officials in Indian embassies and Ministry
of Agriculture and Ministry of Commerce. Creating this eco system would greatly help sort
out issues faced by India’s exporters, understand the policy changes that are happening in
those markets, thereby improving the domestic policy making as well as programs, export
incentives, imposing tariffs etc. It may be noted, that the total Agriculture Trade of
India is around Rupees four lakh crore and the cost of creating this infrastructure in
Indian embassies would be a miniscule fraction of the benefits that would accrue.
• To start with, the central government may create the posts of Advisor (Agri-trade) in ten
select export markets in South America, Africa, Australia, China and ASEAN (at Vietnam),
leaving out the two places where already such experts are placed (i.e., EU and USA).
• The trade strategy should focus on all kinds of agricultural goods, i.e. manufactured value
added products, semi-processed goods, unprocessed commodities and fresh whole produce
of farmers. Short supply chains having direct linkage with farmer groups should be the
preferred option.
An aggressive export strategy is important for developing agriculture in a future ready manner,
with growth that is market-linked and market-led.
Need for a Stable Trade Regime

Trade typically encompasses imports, exports and compliance with associated rules of trade.
All three components need to work in a complementary manner. In case of farmers, these need
to also enable and empower them to capture better value and over sustainable periods.
Import restrictions
A cursory look at the tariff changes by India, over the last decade, will show that there have
been frequent and short term adjustments, frequently in reaction to temporary domestic supply
imbalance. Long term trade relations are put at risk when policy is varied in the short term and
unstructured in nature.
Taking the case of wheat as an example, in the last eight years (between 2007-08 and 2014-
15), the import tariff was largely zero. In August 2015, import duty was raised from zero to 10
176
per cent and subsequently within a month in October, 2015 it was raised further to 25 per cent.
A year later, the import duty was reduced to 10 per cent in September 2016 and was brought
down to zero in December 2016. In March 2016, the duty was again raised to 10 per cent.
Wheat saw a surge in imports, in

2016-17, though in 2017-18 the
quantity is expected to be half.
However, imports happened for
various reasons, including due
to inefficiency of the domestic
market, making imports cheaper
for traders. Wheat imports also
happened when FCI restricted
sales to bulk purchasers.
In case of pulses, during the last

10 years, the imports were allowed at zero tariff. Only during March, 2017, the import duty on
Tur dal was raised from zero to 10 per cent. Though having raised the duty, Tur Dal imports
continued at zero duty from Myanmar and a few African LDC countries. These countries enjoy
tariff concessions due to the Indo-ASEAN FTA (in case of Myanmar) and DFTP scheme (in
case of LDC countries). In such situation, high import duty alone cannot be the answer. It will
entail closer monitoring to ensure that the imports are happening from the concessionaire
country by obliging it to furnish a certificate of origin.
Similarly, import tariffs on edible oils show frequent changes. The import duty on crude palm
oil was at 60 per cent during January, 2007. It was reduced over the next one year to 50 per
cent, then 45 per cent to 20 per cent and set at zero during April 2008. It remained so for the
next 5 years and again was raised to 2.5 per cent in January 2013, then raised to 7.5 per cent in
December 2014 and again increased to 12.5 per cent during September, 2015. It was reduced
to 7.5 per cent after one year, in September, 2016.
In parallel, the import tariff on refined palm oil also shows wide variations during the last 10
years. It was at 67.5 per cent during January 2007 and in the next one year was gradually
reduced to 57.5 per cent, then 52.5 to 27.5 per cent and finally to 7.5 per cent during April
2008. It again was changed to 10, 15, 20 and 15 per cent over the next eight years.
In July 2017, having taken a more comprehensive view from the perspective of oilseeds
producing farmers and the need to acquire greater self-sufficiency in this sector, the import
duty have been notified at 30 per cent on refined oil and 15 per cent on crude oil.
Similar import tariff changes were seen in respect of other edible oils such as crude sunflower
oil, soyabean oil (crude), mustard/rapeseed/colza/canola (crude) and all other edible oils
(crude). They were all brought down to zero per cent during 2008 and then raised subsequently.
177
In case of refined oils too, tariffs were brought down during 2008 and then increased
subsequently.
As far as import policy for agriculture is concerned, it is often considered as a price

support and price stabilisation tool, which is tilted more towards consumers. Such
frequent changes, triggered by concerns of consumer unease over prices, cause disruptions in
cultivation patterns at domestic farms. Sudden reduction in import tariffs due to increase in
consumer prices harm the long term interests of our farmers, and cheap imports tend to offset
the commercial welfare of farmers.
What is now needed is to reorient trade policy to serve the interests of the farmers, who as agri-
entrepreneurs are seeking opportunities for monetisation of their produce with comparative
advantages. The trade policy then will come to acquire the characteristics of an agri-export
facilitator, in contrast to consumer-centric from a larger perspective, the interests of both the
farmers and consumers will need to be balanced.
Export limits
In case of exports too, policy is used as an internal price control mechanism, to adjust tariffs to
curtail any increase in consumer prices on an ad hoc basis. The Minimum Export Price (MEP)
is a frequently used tool with the intention to restrict or ban the export of a commodity in
reaction to rising prices in the domestic market.
In either case, the agenda is to control the supply of a commodity to the domestic market, the
oversight being temporary and inconsistent in duration, as a contrived reaction to short term
changed circumstances. The policy does not actively promote agricultural trade but is
mainly used to control prices in the domestic market.
Both import and export controls when imposed in seemingly ad hoc manners, disturb the global
trading relationship. The effect of limits on imports trade also impacts in reciprocal lowering
of exports and even to the extent that export relations are not promoted.
Long Term Agricultural Trade Policy

The Foreign Trade Policy announced by the Department of Commerce usually takes a long term
view (3 years at present). However, there is no corresponding long term Agricultural Trade
Policy in the country.
Agricultural trade policy operates under a framework where it is readily used as a supply control
mechanism. The resulting short term adjustments in tariff and export windows tend to disrupt
planning, or relationship building in international trade. Agriculture is already unpredictable,
subject to vagaries of nature on the domestic front and market uncertainty. A short term view of
trade policy can only add further to the risks and uncertainties.
It is recommended that India’s agricultural trade policy should be guided by balancing the
178
interest of both the producers and the consumers, in addition to long term food and nutritional
security concerns of the country. A trade perspective over 5-10 years period is suggested. A
mid-term planned review of agriculture trade policy is another important recommendation, akin
to the mid-term review undertaken for foreign trade policy.
The import restriction requirements can be structured on pre-determined supply signals,

specific to crops and for periods of the year, so that the trade can be accordingly planned for
the long term. For example, it can be declared that if the production of a particular commodity,
at the time of first production estimates, is expected to be 5-10 per cent less than the moving
average of the preceding three years, import tariff reduction of 5 per cent will be considered.
Similarly in reverse, if the production expected is higher than 5-10 per cent of average, the
import will be curtailed. The status would remain for a minimum of 6 months, unless the supply
situation changes by another 5 per cent to the contrary. Different combinations of parameters,
specific to commodities, can be determined. Such pre-set triggers will bring transparency and
allow the trade to make planned adjustments to supply dynamics and accordingly strengthen
their links with trading partners abroad. The price and demand forecasting mechanism in
Chapter 9 will also help with relevant demand-supply intelligence to serve this purpose.
Government needs to reconsider agricultural trade policy and structure the mechanism such
that the agricultural economy has more freedom to build external markets, which will benefit
plans for productivity increases. Closure of export windows deprives producers from planning
long term targets for international trade. Export bans result in a short term excess and long term
disruption in building export markets. Exports need to be promoted aggressively and preferably
not be used as price control mechanism. Exports can add to demand for domestic produce and
provide an upward lift to the market price, which is advantageous to the farmers.
Annotation
India is considered a developing nation and accordingly relies on special leeway provided to
non-developed countries in various international frameworks, such as the WTO. However, the
situation will change and to be future-ready, the various policies should incrementally shift
their approach from input subsidy to investment support.
To hasten achieving the status of developed nation, agricultural output needs to connect with
global markets, in a more meaningful manner. Isolating practices such as random opening and
closing of export and import windows should be limited. A more transparent trade policy,
framed to support and promote exports and reciprocal imports needs to be developed. An
institutional mechanism to converge the agenda of departments looking after agricultural
sectors, consumers, commerce and external affairs may be established to coordinate policy
formulation.
The large and growing production base of India’s agriculture, will stagnate unless external
markets are aggressively developed. Specific attention is needed to be reform the agricultural
market architecture, promote clusters to produce export quality varieties, ease evacuation from
179
ports to international destinations, and build agri-trade relations with complementary

requirements in partnering countries. Singular focus on promoting finished products of India
needs to be tempered with equal focus on fulfilling international demand with produce of India.
There is large production base of raw material from agriculture and allied, that is constrained
from further growth, unless it is linked with extra-national demand.
Indian embassies or high commissions are well positioned to play an important role in pursuing
an aggressive agricultural trade policy. However, they will require the support of officers
/resources with domain knowledge posted in the embassies/high commissions at appropriate
levels of seniority.
Key Extracts
 The growing production and focus on higher productivity will require associated
growth in market access, across borders.
 An aggressive agricultural trade policy is recommended, with a short term target of
USD 100 billion in agricultural exports by 2022-23. Aggressive trade policy will also
include building reciprocal trade relations with trading partners.
 Ad hoc opening and closing of trading windows should be structured through an
institutional mechanism that factors in the impact on international trade, domestic
consumers and farmers, alike.
 A long term trade regime, with a minimum 5 to 10 years perspective is necessary.
 Though all international market access of agricultural products is tariff based under
WTO, with committed reduction in the long run, non-tariff measures are expected
will govern trade relations. A focused trade analytics cell needs to be set up to assess
and stay ahead of such challenges.
 Export promotion agencies of the govt. require to restructure and develop pull-based
exports, and not merely to push products and brands into unknown market situations.
A feedback mechanism to make producers responsive and remain competitive is
required.
 There appears scope to take advantage of additional input subsidies under the Amber
Box, however, it will be more relevant to scale up investments in modernising
marketing system, logistics and irrigation facilitates, all coming under Green Box.
180
Livestock and Fisheries Marketing

Livestock and fishery are an important source of farmers’ income and form the backbone of agricultural
exports of the country and the growing demand for animal food products signifies added opportunity
for farmers. In direct contrast, the domestic marketing in these sub-sectors leaves much to be desired.
Background
Livestock production and crop based agriculture are intrinsically linked, each being dependent
on the other, and both are crucial for overall food and nutritional security. The ownership of
the livestock is more evenly distributed, with landless labourers and marginal farmers owning
bulk of livestock. Rural women play a significant role in Animal Husbandry and are directly
involved in most of the operations relating to feeding, breeding, management and health-care
of the livestock.
The dictionaries broadly define livestock as ‘farm animals regarded as an asset, who are raised
on a farm to generate a profit, such as cows, sheep, chicken and pigs’. The FAO/WHO Food
Standards Programme defines livestock “as any domestic or domesticated animal including
bovine (including buffalo and bison), ovine, porcine, caprine, equine, poultry and bees raised
for food or in the production of food. The products of hunting or fishing of wild animals shall
not be considered part of this definition.” The animals referred to are large and small
quadrupeds, birds (including poultry like partridge, pheasant, ostrich), insects (bees) and larvae
of insects (silkworms). However, in today’s age even snake and scorpions are being farmed for
venom. With the growth in inland fisheries, fish farms can also be considered as farmer’s
livestock as it is an animal asset and is cultivated for commercial production.
From the perspective of the DFI Committee, livestock broadly implies living stock or assets,
of animals that are reared in agricultural setting, to produce goods (such as meat, milk, eggs,
wool, hide, feather, honey, etc.) and/or to produce labour to service agricultural activities.
Livestock marketing involves the facilitation of trade of the goods and services that arise from
livestock. The produce from livestock can undergo agro-processing and the resultant products
are marketed by attached industries and therefore different from livestock marketing.
Livestock produce and products

Livestock production can be broadly categorised into production of animals themselves and
the secondary produce such milk, eggs, wool, hide, meat, etc. Besides trade in live animals, the
other livestock produce that is traded can be categorised into produce from live animals,
products from slaughtered animals and by-products from livestock production.
Produce from live animals are whole milk (from cow, buffalo, camel, sheep, goat), eggs (from
hens, duck, partridge, ostrich, etc.), wool, honey, bees wax, ahimsa silk, germplasm, etc.
Products from slaughtered animals include meat, offal, fat, skin (sheepskin, buffalo hide, pig
skin, rabbit skin, etc.), fur, etc. The by-products of livestock production are both dairy based
181
and non-dairy based requiring added activity besides initial harvesting. The dairy based
products include butter, ghee, curds, cheese, whey, casein, rennet, ice-cream, powdered milk,
dried eggs, egg albumin, etc. and are closely integrated with the primary produce (milk) from
livestock farming. The other by-products are linked to products of slaughtered animals such as
meat preparations (dried, salted, canned, homogenised, cured, etc.), animal fat (lard, tallow,
etc.), animal oils, gelatin (food and non-food), bio-extracts (cosmetics, life sciences, medicine,
etc.), clothing (goods using leather, fur, feather), composites (bone, feather, etc.), and much
more.
Livestock by-products form an integral part of various products of secondary sector, like some
processed foods, wax paper, crayons, margarine, paints, brushes, cleaners, adhesives,
lubricants, candles, soaps, lipsticks, shaving cream, water filters, insulation, antifreeze, certain
plastics and rubber, upholstery, vaccines, pharmacological proteins, floor waxes, sporting
goods, etc. Like other forms of agriculture, livestock farming is an extensive subject and the
commodities that result touch every aspect of human life.
Table 11.1 Livestock Population in India (in million) – Livestock Census, 2012
Species 1951 1982 1987 1992 1997 2003 2007 2012
Cattle 155.3 192.5 199.7 204.6 198.9 185.2 199.1 190.9
Buffalo 43.4 69.8 76.0 84.2 89.9 97.9 105.3 108.7
Total Bovines 198.7 262.4 275.8 289.0 289.0 283.1 304.8 300.0
Sheep 39.1 48.8 45.7 50.8 57.5 61.5 71.6 65.1
Goats 47.2 95.3 110.2 115.3 122.7 124.4 140.5 135.2
Horses & Ponies 1.5 0.9 0.8 0.8 0.8 0.8 0.6 0.6
Camels 0.6 1.1 1.0 1.0 0.9 0.6 0.5 0.4
Pigs 4.4 10.1 10.6 12.8 13.3 13.5 11.1 10.3
Mules 0.1 0.1 0.2 0.2 0.2 0.2 0.1 0.2
Donkeys 1.3 1.0 1.0 1.0 0.9 0.7 0.4 0.3
Yaks NC 0.1 0.0 0.1 0.1 0.1 0.1 0.1
Total Livestock 292.8 419.6 445.3 470.9 485.4 485.0 529.7 512.1
Poultry 73.5 207.7 275.3 307.1 347.6 489.1 648.9 729.2
Dogs - 18.5 18.0 21.8 25.5 29.0 19.1 11.7
Rabbits - - - - - 0.5 0.4 0.6
Primary Livestock Consumption

Meat consumption in India is much lower than global averages, for cultural and religious
reasons. But India has shown extraordinary growth in the consumption of milk, eggs, and
poultry meat. Poultry is in fact one of the fastest growing segments of the agricultural sector in
India today. Poultry meat is the primary growth driver among meats, with growing preference
for this over more traditional red meats. As a result, the industry estimates the broiler meat
market is at about Rs 65,000 crore and pegs egg market at Rs 30,000 crore.
182
SDN As per OECD (2018), Meat

India consumption (indicator), the total
BGD
ETH POULTRY
meat consumption in India, is
NGA 3.099 (kilograms per capita). In
TZA BEEF
MOZ PIG comparison, the World per capita
GHA SHEEP consumption at 34.24 kgs and in
PAK
ZMB BRICs the consumption is
EGY reported at 32.22 kgs per capita.
THA
PHL
IRN The breakdown of meat
BRICS
World consumed by Indians, by type, is
JPN as follows – poultry has the
KAZ
PER
highest share of consumption at
MEX 61 per cent, followed by beef and
CHN
VNM
sheep (goat) at 17 and 15 per cent
SAU each, and pig meat at 7 per cent.
KOR
RUS
NZL Worldwide indicators show that
EU28 poultry holds the highest share at
CAN
BRA 40 percent, followed by pig meat,
ISR beef and sheep at 36, 19 and 5 per
URY
ARG cent respectively (in quantity
AUS 13.8, 12.3, 6.6 and 1.7 kg per
USA
person per annum respectively)
0 25 50 75 100
Meat consumption is measured in carcass weight (except for poultry expressed as ready to cook weight) and in kilograms of
retail weight per capita. Carcass weight to retail weight conversion factors are: 0.7 for beef and veal, 0.78 for pig meat, and
0.88 for both sheep meat and poultry meat. Trend lines indicate retail kg per capita.
Figure 11.1 Meat consumption trends in India (OECD-FAO data)

Beef/Carabeef Poultry Goat/Sheep Pork
1.6
1.2
0.8
0.4
0.0
1993
2004
1990
1991
1992
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: OECD-FAO Agricultural Outlook (Edition 2017)
183
Historical trends indicate that red meat consumption is generally declining while that of poultry
meat is growing rapidly in India. These trends are also indicated by other observations. The per
capita consumption data from multiple NSSO rounds, also indicates that domestic demand for
red meat is declining whereas protein intake in the form of poultry, fish and eggs shows
consistent increase. Pork consumption has grown 1.4 per cent in the last five years, below par
with vis-à-vis population growth rates. Beef consumption has shown overall 25 per cent decline
in consumption since 2011. Meanwhile, consumers show significant preference for poultry
with a growth of 16 per cent in five years. Evidently, domestic demand for red meats is
generally slowing down and even reversing, while demand for white meat (chicken and fish)
is growing robustly.
Figure 11.2 Trends in mutton consumption (per capita annual)

1.7
Mutton
1.58
1.3
Kgs./Year
0.96
0.9
0.60
0.73
0.5
1987-88 1993-94 1990-00 2004-05 2009-10 2011-12
Urban 1.58 1.34 1.22 0.85 1.11 0.96
Rural 0.73 0.73 0.85 0.57 0.57 0.60
Figure 11.3 Trends in chicken consumption (per capita annual)

3.5
2.91
3.0 Chicken
2.5
Kgs,/Year
2.0
2.17
1.5
1.0
0.5 0.24
Source: Various NSS Rounds
0.0
1987-88 1993-94 1990-00 2004-05 2009-10 2011-12
Urban 0.24 0.37 0.73 1.03 2.19 2.91
Rural 0.24 0.24 0.49 0.61 1.50 2.17
Nevertheless, the per capita consumption in poultry is yet only in the range of 1.5-2 kgs per
annum. The poultry industry is categorised into the layer (egg) industry and the broiler (meat)
industry. There are obvious overlaps between the two, with layer farms that focus on egg
production also providing broiler meat. The small layer farms are increasingly giving way to
large layer units with hundreds of thousands of birds in a single unit. The layer farms are
184
concentrated in certain states and the fresh eggs are transported to other regions across the
country. Consumption of eggs shows constant growth, having doubled in the past decade. This
coincides with consumption growth in poultry meat.
Figure 11.4 Trends in Egg Consumption (per capita annual)

40
35 38.69
30
Numbers/Year
25
17.40
20 23.60
15
10 6.33
5
1987-88 1993-94 1990-00 2004-05 2009-10 2011-12
Urban 17.40 18.01 25.06 20.93 32.49 38.69
Rural 6.33 7.79 13.26 12.29 21.05 23.60
Figure 11.5 Trends in milk consumption (per capita annual)

kg per capita Processed Dairy products Fresh Dairy products
45
Note: Weight on Solid-milk basis, calculated by
40 adding the amount of fat and NFS for each
35 product. Processed products include butter
cheese, skim milk powder and whole milk powder
30
25
20
15
10
5
0
2014-16 2026 2014-16 2026 2014-16 2026 2014-16 2026 2014-16 2026 2014-16 2026 2014-16 2026
European Union United States Brazil India Pakistan China Sub-Saharan Africa
Source: OECD/FAO (2017), “OECD-FAO Agricultural Outlook”
Consumption of fresh dairy is more prevalent in India, unlike a preference for processed dairy
products in western countries.
Figure 11.6 Trends in milk consumption (per capita annual)

70 65.97
65
60
55 51.83
Ltrs/Year
50
52.72
45
38.93
40
35
1987-88 1993-94 1990-00 2004-05 2009-10 2011-12
Urban 51.83 59.50 62.05 62.17 65.19 65.97
Rural 38.93 47.94 46.11 47.04 50.09 52.72
185
Status of Marketing of Livestock Commodities

Markets are anticipated to facilitate trade and provide for growth. Value addition on the
produce, optimises and aligns the output with consumer demand and further assists growth.
The potential of livestock sub-sector in sustaining agricultural growth is increasingly
recognised. The lack of producers’ access to markets may stall such expected growth.
Livestock marketing involves the trade of many commodities resulting from farming of
quadrupeds, birds, insects and fish. This chapter broadly deals with the marketing of the
following:
i. Live animals (cattle, buffalo, goat, sheep, poultry)

ii. Livestock Products (meat and dairy products)
iii. Produce of live animals (Milk, Egg, Wool)
These three segments are discussed vide sections 11.4.1, 11.4.2 and 11.4.3 respectively. The
marketing of fisheries is dealt separately. As regards in this the production from beekeeping
and silkworms (sericulture), they are discussed in Volume VIII of this Report, and therefore
not included herein. That their marketing too is important needs to be recognised.
Marketing of live animals

Like other agricultural markets in India, those for livestock have also remained under-
developed, in fact, much less developed in comparison to crop based commodities. There are
about 2,000 markets for live animals, falling under the jurisdiction of state governments and
managed by local bodies such as Municipal Corporations and Gram Panchayats. Most of these
markets are irregular, lack transparency in transactions and are short of basic infrastructure and
marketing facilities. In handling live animals, the role of available infrastructure is important
to comply with animal welfare and to maintain the health of the animal. The traded livestock
subsequently undergoes transportation between markets; as also market and final buyer.
Initiated at such market centres, special care needs to be taken, not to treat the living animals
like other “cargo”. This will though add to the transportation/transaction cost.
A considerable proportion of live animals, mainly small ruminants (sheep & goat) are
exchanged amongst livestock farmers themselves and between farmers and intermediary
traders. Intermediaries assemble animals from farmers for further sale to larger traders as well
as to slaughter houses and butchers. Bulk of the trade with farmers of small ruminants takes
place with intermediary traders. Large livestock farmers generally are able to directly access
the organised markets for sale. Sometimes, small producers assemble their produce to sell
collectively to large buyers. Butchers-cum-retailers in small towns too procure live animals
directly from producers. Unlike in case of fruits and vegetable farmers, direct sales to end-
consumers are rare.
There are a number of reasons for low participation of livestock producers in markets. The
marketed surplus is often small, while markets for live animals are thin, irregular and often at
186
far distance from the production centres. These escalate the cost of transportation and
associated activities like housing for animals, and the opportunity cost of time. Further, lack of
basic facilities in markets, for producers as well as animals also discourages producers to bring
their animals to the markets. Most livestock produced by smallholder farmers are marketed by
non-farming entrepreneurs, who operating as a marketing chain, collect, pool and distribute the
livestock products to processing industry and wholesale buyers.
Figure 11.8 Typical marketing chain for livestock farmers
Ease of livestock movement, including the documentation to ensure safe transit, is also an
aspect that livestock markets are expected to facilitate. Prices of live animals, especially
ruminants, are negotiated by buyers and sellers, taking into consideration the animal
characteristics, such as age, body weight and structure, appearance, breed, yield and health
status. However, no harmonised standard of the identified parameters is uniformly applied.
Marketing of poultry live birds is similar, though more organised, where the producers have
integrated their output into the supply chain of the poultry processing industry. Bulk of trade
in live broilers and eggs takes place between producers and traders, directly or indirectly
through commission agents, in designated markets or at the farm gates. Retail traders procure
broilers either directly from producers or from wholesale traders. Direct sale between producers
and consumers/retail traders is comparatively limited. In some states, poultry co-operatives
also facilitate marketing, but on a limited scale.
Live poultry markets can range from local markets at a community or district level that open
intermittently and may only sell a few dozen live birds in a day, to large wholesale markets
with a daily throughput of thousands of poultry, where hundreds of birds are sold, slaughtered
187
and butchered on a daily basis. Poultry marketing, is undergoing significant transformation in

major producing regions. Contract farming in poultry has emerged big taking poultry down the
path of industrial farming. Producers associations like Broiler Producers Marketing
Association (BROMARK) set the daily harvest prices depending on the market.
The majority of domestic consumers prefer poultry meat from small butchers, and reports
indicate that more than 90 per cent of chicken is sold freshly butchered at retail level. This
allows smallholding farmers to continue trade in the live animals with small town butchers and
wet market retailers. Smallholder farm enterprises have organised themselves to undertake
direct marketing of chicken and eggs into adjoining cities (Volume III, 3.2-A), resulting in
income growth. In these cases, peri-urban poultry farmers have opportunity to capture a larger
share of the consumers spend. Both market channels, formal and non-formal, are valuable to
the farmers.
Marketing of livestock products

11.4.2.1. Meat
The country is produced about 7.4 million metric tonnes (mMT) of meat, including poultry
meat, in 2016-17.
Figure 11.9 Meat production India (million metric tonnes)
6.7 7.0 7.4

Production (million tonnes) 5.9 6.2
5.5
Production from commercial poultry farms 4.9
included from 200708 onwards 4.5
4.0 4.2
2.3 2.3
1.9 1.9 1.9 1.9 2.1 2.1 2.2
Goat Pig
Sheep Species-wise share in
14% 6%
8% meat produced
in 2016-17
Poultry
47%
Buffalo
20%
Cattle
5%
Source: DAHD Annual Report, 2016-17
188
This quantum of meat is routed through slaughter houses, to organised domestic and export
trade or through the informal fresh market retail system. There are said to be about 4,000
slaughter houses registered with local bodies and more than 25,000 unregistered premises.
Other accounts indicate even higher numbers. As per status shared by Food Safety and
Standards Authority (FSSAI), among these 120 slaughter houses are central licensed, 389
slaughter houses are state licensed and only 2,409 slaughter houses are registered under FSSAI.
In case of meat processing units (active), 225 have central license and 181 units have state
license. Slaughter houses have agents to procure animals directly from farmers or through the
livestock markets.
The slaughter ratio for cattle and buffalo population is about 2 per cent every year, and in case
of sheep, goat and pigs it is 40, 46 and 80 per cent respectively. Most of the slaughter houses
are overcrowded and the practices are traditional, resulting into low recovery rate, and wastage
of by-products like blood, skins, tallow etc. The meat slaughter houses are intrinsically linked
to hide production and the leather industry.
Table 11.2 Export of carabeef and poultry (2016-17)

Product: Carabeef Product: Poultry (eggs and meat) items
2016-17 2016-17
Port (State) Port (State)
Qty (tons) Rs. Crore Qty (tons) Rs. Crore
Andhra Pradesh 15351.57 280.99 Andhra Pradesh 12896.21 70.8
Bihar 2.3 0.03 Delhi 87.36 1.22
Delhi 9065.06 268.73 Gujarat 0.85 0.03
Haryana 160841.17 3287.04 Karnataka 5647.56 65.78
Kerala 2119 38.57 Kerala 24595.3 12.45
Maharashtra 559399.42 11234.74 Maharashtra 19621 80.62
Punjab 430 6.12 Tamil Nadu 385024.96 289.9
Tamil Nadu 71657.35 1238.56 Uttar Pradesh 64 0.15
Uttar Pradesh 504696.59 9806.54 West Bengal 787.39 9.49
West Bengal 13.58 0.16 Total 4,48,724 530
Total 13,23,576 26,161 Source: DGCIS
Table 11.3 Export of small ruminants, processed meats, casings (2016-17)

Product: Sheep/Goat meat Product: Processed meats
2016-17 2016-17
Port (State) Port (State)
Qty (tons) Rs. Crore Qty (tons) Rs. Crore
Andhra Pradesh 238.41 8.99 Andhra Pradesh 14 0.25
Bihar 0.6 0.02 Maharashtra 126.7 4.33
Delhi 12115.94 496.56 Total 140.7 4.58
Haryana 137 4.2
Kerala 0.99 0.06 Product: Animal Casings
Maharashtra 8004.71 308.31 2016-17
Port (State)
Uttar Pradesh 1510.9 51.59 Qty Rs. Crore
Total 22,008 870 Delhi 14.01 2.02
Gujarat 0.2 0.01
Maharashtra 159.03 11.81
Source: DGCIS Total 173.24 13.84
189
On the export front, private enterprises have achieved well in marketing of meat. The country
has 28 integrated meat processing plants that have been approved by APEDA, besides 80 stand-
alone abattoirs cum meat processing plants.
These export plants follow sanitary and phyto-sanitary (SPS) guidelines of the Codex
Alimentarius and have HACCP (hazard analysis and critical control points) and ISO
certification. The live animals are bought by the slaughter house from a disease free zone, about
100 km in radius around the plant, where disease control programmes are in place. The plants
have various facilities for holding of animals, lairage, race, knocking box, stunning units,
abbatoir with slaughter line, de-boning, chilling freezing, packaging and cold storage. Facilities
for by-product processing, effluent treatment, bio-methanation, rendering, etc. are also
incorporated. The animals, bought at the local livestock markets, are first tagged to ensure
traceability and transported as per guidelines of Society for Prevention of Cruelty to Animals
(SPCA) Act, 1960 and Bureaus of Indian Standards (BIS), 2007 Standards to take care of
animal welfare. Standard Operating Procedures (SOPs) are followed, including those required
by importing countries. After slaughter and skinning, the carcass is chilled and then de-boned
or cut before being packed and subjected to refrigerated processes before the frozen meat enters
the cold-chain for market linkage. All the integrated plants have separate line for handling
small ruminants (sheep, goat). The meat from most of the small ruminants meat is exported to
Gulf region. The frozen meat is loaded onto refrigerated containers, maintained at -18°C to -
20°C, for onward connectivity to importing countries through seaports or airports.
India, as of now holds the top position in beef exports, albeit carabeef (buffalo meat), over a
few years, indicating a well-established marketing and supply chain network. However, the
domestic marketing system does not demonstrate equal quality and standardisation in these
products. India's exports of animal meat products include buffalo meat (USD 3.9 billion),
sheep/goat meat (USD 130 million), poultry products (USD 79.5 million), animal casing (USD
2.1 million), processed meat (USD 0.69 million). The main markets for Indian buffalo meat
and other animal products are Vietnam, Malaysia, Iraq, Algeria, Egypt, Indonesia and UAE.
Poultry products go to Oman, Saudi Arabia, Indonesia, Russia and Maldives.
The status in meat exports indicates, that further development can be undertaken to capture a
larger share of world markets, thereby providing more income generating opportunity to the
local farmers. Having demonstrated the capability to maintain standards through large export
presence, the improvement in domestic marketing is also feasible, and is largely related to
lower per capita demand for meat, among the lowest in the world. Meat exports are affected by
health concerns and the indiscriminate use of anti-biotics is a major challenge, especially in
poultry. India is also one of the biggest consumers of agricultural antibiotics, accounting for 3
per cent of global consumption. Though antibiotics aid in intensive food production, their
uncontrolled use on farms is a concern. In India, standards for tolerance of antibiotic residues
in poultry are yet to be adopted, although such standards do exist for seafood.
Poultry market is currently dominated by meat of broiler birds, whereas earlier chicken
190
implied “spent hens” or male birds. Broiler birds made inroads into India around 1975, when
hatcheries imported the parents of the hybrid broilers. The breeding operations started in Delhi,
and hatcheries sold day-old chicks to farmers who raised them and sold to traders. Live broilers
have tender meat and are more efficient, and became a food entity within 10 years. Movement
of parent stock, hatching eggs, day-old chicks initiated the broiler growing everywhere and
later concentrated in South India. Live broilers are typically not transported for long distances.
Further development in domestic meat markets, from the farmers’ income perspective, will be
demand led. However, interventions for food safety by the health ministry, are expected to have
their impact in organising the meat processing industry and its marketing. Currently, the
majority of the domestic meat consumption is in the fresh format, through retailer/butchers.
The meat is mostly marketed in fresh cut format, where local butcher dress the meat on demand.
The majority of consumers, both occasional buyers and regular eaters, have not taken to pre-
cut and packaged meat as is the case in western countries. There are various reasons for
domestic consumers preferring meat freshly cut in corner shops, over processed and pre-cut
meats, including the differentiated cooking practices which traditionally involve many
processes, unlike in case of barbequing or roasting of meat. The fresh meat selling process is
expected to continue to predominate in the Indian meat market.
A 2012 study on Indian Agribusiness18 by the Boston Consulting Group, analysed the sales of
meat in India, which highlights the market share between processed and unprocessed
consumption. It indicates that the bulk of meat demand was routed via the fresh or wet markets.
Not much has changed in ensuing years, and the growth in consumption has maintained a
similar ratio in markets between processed and unprocessed meats. In case of bovine meats,
the processed volume is mainly for export markets.
Figure 11.10 Meat market share India (Rs '000 crore in 2010)
20
1
5 Unprocessed Processed
15
Rs '000 crore
10
18
14 13
5
1
-
Bovine Poultry Ovine Pork
Source: BCG Study on Indian Agribusiness 2012.
In case of poultry, majority of the consumers still prefer buying the meat that is freshly
18 Indian Agribusiness – Cultivating Future Opportunities, Boston Consulting Group, 2012
191
harvested at point of sale, and only a small share of output is marketed as chilled, frozen, or
further processed products. It is worth noting, that if the live poultry is kept disease-free and
safely tended until point of consumption, the supply does not require complicated cold-chain
with its associated costs and hazards, and the meat is safe for consumption. However, such
process can generate waste in the form of unutilised offal and by-products are not properly
captured. The costs of moving live birds, including transport, shrinkage, and mortality costs,
also limits the inter-regional movements. As a result, poultry markets are regional, rather than
national in scope. The potential for low-cost producers to market their product in higher priced
markets is limited and this is captured by interventions by the industrial sector.
The lowering of costs and marketed prices can further ramp up demand from consumers. This
increase in demand, would be beneficial to the farmers who can then safely scale up production.
However, the poultry industry is one of the most organised and a recent report by ICRA in
March 2018 indicates, that the broiler volume growth is intentionally kept at lower levels by
the organised players, to control the supply and ensure reasonable broiler realisations. This
strategy might be restraining from faster growth in domestic consumption; and given the easy
acceptability of chicken meat, domestic demand would get a fillip from lower prices, and result
in far greater volumes in sales, which would bring down fixed costs in the overall supply chain.
Though many projections suggest, that over time the Indian consumer might eventually opt to
shift consumption from unprocessed to processed meat, the ground reality of current consumer
preference cannot be disregarded. Therefore, to the immediate benefit of farmers, organising
the supply chain into the fresh or unprocessed market is important. Farmers should be enabled
to capture a greater share of the existing trade, rather than await a long term shift in
consumption habits and growth in demand.
The current demand-supply gap in the meat processing industry is largely attributed to the
capital involved in maintaining cold chain temperatures. Large capital is also required for
processing and preservation of meat, which results in higher costs, and sellers having to spike
up the price of the meat. Food safety concerns are sometimes used to justify such options.
However, provided the live animal and harvested carcass is kept hygienic, the fresh meat is
safe for the short term. Fast selling cycles ensure that stock is not held for long and the meat is
normally harvested and replenished on a daily basis.
About five to six per cent of poultry meat is sold in processed form, of which only about one
per cent undergoes processing into value-added products (ready-to-eat/ready-to-cook).
However, for farmers, the growing demand for poultry meat is an opportunity to scale up
volumes into their existing markets. The poultry market is expanding, as there are very few
social barriers for consuming poultry meat and also because of it being relatively more
affordable than other meats.
In such a market situation, the informal status of markets with regionally limited supply lines,
is an opportunity for start-ups to initiate differentiated online marketing and local delivery
192
services. Instead of developing long distance supply systems, the start-up entrepreneurs can
organise the steady demand from urban centres to provide a service to both farmer and
consumer, by linking source with nearby demand for fresh meat. This is seen in growing use
of ICT platforms, to streamline the marketing channel of many perishable foods. Farmers with
small land-holding can grow broilers on contractual arrangements for a company, which can
reach the housewife directly to supply the chicken, cutting down the middlemen. Such
mechanism is already being practised by farmers, who get better and assured returns compared
to crops that are more nature-dependent and uncertain.
Marketing produce of live animals

11.4.3.1. Milk
The total milk production in India was 17 million tonnes during the year 1950-51 and this has
grown to touch 165 million tonnes in 2016-17. India remains one of the largest milk consumers
and also the producers in the world and demand for fresh milk and dairy products is expected
to grow in the coming decade.
Figure 11.7 Milk production and corresponding Growth Rate

6.3% 6.3% 6.4% 7%
Production (mill tonnes) Growth rate (CAGR)
150 6%
4.6%
4.1% 4.2% 5%
4.0%
3.8%
100 4%
2.8% 156 165
146 3%
138
122
50 97 2%
66 80
44 54 1%
17
0 0%
Source: data from DAHDF
Figure 11.8 Share in milk production by species (2016-17)

Goat
Buffalo Non-descript 3.5%
13.7%
Exotic breed
1.1%
Crossbred
25.5%
Buffalo Cattle
49.1% 47.4%
Indigenous
11.3%
Buffalo Indigenous Non-descript
35.4% 9.5%
193
In comparing the milk contribution by the major species, the highest share is from buffalos.
Though marketing and transaction costs are also high for milk, dairy co-operatives have fairly
succeeded well in linking the producers to markets, especially in Gujarat, Maharashtra,
Karnataka, Tamil Nadu and Kerala. Coincidentally, these states account for large tracts of
rainfed cultivation. Procurement of milk by cooperatives in most other states is reported to be
less than 7 per cent of the milk produced. The private sector has a larger presence than
cooperatives in Uttar Pradesh, Punjab and Haryana, and these states account for more than 50
per cent of the private dairy processing plants. These were the states, where dairy cooperatives
had not developed during the pre-reform period. With the launch of economic liberalisation in
1991 in the country, diary sector too was opened up to private sector. It appears that in states
where no robust cooperatives enlisted, private sector grew up appreciably.
Being a homogenous produce, milk supply is readily organised through establishing pooling
points or collection centres, to thereafter communicate it in most economical way to consumers,
including processing factories (see Volume III, 4.6.2). Dairy cooperatives, as well as private
sector processors, have adopted this aggregation and supply model, establishing many hub-
spoke sourcing and delivery systems. The linking of milk producers to domestic markets, has
acted as a stimulant to growth. A good supply chain network and growing demand also protects
the Indian farmer from global price crashes, as observed in 2015-16. Milk and dairy products
hold cultural significance in the Indian diet and a large portion of the population is lacto-
vegetarian. The demand for milk and dairy products is income-responsive, and growth in per
capita income is expected to increase demand for milk and milk products.
Projections indicate, that by 2025 the production of milk in India will cross 200 million tons
per annum, implying a growth of over 30 per cent over the average of annual production in
2013-2015. All other countries are expected to enhance their milk production by 2025, with
growth ranging from 1 to 29 per cent (average growth of 13 per cent) over their 2013-2015
production average. As there continues demand for milk and dairy products from consumers,
the sector will benefit most from productivity increase by expanding its network of milk
collection centres.
Domestic demand is primarily centred on fresh milk, and some value added products such as
powdered milk is a result of milk surplus being converted into long term storable format. Indian
milk economy is worth Rs. 5 lakh crore, growing at 15 to 16 per cent per annum, of which the
processed milk economy is estimated at Rs. 80,000 crore. As per the annual report (2015-16)
of National Dairy Development Board (NDDB), almost 80 per cent of the milk procured by
cooperatives is marketed as liquid milk. In 2015-16, the dairy cooperatives collectively
procured 15.58 million tonnes of milk, of which liquid milk marketing stood at 12.08 million
tonnes (an increase of around 2.73 per cent over the previous year).
The post-production activities for milk are well exemplified in the supply chain model
deployed. The model includes provision of village level pooling/collection points which initiate
194
the post-production market linkage. The pooling points are strengthened by supporting village
level capital items like bulk milk coolers, milk cans, etc. This system has resulted in greater
transparency and fairness in milk procurement, as well as improvement in quality of milk. In
this same sector, private companies also exist and compete with farmers. The competition has
also brought greater transparency and economic benefits to the farmers.
Private sector found an entry into this segment only after 1991, when the country embarked
upon economic liberalisation. Till then the dairy sector was cooperative-sector, protected from
external competition by import restrictions, and from the domestic market by disallowing the
private players.
The use of appropriate technology, has ensured that the milk can safely travel to various
destinations – to processors, markets and consumers over longer distances, thereby expanding
the selling reach of the farmers. The expanded marketing radius, allowed for growth in selling
volumes, nurtured production and higher incomes thereof. The farmers’ cooperatives have
taken responsibility of pooling and chilling the milk, and in some cases, even the processing,
packaging and retailing is taken up by cooperatives. The milk is sold in multiple formats, the
form varying from liquid milk to ghee, butter, beverage, sweets, etc. The market is pan-India
and the supply chain is dynamic with fresh milk supplies replenished twice daily at times.
There are barriers and apprehensions for greater participation from smallholder producers’ in
the marketing system. There is apprehension that small-scale producers will be marginalised
in the process of scaling-up of private sector in the milk production and marketing systems.
Though there is evidence to indicate, that smallholders are not altogether excluded from these
systems, the concerns relate to identifying and promoting suitable institutional structures that
will not disfavour the smallholders. Contract farming is one such solution that will allows
smallholders to integrate their production into the supply chain of processing plants. Farmers’
cooperatives also can do with a focus on rejuvenating and replicating the successful examples,
especially those that focus more on marketing of farmers’ production viz those that primarily
focus on channelising farm inputs.
11.4.3.2. Eggs
Annual production of eggs has grown from 183 crore pieces in 1950-51 to 8,813 crore eggs in
2016-17. This amounts to about 24 crore eggs per day, every day of the year. If 60 per cent of
India’s 130 crore population were to eat an egg every day, the production would have to grow
three-fold. Nationally, around 19 per cent of the egg production is from backyard poultry
enterprises, in which 64 per cent are produced by indigenous (desi) fowl. Ducks contribute
about 7 per cent of the eggs in this sector. The organised or commercial sector contributes about
81 per cent of the eggs produced. Commercial ventures also source eggs from smallholders,
regularly or on contract, and are a channel for the small farmers to access the larger market.
195
Figure 11.9 Egg production and corresponding Growth Rate
6.4% 6.4% 6.3%

6.1%
90 5.9%
5.5% 5.7% 6%
5.2% 5.0%
60
4%
Production (billion number) 88.1
82.9
Growth rate (CAGR) 74.8 78.5
30 63.0
2%
46.2
36.6
27.2
16.1 21.1
1.8
0 0%
Source: data from DAHDF
The large commercial poultry layer farms are mainly concentrated in South India with Andhra
Pradesh, Tamil Nadu and Telengana representing nearly 60 per cent of the egg production. The
next four states, Haryana, Punjab, Karnataka and Maharashtra, account for about 26 per cent
of eggs produced from commercial layer farming. Odisha, West Bengal, Uttar Pradesh, Gujarat
and Chhattisgarh contribute about 2 per cent each. Ranked next are Madhya Pradesh, Rajasthan
and Uttarakhand who share 3.6 per cent of such production. The rest of the states have
negligible or zero output from commercial layer poultry farms.
Figure 11.10 Share in egg production – backyard and commercial (2016-17)
Backyard poultry layer farms Commercial poultry layer farms

(lakhs of eggs) (lakhs of eggs)
Duck Desi,
Fowl 4.7
improved,
48003.9, Duck desi,
29% 8446.4, Fowls
Duck, 5% Improved, Duck,
Fowl desi, 10787.3 113.5
716985.7 Fowls
105390.3, 99.98% Duck
Desi, 14.4
64% Improved,
Duck 108.7
improved,
2341.0,
2%
In case of egg production from backyard poultry farms, West Bengal alone contributes nearly
30 per cent of the total egg production, with Kerala providing around 14 per cent of the eggs.
The next two states, Maharashtra and Bihar contribute around 6.8 and 6.4 per cent respectively.
Andhra Pradesh, Telengana and Uttar Pradesh account respectively for 5.6, 4.4 and 4.2 per cent
196
each. The next dozen states share about 25 per cent of the egg production from backyard poultry
farms. Meghalaya, Manipur, Uttarakhand and A&N (Andaman & Nicobar) islands rank next
with production share of 0.6 to 0.5 per cent. Backyard poultry farms are prevalent across the
country and more dependent on their reach into nearby markets.
Figure 11.11 Eggs market chain
Layer Poultry Wholesaler / Last mile

Traders / Agents
farmer forwarding Retailer
• Backyard or • Aggregation, • Fast turnover • Fast turnover
Commercial packaging, • Retailer linkage • Low margin, high
• Contract or Direct transport • Low margin, high volume business
market • Risk of en-route volume business
• Feed, water, breakage
Health & risk
management
In all, Tamil Nadu is the largest producer of eggs followed closely by Andhra Pradesh,
respectively holding 18.9 and 18.0 per cent share in the total eggs produced in the country.
Telangana is the third largest egg producer state with 13.4 per cent share in the total egg
production. These production figures are not to infer as a reflection of state-wide per capita
egg availability or consumption of eggs, as these are traded and transported across regions,
making per capita availability more a factor of the forward supply chain.
To meet the increasing demand, apart from egg production, efficient egg marketing is
necessary. It is difficult to run a profitable business without proper and organized marketing
system. The channelling of eggs to markets through commercial organised enterprises is
different from those produced by backyard layer poultry farms. In the marketing systems used,
transport logistics (costs and availability) are the key differentiators.
The smaller backyard layer farms, typically do not have capacity to transfer the eggs directly
into demand centres, and hence it is the intermediary who aggregates and transports to markets.
In case of commercial layers, the organisation of the logistics is more easily facilitated due to
commercial scale production as the first stage of aggregation is eased.
The egg prices fluctuate across the markets, directly influenced by the consumption trends.
Increased consumption (by 20 per cent) of egg during winter season results in higher demand
and prices in the market. The demand is also high around festivities and dips during fasting
periods.
The price is lowest in summers due to poor demand in the hot weather season during months
of March, April and May. In fact, reports have observed that when vegetables turn costly in
winters, consumers substitute with eggs, which in turn pushes up their price. To illustrate, in
the year 2017 winters, the spike in egg prices was largely attributed to the rise in prices of
197
vegetables such as beans, cauliflower, cabbage, brinjal, etc. However, the price variations in
egg are less than those experienced in perishable fruits and vegetable crops, largely because of
the extensive supply chain network into markets and the organisational capacity to adjust
production.
Table 11.4 Egg wholesale price (monthly average over 5 years) - Rs per 100 pieces
Year/Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 334.2 349.9 289.6 257.7 254.9 337.7 315.0 301.6 312.6 326.6 379.9 389.0
2014 374.3 337.0 320.9 263.2 303.2 321.8 318.5 301.8 336.7 333.1 381.6 381.4
2015 349.3 279.1 262.5 253.0 282.2 359.3 313.4 308.7 296.0 304.1 357.2 395.0
2016 397.8 350.7 303.9 298.2 369.7 386.1 417.0 348.9 347.3 365.1 379.2 381.7
2017 338.5 325.9 329.2 280.1 325.8 359.0 342.3 344.6 357.7 383.0 475.8 383.5
2018 396.0 367.7 323.8 299.5 - - - - - - - -
Average 371.2 332.1 308.1 278.8 320.2 356.6 347.8 326.0 334.4 346.3 398.5 385.4
Median 374.3 337.0 320.9 280.1 314.5 359.2 330.4 326.7 342.0 349.1 380.4 383.5
Source: National Egg Co-ordination Committee
Large egg layer commercial ventures are organised to adjust their production with forecasted
demand. The National Egg Co-ordination Committee (NECC), registered as a Trust in 1982,
is an Association of more than 25,000 farmers and traders. Among other aspects, it monitors
and manages surplus stock into deficit markets and advises farmers on the sale price of eggs.
For example, in Namakkal zone (Tamil Nadu) in 2016, after reports that traders were driving
down prices of smaller eggs, the NECC held a special meeting to discuss discrepancies in egg
procurement by the traders and to fix categories. It decided, that from 1st May, 2016 farmers
would sell eggs as per following categories - 53 gram plus egg (large eggs), and 40 gram to 53
gram egg (export eggs), for which the price per piece is large egg price less 10 paise; 45 gram
to 48 gram (medium eggs), for which price is 20 paise less large egg price; and 40 gram to 44
gram (small eggs) for which large egg price less 30 paise was set. The average weight of egg
produced in the country is 53 gram.
Though sensitive to breakage, eggs are normally safe if kept free of moisture – moisture allows
bacteria to penetrate the shell and washing dirt off the shell can infest it with salmonella if
water is untreated. In studies, it was observed that fresh eggs collected at farms had less
incidence of salmonella contamination, compared to those collected at retail shops. This
indicates that transportation and handling in the logistics chain needs to be improved. FSSAI
has proposed standards for fresh eggs, laying down parameters that eggshell must be free of
blood rings, not be soiled or have faecal matter and must not be cracked or leaking. FSSAI has
also laid emphasis on the storage conditions like moisture and temperature so as to reduce
chance of microbial contamination. These proposed standards will come into force if approved.
On the export front, a downwards trend is seen. India mainly exports table eggs, egg white
powder & egg yolk powder. The bulk of exports is as eggs & egg powder to Afghanistan,
Angola, Bahrain, Comoros, Congo, Cote D'Ivoire, Gambia, Hong Kong, Indonesia, Iran,
198
Kenya, Lebanon, Liberia, Malaysia, Maldives, Mozambique, Nepal, Nigeria, Oman,

Philippines, Russia, Saudi Arabia, Singapore, South Africa, Sri Lanka, Sudan, Taiwan,
Tajikistan, Tanzania, Thailand, UAE, Vietnam.
Figure 11.12 Egg exports from India (numbers in crore eggs)
122.3
109.9
104.9
70.3
53.3
46.0
56.0 53.6 40.2
34.6
27.8
21.1 21.7
Note: 2017-18 figures till January 2018.
Exports are affected by factors such as bird flu and other food safety and health concerns,
besides other international trade dynamics. In revenue terms, India is among the top fifteen
exporters of shell eggs though in terms of total export volume, the ranking is higher. Improved
terms of trade of exported shell eggs will help farmers. However, the domestic consumer is an
immediate and growing market opportunity.
On an average, eggs sold to domestic consumer are laid about 10 days to two weeks earlier. In
summers, the eggs can stay saleable for another week or two without refrigeration, and upto a
month or more in winters in the northern markets.
Traditionally in India, eggs are perceived as commodity products, with little or no

differentiation in terms of quality. Reports indicate that sale of eggs through modern retail
formats have no impact to those sold through traditional formats. Eggs are purchased from the
neighbourhood groceries, and these are highly dependent for supply on the regularity and
efficiency of the logistics. The produce from backyard layer poultry farms can have a far shorter
market cycle if farmers organise delivery to nearby towns and cities.
Egg marketing is an opportunity for social entrepreneurs and start-ups. Sourcing from
smallholder famers and organising the supply into homes, retailers and institutional buyers will
benefit the farmers and facilitate safe supply to buyers. Branded and speciality eggs are slowly
picking up in market and are projected to be richer in proteins, contain less fat and are picked
from bio-layer farms. With attractive packaging and promise of a healthier proposition, these
eggs command a premium over ordinary eggs. These enriched and low-fat branded eggs are
becoming a staple choice of some families, as income levels and health consciousness rise.
199
11.4.3.3. Wool
India is the seventh-largest producer of wool in the world with a global production share of
nearly 1.8 per cent. More than 80 per cent of the country’s wool is produced in the states of
Rajasthan (32.9%), Jammu & Kashmir (16.7%), Karnataka (15.1%), Telengana (10.7%) and
Gujarat (5.2%). Raw wool production grew steadily from 27.5 million kgs in 1950-51 and
peaked during 2002-03 at 50.5 million kgs (50,500 tonnes).
Figure 11.13 Wool production and corresponding Growth Rate
Production (million kg)

Growth rate (CAGR) 3%
40
0%
-3%
48.4 47.9 48.1
42.4 44.9 43.0 43.6 43.5
20 39.1 41.2
-5%
27.5
-8%
0 -10%
Source: Department of Animal Husbandry, Dairy and Fishery Development (DAHDF)
The wool is supplied to the woollen industry, which is mainly concentrated in Punjab which
alone accounts for about 35 per cent of wool production units, followed by Maharashtra and
Rajasthan; and with a few others located in Haryana, Uttar Pradesh, and Gujarat. The product
portfolio from textile intermediaries is divergent, ranging from finished textiles, knitwear,
blankets, carpets and some presence in technical textiles. Woollen products face stiff
competition from artificial fibres and this has been
Figure 11.14 Wool Production
depleting the hosieries in many towns and the woollen by animal source (2016-17)
industry has undergone a consolidation phase since its
Lamb, Ram/Wether,
heydays. 6506.1, 7274.7,
15% 17%
The wool is primarily produced from sheep,
categorised by ewe (adult female sheep), Ram (adult
male), wether (castrated male), lamb (young sheep). Ewes,
29763.6,
The ratio of wool from these sources is shown in the 68%
adjoining graphic.
Wool source
(million Kgs)
Yaks are another source of wool though the production
is minimal. At the last livestock census in 2012, India had 65,069 thousand sheep and about 77
thousand yaks. The total wool production in India is not enough to meet the requirement of the
country’s woollen industry. The bulk of Indian wool is of rough quality and is used mostly in
200
the hand-made carpet industry.
The woollen industry in the country is of the size of Rs. 11,484.82 crore and broadly divided
& scattered between the organized and decentralized sectors, comprising composite mills,
combing units, spinning units, knitwear and woven garments units, machine made carpets
manufacturing units and smaller hosiery and knitting, power-looms, and independent dyeing,
process houses, woollen handlooms and hand knotted carpets, rugs and druggets.
The Ministry of Textiles reported that of the total wool produced, 85 per cent is carpet grade
wool, 5 per cent is apparel grade and the remaining 10 per cent is coarser grade wool used for
making rough Kambals, etc. India depends almost exclusively on the import for fine quality
wool, which is demanded by the industrial woollen mills and decentralised hosiery sector.
Table 11.5 Raw wool imports by India
Quantity Value
Year
(in million kgs.) (Rs.in crore)
2010-11 94.77 1434.65
2011-12 76.29 1876.87
2012-13 77.16 1801.90
2013-14 89.60 1967.72
2014-15 96.53 2125.74
2015-16 97.83 2016.12
2016-17 87.15 1894.26
2017-18 79.95 1884.59
Source: Ministry of Textiles, DGCI&S
The gap between wool production and wool demand form the woollen industry is an
opportunity for Indian farmers.
The following countries are the top six raw wool exporters to India in 2017-18:
Qty. in million kgs

SN Country
(2017-18)
1 Australia 14.08
2 China 10.51
3 New Zealand 9.16
4 Saudi Arabia 4.92
5 Pakistan 4.69
6 Syria 4.50
Source: Ministry of Textiles, DGCI&S
The quantity of raw wool imports, is nearly double the domestic wool production. Combined
domestic raw wool production and the imports in 2016-17 indicate that total wool requirement
was 130.65 million kilograms. The Ministry of Textiles, in its National Fibre Policy of 2010,
201
has projected wool consumption in India to increase beyond 200 million kgs by 2020.
Notwithstanding such projections, the fact that the woollen industry is importing large amounts
of raw wool, can be addressed through appropriate interventions at production and post-
production levels. These will include improving the quality of wool and the handling of raw
wool, such that it can compete with the quality from global supply. This will not help farmers
capture more of the demand from textile units, and in turn motivate them to adopt better
practices and achieve greater productivity.
The constraints faced by wool sector can be summarised as follows:

 Low priority of state governments in development of wool sector.
 Shortage of pasture land, forcing breeders to migrate their flock from one area to
another throughout the year.
 Piecemeal value capture by the sheep breeders i.e. from sale of raw wool, live sheep,
manure, milk, mutton, skin, etc., without reaping full benefit from value capture across
all possible outputs.
 Inadequate production of specialty fibres i.e. pashmina goat wool, angora rabbit wool,
etc. and low productivity per animal.
 Lack of contract farming and associated motivation to adopt modern methods of animal
management, machine shearing of sheep, washing & grading of raw wool etc. (a Model
Contract & Servicing Act, can be expected to support contracts in this area).
 Inadequate raw wool marketing facilities and infrastructure.
 Ineffective role of state wool marketing organisations in wool producing states.
The weakest link after wool production is primarily the marketing of wool. The wool marketing
is essentially in the hands of private wool merchants and traders. The wool producers do not
have the benefit of organized market of wool available. The prices of wool have been widely
fluctuating, and in real terms there has been hardly any increase in the price of wool in last
decade.
To bring greater focus on marketing of raw wool, the Ministry of Textiles has introduced a new
scheme, namely, Wool Marketing Scheme (WMS) in all major wool producing states to
support greater procurement of wool on remunerative price by creation of Revolving Fund for
Marketing of Wool.
Other activities supported are operation of e-portal for auction of wool, formation of wool
producers’ societies, financial assistance to strengthening infrastructure required for marketing
of existing wool mandi/grading centres (storage halls, auction facility, testing platform etc.).
A financial provision of Rs. 10 crore has been made under this scheme for implementation for
the years from 2017-18 to 2019-20.
202
Interventions in Livestock Marketing

Marketing is typically associated with production and productivity of livestock, the latter
affecting the economics or cost of production. These aspects, including making available
grazing lands, breed and feed improvements, better rearing practices, etc. are dealt with in
Volume VIII-D of this Report. At this stage of development in livestock farming, it is
imperative that eased access to markets, standardisation of market parameters, health and safety
of livestock, bio-security of animals and humans, and overall ease of business in the post-
production cycle, are taken care of. Livestock marketing involves trade in live animals as well
as commerce in the produce from live animals. When managing living animals, their welfare
is to be facilitated, as much as hygiene and safety of produce and products from the livestock.
The live animals are traded between farmers, largely for purpose of breeding and farm labour,
or to build on existing livestock assets. The trade of live animals also occurs between farmers
or their intermediaries with meat processing factories, who optimise on the meat as their
primary product and feed leather, blood, feathers and other by-products to other industries.
Live animals are also bought by local wet market butchers and retailers. As bulk of livestock
owners are smallholder farmers, a primary intervention will be to facilitate the grouping and
transport of their assets to wholesale buyers. Such organisation is also envisaged for crops,
through the Gramin Agri-Markets (GrAMs), which are discussed in Volume IV of this Report
under the nomenclature of Primary Retail Agricultural Markets (PRAMs).
Production enhancing policies have pushed economies of scale on feed and production, but the
output marketing systems have not been given suitable focus. Markets have remained informal
and at times exploitative of small producers. This demotivates them from adopting modern
practices and new technologies. Easing of market access and connectivity will benefit the large
number of small livestock owners.
The country has no authentic market for quality, disease-free germplasm in the form of i)
sperm; ii) embryos; iii) calves; iv) heifer; and v) adult bovines. As such, por quality of
germplasm with unknown genetic is sold in unorganised markets. This is of importance if
indigenous breeds are to be refined and promoted.
NCDFI eMarket - Digitalization of dairy cooperative trade

The National Cooperative Dairy Federation of India, has its primary objective to facilitate the
working of dairy cooperatives through coordination, networking and advocacy.
NCDFI supports 27 state milk federations comprising of 218 District/Tehsil processing unions
that incorporate about 1.73 lakh primary village societies that focus on milk production and
collection. Among its major activities, is the coordination of milk and dairy product supplies,
arranged on contractual terms, to the Ministry of Defence, functioning as a ‘carry & forwarding
agent’ for frozen semen doses, and coordinating the sale of dairy commodities and procurement
of agri-commodities through its eMarket.
203
The transactions are conducted by way of auctions, using the following two methods:
1. Forward Ascending Price Auctions, for the following products:
 Milk Powder (Skimmed & Whole)
 Ghee
 Butter
An overview of the forward auction process is depicted in the following figure.
Figure 11.15 NCDFI eMarket Forward Auction process
Table 11.6 Dairy Auctions on NCDFI eMarket

Turnover
Period SMP (MT) Butter (MT) WMP (MT) Ghee (MT)
(Rs crore)
Jan 2015 -
3,667 4,701 162
Mar 2016
Apr 2016 -
15,904 3,623 850 143 415
Mar 2017
Apr 2017 -
14,576 3,115 2,000 5 371
Mar 2018
Totals 34,147 11,439 2,850 148 948
Source: NCDFI
Since its launch in January 2015, a total of 48,584 tonnes of dairy products have been
traded, using the NCDFI eMarket.
2. Reverse Descending Price Auctions, for the following products:

 Cattle Feed
204
 Mineral Mixtures
 Edible Oils
 Sugar
 Maize
 De Oiled Rice Bran (DORB)
An overview of the forward auction process is depicted in the following figure.
Figure 11.16 NCDFI eMarket Reverse Auction process
Table 11.7 Overview of Reverse Auctions on NCDFI eMarket

Maize DORB Rice polish Others Turnover
Period
(MT) (MT) (MT) (MT) (Rs crore)
Dec 2015 -
190 6001 0.92
Mar 2016
Apr 2016 -
66,199 33,450 3,925 153.96
Mar 2017
Apr 2017 -
2,49,072 81,855 12,300 11,974.5 507.84
Feb 2018
Totals 3,15,461 1,15905 16,225 11,974.5 662.72
Source: NCDFI
Reverse auction of agri-commodities was launched in December 2015, and total of 4.598
lakh tonnes of commodities have been traded, using the NCDFI eMarket.
The auction process facilitates price discovery based on market led fundamentals, with buyers
and sellers competing for the goods basis demand-supply situation. The NCDFI eMarket has
established a Market Oversight Committee to assist in resolving any dispute or difference in
respect of any matter relating to, or arising out of the contract. If the parties do not agree to the
205
resolution proposed by Market Oversight Committee, the parties are then free to appeal to the
National Dairy Development Board (NDDB), whose decision shall be final and binding on all
parties. The NCDFI eMarket was developed, with technical support of NCDEX, designed to
facilitate fair market price discovery, to overcome time consuming tender procedures
and to bring in faster processes while having wider participation and transparency in the
process. This eMarket exemplifies the role of market platforms in transparently
intervening across regional demand and supply variations and allowing for a more
harmonised pricing mechanism. Such market platforms need to be further strengthened
to help to balance the demand and supply gaps at a national level.
Markets and online trading in livestock and produce

The Department of Animal Husbandry, Dairying and Fisheries Development (DAHDF),
Ministry of Agriculture & Farmers Welfare has launched a web-portal, epsahuhaat.gov.in, to
provide an electronic platform that provides real time access to relevant information on
germplasm and live animals. The platform helps connect breeders, state agencies and farmer
stakeholders. Initiated in 2016, the portal has also helped in updating estimates on the livestock
population, for which a census was last held in 2012.
The ePashuhaat platform also lists information on availability of artificial insemination

technicians with contact details, real-time availability of germplasm, identification and
traceability of germplasm and other related information. Live animal exchange is also a
function. The platform is the first step in unifying and harmonising the livestock market.
To fully facilitate livestock transactions, the next steps require the organising and modernising
of the existing livestock market places to safeguard the living animals, to minimise their
suffering and thereby securing their imminent health and their ability to resist disease. This
warrants appropriate focus on livestock market infrastructure. It is recommended that livestock
markets be developed so that-
206
i. The bio-security at the physical markets is improved. This will reduce risk of disease
spreading from one animal to the other, or from animals to human. Live poultry markets
are frequently implicated in zoonotic transmission of avian flu from birds to humans.
ii. The Department of Animal Husbandry, Dairying and Fisheries Development in
coordination with the recently set up Intersectoral Coordination Committee and the
Core Working Group on Anti-microbial Resistance (NAP-AMR) 2017-2021, is to
develop suitable protocols at animal markets to maximise animal and human safety at
the live animal markets. It should also intervene on indiscriminate use of antibiotics.
iii. Proper standards should be implemented at live animal markets, such as providing for
non-porous or tile floors and walls, segregation of animals, sufficient potable water for
animals, feed and fodder, washing system and covered drains, liquid waste treatment
systems, handwashing and sanitation facilities for traders and farmers, separate entry
and exit gates for vehicles bringing animals, etc. No retail activity or slaughtering
should be allowed inside premises of wholesale live markets
iv. Tagging of animals at live markets to ensure traceability will improve the marketing
system and aid in food safety implementation. No wild animals must be sold at markets.
The accuracy of tagging can be ensured by adopting technologies like RFID, micro-
chips etc.
v. Premises for quadrupeds and ruminants should be developed to separate them from bird
markets. Shade and water availability (troughs, etc) should be made mandatory for live
animal at the markets.
vi. Rodent and insect control programs and systems must be in place and rigorously
monitored.
vii. Safe disposal of dead animals must be built into the marketing mechanism, including a
dead animal testing and reporting system.
viii. A complete list of live animal market infrastructure and facilities may be circulated and
markets should be jointly inspected, regularly with producer associations, state
government and central government officers.
ix. India’s development story in livestock is replete with the mobility of animals across the
country. Cross-regional movement of live animals (quadrupeds and poultry) is essential
and the transport of live animals from their breeding grounds to markets and processors
should be facilitated. Relevant documentation allowing unhindered inter-state passage
is required.
x. Prices of live animals, especially ruminants, are negotiated by taking into consideration
the characteristics, such as age, body weight and structure, appearance, breed, yield and
health status of the animal. These parameters need to be standardised, as far as practical,
to streamline the market transactions.
xi. The DAHDF, Ministry of Agriculture & Farmers Welfare had four Regional
Directorates for poultry development with various farms and units. In 2003, all the
207
poultry units of the central government were restructured into Central Poultry
Development Organisations. The development work however, is still largely focused
on production side and marketing is not directly addressed. The National Action Plan
for Egg & Poultry-2022, also needs to focus on market development and marketing to
the benefit of small holder farmers. Commensurate market development will avoid the
situation as in crops, where surplus production has had to be supported through
government procurement. Given the higher perishable nature of eggs and poultry meat,
an efficient marketing system supported by needed agri-logistics is a sine-qua-non.
xii. Wool markets can be improved by providing modern shearing facilities. Similar
facilities can be developed at specialised GrAMs (proposed for development) in sheep
rearing areas. The shearing tools and raw wool handling can be provisioned as service
option at these GrAMs, besides subsequent e-marketing to the woollen industry. Clean
wool handling will protect the quality of wool and help meet some of the demands from
industry. Speciality wool development can also be undertaken, since wool from rabbits
and yaks is mostly in hand of small and marginal farmers.
xiii. Livestock export is normally not in live animals (live animal trade is on the decline),
but mainly is in the form of meat and other products. There is considerable scope to
increase buffalo meat exports due to its price competitiveness and huge production
potential. Such trade also supports the important hide and leather industry. Efforts need
to be made to remove bottlenecks to further growth in such trade.
xiv. Export of meat from small ruminants is limited, largely due to higher domestic demand.
However, the demand from existing markets for goat meat from Gulf countries can be
developed further. Domestic demand for poultry is also high, and a priority would be
to improve the market network and access of backyard poultry farmers into niche peri-
urban markets, especially for traditionally reared desi fowl and duck meat.
xv. Modernisation of milk collection points and rejuvenation of cooperatives is necessary.
Imports and private sector dairy plants have competed with cooperatives, since removal
of quantitative restrictions and de-monopolisation of imports post the liberalisation of
Indian Economy rolled out in 1991. The competition is healthy, as it has helped build
new products and capabilities. However, capacity building and greater technology
support can be provisioned for cooperatives and farmer producer groups.
xvi. Most livestock development programs are focused on setting up infrastructure and on-
production side of the products. At the same time, concerted effort needs to be applied
to strengthen the supply side from small and marginal farmers, to link them with
markets and bulk buyers where possible. This will require developing a back-end
operations where small farmers can aggregate their poultry, small ruminants and
connect onwards to markets. Existing trade in this activity can be modernised with the
necessary infrastructure if the client farmers of the existing traders are provided equity
or other sharing mechanism in the service.
208
xvii. The processing industry has been developed to an extent where the units are not always
acting to the benefit of farmers. Policies and government support should be linked to
demonstrable measures of economic growth leading to the doubling of farmers’ income.
xviii. Trade in livestock by-products needs to be promoted. With a large livestock population
and growing meat, egg and dairy industry, various by-products like extracts, bone char,
hair, hide, enzymes, and many more are generated. These items have not caught active
attention on development front. These possess value and capture of this value is
important from the perspective of generating additional income to the livestock farmers.
xix. Livestock sector will benefit by organising a division on livestock marketing under the
Department of Animal Husbandry, Dairying and Fisheries Development. The focus on
infrastructure development can include parameters to ensure that the infrastructure is
brought to use to benefit income growth in small farmers.
Fisheries Marketing
Fish and fish products have presently emerged as the largest group in agricultural exports of
India, with 995.1 thousand tonnes in terms of quantity and 5.4 million US dollars in value. This
accounts for around 10 per cent of the total exports of the country and nearly 20 per cent of the
agricultural exports. More than 50 different types of fish and shellfish products are exported to
75 countries around the world.
On the domestic front, fish marketing system is working on traditional and informal patterns,
mostly run by private traders, lacking modern facilities and involving a large number of
intermediaries between producer and consumer. All this reduces the marketing efficiency and
fisherman’s share in consumer’s rupee. Though domestic fish marketing holds a great potential,
it is still vastly disorganised and unregulated. In most of the cases physical facilities and
infrastructure in all types of fish markets are far from satisfactory.
Status of the fish processing Industry

The fish processing industry in India is focused on exports and appears well developed. Out of
the 625 registered exporters, 380 are manufacturer exporters and 240 are merchant exporters.
The fish processing industry consists of 215 ice plants, 481 shrimp peeling plants, 371 freezing
plants, 495 cold storage units, 7 canning plants, 16 fish meal plants, 11 surumi plants and 1
agar-agar production units. Of the sea food processing plants about 95 per cent are concentrated
in 20 major clusters in 9 states. HACCP (Hazard Analysis & Critical Control Points)
certification is mandatory and all the sea food processing plants are HACCP complaint. About
15 per cent of the total fish landed is used for the export of fishery products.
Generally, the fish passes through several intermediaries from the landing centre or fish farms
to the consumer, through a network of wholesale, major, minor retail, roadside markets, etc.
The intermediaries provide different services of head loading, icing, packing, transporting,
processing and preservation. Value added activity happens at the primary level through sorting,
grading, cleaning, icing and packing of fish. Normally fish is graded and sorted manually. If
209
the same fish is meant for exports the processers further grade, clean, process and pack the fish
for exports.
Status of domestic fish marketing

The importance of domestic marketing can be understood from the fact that about 85 per cent
of the fish landed, is distributed through domestic markets. As more and more trade restrictions
are being imposed on the fishery product exports, the domestic market is expected to remain
the mainstay of the fisheries sector. The domestic demand is also showing an increasing trend.
Figure 11.17 Trends in fish consumption (per capita annual)

3.5
3.24
3.3
3.1
2.9 3.07
2.7
Kgs./Year
2.5
2.3 2.07
2.1
1.9
1.7 1.95
1.5
1987-88 1993-94 1990-00 2004-05 2009-10 2011-12
Urban 2.07 2.43 2.68 2.51 2.90 3.07
Rural 1.95 2.19 2.56 2.45 3.27 3.24
The fish market in the northern parts of the country has remained untested to a large extent.
Appropriate fish handling and cold-chain connectivity will be required to deliver fish to the
northern markets of the country. Private sector entrepreneurs are recognising opportunity from
this unserved demand and realise, that regular and efficient supply to these untapped markets
will make fish more affordable and in turn further drive consumption volumes upwards.
The key constraint in domestic fish marketing arises from the perishable nature of the fish, and
the time lag to transport the fresh catch from the fish landing centres to the interior markets.
Lack of proper handling results in poor quality of material, risk of food borne diseases,
nutritional and post-harvest losses. Fish also needs to be segregated from other food types
which tends to disallow shared infrastructure usage. The harvested fish is not evenly distributed
to interior areas due to lack of refrigerated transportation.
Mostly, the fresh fish meant for domestic consumption is not processed and transportation is
undertaken in insulated or covered trucks (non-refrigerated), using ice flakes to chill and pack
the fish. This system is preferred for saving costs, compared to actively refrigerated transport
modes (reefer containers or trucks). The commission agents and traders are known to
compromise on the quantity and type of ice used, putting the hygiene and food safety at risk.
Ice flakes made from non-potable water can cause serious contamination.
210
The majority of domestic markets have poor handling facilities and the fish that reaches the
consumer for domestic consumption is already one or two days old. Availability of potable
water, good quality ice, electricity, waste disposal system, etc. is inadequate. This also hampers
consumer acceptance and demand for fish from hinterland population.
The various stakeholders in the marketing channels sell the fish to the next level as soon as
possible, that coincidentally results in a fast selling cycle in the trade. This has advantages of
reduced inventory holding costs and risks. Processed and preserved fish can be stored for longer
duration and has a longer production to selling cycle.
Due to variety of reasons, fisheries sector has long been neglected and serious efforts are
needed for efficient marketing of fishes so as to match up with its production. Fish marketing
usually starts with the auction system which is highly irregular, disorganised and unregulated
in most states of India, making it a very tough task for any new entrant to enter into these
markets. There is need for improvement in various regulation by the cooperative federations
so as to make entry easy for new entrants, also there is need for improvement in facilities like
creating and maintaining much needed infrastructures such as launching cold storages at major
collection points, improved road access to fish catching centres (ponds, rivers etc.), from the
main markets, ice factories, etc.
The domestic marketing channel of fish, irrespective of its form, i.e. fresh, dried, processed,
etc. is multi-layered and requires collaboration among various actors in the marketing chain.
However, in case of ornamental fish, the business is more closely integrated in the hands of a
few enterprises. The ornamental fish production and trade are also emerging as a lucrative
commercial aquaculture venture.
Table 11.8 Quantity of ornamental fish sold in selected markets of India (2015) (In lakhs)
Name of the Kolkatta Chennai Mumbai
Ornamental Fish (Howrah) (Kolathur) (Kurla)
Molly 40.30 27.8 11.20
Guppy 24.20 27.80 19.00
Platy 24.20 10.70 11.20
Gold Fish 56.40 49.50 23.40
Koi Carp 9.70 14.30 6.10
Zebra 19.30 10.70 8.90
Angel Fish 24.20 25.70 16.20
Total (in lakhs) 198.30 166.50 96.00
Source: Nightingale Devi B. 2014
Ornamental fish markets are located in different parts of the country. The most important
ornamental fish markets in the country are located at Howrah, Kolkatta, Kolathur, Chennai and
Kurla, Mumbai. Many other centres like Kochi, NCR (National Capital Region) of Delhi are
developing as important hubs. Vertical integration is high at 64.44 per cent among ornamental
211
fish marketing firms in Kurla, 83.33 per cent in Howrah and 76.19 per cent in Kolathur.
Vertical integration essentially implies that the firms are performing more than one function at
a time, in the marketing process. The firms in these markets work as wholesalers, commission
agents, retailers and post production service agents of ornamental fishes. The extent of
horizontal integration in selected ornamental fish markets was negligible at 6.64 per cent,
which indicated that the number of firms having a spread of outlets performing the same
function was almost negligible. The vertical integration also concentrates market power in the
hands of a few firms; the top three account for 10.6, 8.5 and 9.8 per cent of total ornamental
fish transactions respectively. The extent of concentration of market power indicates a lower
degree of market freedom.
Value to fishermen
As in case of all perishable produce, the farmer or fisher, has little time to evacuate the harvest,
and without any market connectivity services, has to sell off the produce at first instance to the
local agents. The price discovery therefore is made on the basis of incoming daily catch and
demand that is monopolised by the commission agents. Therefore, the fish farmers are obliged
to take the price offered by the commission agents who in turn can delay payments by as many
as 6 months to 1 year. Such delays can bind the farmers in a debt trap.
Marketing services in the form of refrigerated connectivity with the up country consumers is
lacking and would empower the fishing community with a seller’s choice. Such marketing
services would also help them capture a greater share of the final wholesale value at terminal
markets.
Institutional Support for Fish Marketing (Domestic / Exports)
National Fisheries Development Board

The National Fisheries Development Board (NFDB), established in 2006 under the
administrative control of the Department of Animal Husbandry, Dairying & Fisheries, Ministry
of Agriculture and Farmers’ Welfare works to enhance fish production and productivity in the
country and to coordinate fishery development in an integrated and holistic manner.
A wide range of fishery development activities are supported through state governments and
implementing agencies. These include, intensive aquaculture in ponds and tanks, culture based
capture fisheries in reservoirs, coastal aquaculture, mariculture, sea weed cultivation,
establishing infrastructure like fishing harbours and fish landing centres, fishing dressing
centres, solar drying of fish, domestic marketing, fish processing, ornamental fisheries, etc.
Capacity building of fishermen and fish farmers is also being supported. The activities of
NFDB are overseen by its Governing Body, chaired by the Union Minister of Agriculture and
Farmers Welfare. The Executive committee, has the Secretary of the Department of Animal
Husbandry, Dairying and Fisheries as its Chairman, and provides the general superintendence,
direction and control of the affairs and functions of the Board.
212
In the backdrop of the above, the following areas have been identified for the development
of domestic fish marketing system in the country:
• Modernisation of wholesale markets

• Cold-chain and hygienic retail outlets of varying levels
The retail outlets are an important link in the domestic marketing system. It is only through
retail markets that the fish is traded to the outlets to reach the actual consumer. The quality of
fish that reaches the retail end, is effected by the conditions of the wholesale markets and
connecting cold-chain logistics.
The main drawback of the retail market, is that the fish reaching for distribution is in poor
quality due to weakness as that exist in the wholesale handling, storage and transportation.
Initial freezing and refrigerated transport to safely connect the primary producer to the domestic
consumer in the system is necessary. Apart from a dynamic cold-chain, provision of other
amenities like hygienic retail outlets for merchandising, are required.
Schemes under rural development department for promoting women and weaker sections in
domestic fish marketing are also undertaken by NFDB.
Marine Products Exports Development Authority (MPEDA)

The erstwhile Marine Products Export Promotion Council established by the Government of
India in September 1961 was converged in to MPEDA on 24-August-1972, by an Act of the
Parliament. MPEDA is given the mandate to promote the marine products industry with special
reference to exports from the country.
The organisation is envisaged to take all actions to develop and augment the resources required
for promoting the exports of “all varieties of fishery products known commercially as shrimp,
prawn, lobster, crab, fish, shell-fish, other aquatic animals or plants or part thereof and any
other products which the authority may, by notification in the Gazette of India, declare to be
marine products for the purposes of (the) Act”.
The Act empowers MPEDA to regulate exports of marine products and take all measures
required for ensuring sustained, quality seafood exports from the country. MPEDA is given the
authority to prescribe for itself any matter, which the future might require, for protecting and
augmenting the seafood exports from the country. It is also empowered to carry out inspection
of marine products, its raw material, fixing standards, specifications, and training as well as
take all necessary steps for marketing the seafood overseas.
MPEDA is the nodal agency for the holistic development of seafood industry in India to realise
its full export potential. Based on the recommendations of MPEDA, Government of India
notified new standards for fishing vessels, storage premises, processing plants and
213
conveyances. MPEDA’s focus is mainly on market promotion, capture fisheries, culture

fisheries, processing infrastructure & value addition, quality control, research and
development.
MPEDA activities include:

 Registration of infrastructural facilities for seafood export trade.
 Collection and dissemination of trade information and the promotion of Indian marine
products in overseas markets.
 Implementation of schemes vital to the industry by extending assistance for
infrastructure development for better preservation and modernised processing.
 Promotion of aquaculture for augmenting export production through development of
hatcheries, new farms, diversification of species and technology upgradation
 Promotion of deep-sea fishing projects through test fishing, joint ventures and up
gradation & installation of equipments to increase the efficiency of fishing.
 To carry out inspection of marine products, its raw material, fixing standards and
specifications, training, regulating as well as to take all necessary steps for maintaining
the quality of seafood that are marketed overseas.
 Impart trainings to fishermen, fish processing workers, aquaculture farmers and other
stake holders in the respective fields related to fisheries.
 Conduct research and development for the aquaculture of aquatic species having export
potential through Rajiv Gandhi Centre for Aquaculture (RGCA).
 Conduct extension and awareness activities, trainings etc through Network for Fish
Quality Management and Sustainable Fishing (NETFISH) & National Centre for
Sustainable Aquaculture (NaCSA).
MPEDA also launched the Fish Exchange Portal’, http://fishexchange.mpeda.gov.in, to
enhance the export trade between registered seafood exporters of India and buyers abroad. The
portal provides a platform for buyers across the globe to interact and source the ‘Irresistible
Seafood from Incredible India’ from the registered exporters under this Authority. The portal
also features latest and updated information on world’s and India’s seafood trade statistics,
production information and price trends, for the users to refer and understand the market
scenario. It is loaded with directory of Indian seafood exporters, country profiles, regulatory,
and tariff information, standards, notifications, information on upcoming business events / fairs
etc. so that it will act like a ‘one stop shop’ for the trade needs.
Annotation
Livestock and fisheries sub-sectors are important contributors to Indian agricultural growth and
to income growth of farmers. Various improvements, especially to enhance income opportunity
for small farmers in small ruminants, poultry and fishery are desirable. In dairy products,
despite achieving envious scale and efficiencies, continued growth in demand for fresh milk,
214
requires further optimisation in the marketing of milk. Large surplus stock of milk powder
finds less demand in domestic market.
Poultry sector is well organised in the broiler segment, but the backyard poultry in the hands
of small and marginal farmers requires greater marketing support. The government can play
and important role by promoting marketing entrepreneurs or start-ups to aggregate demand and
link it with supply from backyard farmers.
Goat and sheep sector can also benefit from modernising their market network, as well as by
facilitating marketing of various by-products. Across all segments, modernising of market
infrastructure, including for live animals in compliance with animal welfare is required. Similar
is the case with fishery marketing.
On the export front, livestock products, including fisheries have demonstrated excellence by
capturing a large share of the global market and establishing India among the top exporting
countries. However, a similar level of efficiency is not observed in the domestic marketing
network. Food processing focus in the livestock and fisheries sector is imperative, as the
produce cannot be marketed to wider consumer base without mediation of processing industry.
The prevailing financial and fiscal incentives to promote and develop marketing infrastructure
are listed in Chapter 5 of Volume III of this Report.
215
Key Extracts
 Livestock sector has received sustained government support to realise increased
production. The sector has also garnered private initiatives and grown. However,
market and marketing development has been largely left to the devices of cooperatives
and private sector. And both need to improve for higher efficiency.
 Small farmers with livestock do not have safe and easy access to livestock markets,
having to rely on sales transacted by informal traders. Milk farmers are better
organised as the collection points transact at prices set by terminal wholesale buyer.
 Animal welfare is not addressed at existing live animal markets. Infrastructure,
including for bio-security at markets, needs to be developed at livestock markets.
 Agro-processing industry (food and non-food), should be supported to become more
competitive, with provision to demonstrate measurable impact on farmers income.
 In addition to strengthening the existing livestock markets (2000 in numbers) across
the country, market integration by upgrading ePashuhaat (the online trade platform)
needs emphasis. Similarly, the initiatives like NCDFI eMarket for diary sector
participants need to be strengthened.
 Domestic fish markets are the mainstay of fishers and hinterland demand remains
untested due to insufficient cold-chain connectivity.
 Unlike horticultural produce almost all production from livestock and fisheries
benefits from processing as a marketing intervention. Special attention to bring greater
development of food processing industries in these sub-sectors is required.
216
Nutrition led marketing

There are many produce types, having high nutrition value and ecologically ethnic to India, that are
not being ably marketed to the domestic consumers. The population is increasingly facing nutrition
linked health concerns on both extremes; from obesity as well as under-nutrition. This raises concerns
of long term health degradation and the need for nutrient led marketing is discussed in this chapter.
Context
Nutrition in India, has been an area of concern for many decades. The nation is not only food
self-sufficient, it also generates exportable surpluses. Paradoxically, nutrition adequacy is yet
a goal post to be arrived at. As per the recent estimates, about 37 per cent of under five children
are underweight, 39 per cent are stunted, 21 per cent are wasted and about 8 per cent are
severely acutely malnourished19. The impact of under-nutrition among children is long-term,
inter-generational and irreversible.
The Global Nutrition Report 2016
The country faces a double burden of malnutrition. India reveals India's slow progress in
is also home to over-nutrition related health challenges addressing chronic malnutrition,
at the other end of the spectrum. India is ranked as the manifest in stunting (low weight for
third most obese nation of the world after US and China, age) wasting (low weight for
and as per 2015 data, India has about 69.2 million height), as well as obesity with
people suffering from diabetes. Yet, many who suffer micro-nutrition deficiency.
symptoms of over-nutrition, continue to suffer micro- The Global Hunger Index, 2017
nutrient deficiency, thanks to having imbalanced diets. ranks India at 100th position based
on its performance-on the above
All these facts suggest that a large part of India parameters. This is an alarming bell
continues to consume non-nutritious, non-balanced that deserves urgent attention.
food, resulting either in under-nutrition, over-nutrition The repercussions of both under-
or micro-nutrient deficiencies. At the same time, the nutrition and obesity on the well-
country produces large quantities of high nutrition foods being of individuals are multi-
like cereals, pulses, fruits, vegetables, milk, meat & egg. dimensional and long-lasting,
making it imperative that India up
This situation is a result of various factors, including a its attention to nutrition.
lack of suitable marketing of India produced high
nutrition foods. Many of these food items, are not only cost effective to produce but also grow
in less endowed cultivation environment. They offer opportunities to promote good health and
the income of farmers. This suggests that there is a need for innovative and widespread
marketing of high nutrition food items produced in India, for betterment of both farmers as
producers and consumers.
Changed awareness for a changed food plate

In the initial phase of economic growth, a visible change in Indian diet was evident, wherein
19
Government of India. NFHS4
217
the per capita consumption of fatty foods, salt, sugars and artificial nutrients increased, as well
as in respect of overall calorie intake. These are indicators of initial growth in relative affluence
of populations. A preference for commercially marketed foods, including vegetable oils also
created demand for imports. However, global experience and recent domestic trends show that
with rising level of income and education, the next phase in consumer preference shifts towards
more nutrient and natural foods. This is already manifesting in India, with the diet is
diversifying into fruits, vegetables and an emerging trend towards animal-based food.
However, this comes on the base of a declining per capita share of cereal and pulses in food.
The next stage in development, is when the consumer becomes more health and environment
conscious and shifts towards organic or ‘green’ foods. Changes in food consumption have
implication on agriculture and its trade. The country also has a large nutrient deficient
population and given the large socio-economic diversity, the per capita intake of calories,
protein and fat remains significantly below that of ICMR recommended requirements. The
implication is that in coming years, with increasing per capita income and urbanisation, India’s
demand for various superior food products will see a visible rise. Such demand for high nutrient
food types can be fulfilled from produce of India, and not necessarily from those which are
marketed from foreign shores.
The DFI Committee is of opinion, that there are a variety of nutritious food items of India
which are currently not suitably marketed and general awareness of public of such foods is ad
hoc in nature. A cafeteria of such crops and commodities would include hardy crops like
millets, organically grown produce, indigenous animal breeds, and certain other traditional
crops that are original to specific geographies of India and over which farmers have a right.
Certain crops become inevitable under established conditions of ecology, even when market
signals may not favour them. Under such situation, monetisation of the farmers’ produce can
be triggered by creating a demand for such produce. These kind of crops and commodities
should be encouraged, by undertaking the analysis and authentication of their inherent
nutritional values and unique characteristics; creating awareness through aggressive marketing
promotion; and linking them to organised retail including portal based retail.
In many cases, nutritious foods widely produced in India do not feature on the plate of a large
section of the consumers, sometimes as a result of misperceptions. Consumers’ food choices
reflect cultural preferences, habits, availability, affordability, government policies, religious
beliefs and not in the least, on their awareness or lack of awareness or many a time socially
influenced perceptions. For example, majority believed that millets are meant for the poor.
Consumer food choices are also reflected in their health, and overall physical wellbeing.
Awareness levels for the produce that is ecologically viable and have high nutrient value is a
matter of public service, and needs to be pursued through developing and pro-actively
implementing pro-nutrition marketing.
218
Health implications of consumer habits

Intake of nutrition is linked to both the supply of food, and the knowledge about what food to
eat. Lack of basic food as well as lack of understanding of the nutrient value of food impacts
the population. It is important to create awareness among the all citizens on the importance of
a balanced and diverse diet to induce a positive nutrition-behaviour among the population.
Figure 12.1 Anaemia in Children
Source: National Family Health Survey (NFHS), National Institute of Nutrition
219
Prevalence of anaemia
among children under 5
years has reduced 26 per
cent in the last decade. A
high prevalence of 58 per
cent indicates that the
ratio of suitable foods
can be increased in food
distribution schemes that
target preschool children.
Anaemia in Children
Figure 12.2 Underweight in Children below 5 years - Weight for Age
Source: National Institute of Nutrition compiled from National Family Health Survey (NFHS), District Level Household
220
Survey (DLHS), and Annual Health Survey (AHS)
Over the last decade, there is a

reduction in prevalence in
wasting in children. However,
an increase in wasting in
urban children is observed.
This can indicate incorrect
food intake and may be linked
to commercial marketing of
nutrient deficient foods, and a
lack of public awareness.
Underweight in Children
Figure 12.3 Overweight or Obesity in Women
221
Source: National Institute of Nutrition compiled from National Family Health Survey (NFHS)
In the last decade, per cent of

obesity among rural women
has almost doubled. This
indicates increased intake of
foods associated with obesity
– high in sugar, fats, salts,
etc. This is likely a result of
increased affluence making
for consumers of foods
marketed for convenience.
Public service in form of
nutrient awareness to counter
false marketing is indicated.
Obesity in Women
Figure 12.4 Overweight or Obesity in Men
222
Source: National Institute of Nutrition, compiled from National Family Health Survey (NFHS)
In the last decade, incidence of

obesity among rural men has
almost doubled. This indicates
increased intake of foods
associated with obesity – high in
sugar, fats, salts, etc. This is likely
a result of increased affluence
making for consumers of foods
marketed for convenience. Public
service in form of nutrient
awareness to counter false
marketing is indicated.
Obesity in Men
There is a case for actions to sensitise the consumer, using marketing techniques as a public
service, on the availability of locally grown cost effective foods, which would also influence
and mobilise public demand for food types that are optimal to local climatic conditions.
Promoting a preference for healthy natural foods, ecologically inherent to India, is needed as a
public service, for farmers’ welfare, sustainable agriculture and for health of the nation.
Examples of unexploited nutrition

The lack of correct information often allows misconceptions among consumers which needs to
be addressed by providing nutrition based awareness and attempting behavioural changes. At
times, urban consumers being removed from farming traditions, get influenced by the
nomenclature of certain pulses and cereals. Some of the more nutritious cereals for example
are both non-charitably and disparagingly referred to as coarse cereals, which can lead to
connotations of them being unsophisticated foods. Pulses are known as “poor man’s food’
while these are high nutrition, power foods.
The United Nations General Assembly named 2016 as the “International Year of Pulses”. In
cooperation with the initiating countries of Pakistan and Turkey, as well as Brazil, Italy and
Namibia, the UNECE with the Food and Agriculture Organization (FAO) had organised an
event in Geneva to celebrate the extraordinary nutrition properties of pulses, to make
consumers aware of the super food status of these wonder foods. A more sustained effort to
propagate and maintain consumer awareness is needed, domestic and international.
Horse gram, the name that may engender erroneous image of it, is one such example of a high
nutrition food. The legume was first domesticated in South India at least 5000 years ago, and
consumed since ancient times. It has exceptional nutrition profile, coupled with drought
resistance.
223
The Kulthi (horsegram) plant requires relatively low levels of light and can be grown under-
cover or as understory crop. The vine grows thick and dense and prevents soil erosion. The
stalks and stem are also used as nutrient animal feed. Many other such examples are available,
including produce like moringa (drum sticks), pseudo-cereals like buckwheat, amaranth, etc.
Millets are another set of hardy extremely nutritious and cost effective cereals, with
hierarchical connotations of them being a poor man’s crop, resulting in consumers preferring
to wheat & rice, as their purchasing power looks up. Millets are actually three to five times
more nutritious than rice and wheat in terms of proteins, minerals and vitamins. Millets are rich
in B vitamins, calcium, iron, potassium, magnesium, zinc, apart from being gluten-free, and
low in glycaemic index (GI). These are more suitable for people with gluten allergies or high
blood sugar levels. Millets need very little water for their production. Compared to irrigated
commodity crops currently promoted by policy measures, millets require just around 25 per
cent of the rainfall regime demanded by crops such as paddy, sugarcane and banana. Not only
do they not burden the state with demands for irrigation or power, they are also most
appropriate for water deficient agro-climatic zones.
Millets do not demand rich soils for their survival and are often grown on skeletal soils that are
less than 15 cm deep. Hence, for the vast dry land area, they are a boon. Millet production is
not dependent on the use of synthetic fertilisers, millet farmers mostly use farmyard manures
and in recent times, household produced bio-fertilisers. Therefore, they not only can reduce the
burden of fertiliser subsidy borne by the government, but are more naturally grown foods.
Grown under traditional methods, millets do not attract any pest. A majority of them are not
affected by storage pests either. Therefore, the need for pesticides is close to nil.
224
Another example is coconut oil, a unique oil that is suitable for both edible and non-edible uses.
Yet, many think it to be rich in artery clogging saturated fats because of the negative anti
saturated fat campaigns that has prevailed for decades. Scientific evaluations tell of its potential
to offer protection against heart disease and
a wide array of chronic health problems,
including diabetes and cancer.
They are also reported to prevent and even

treat infectious diseases. However,
knowledge about coconut oil has been kept
buried in medical journals only because of a
general prejudice against saturated fats.
When prioritized and supported, the
coconut oil industry will not only provide
foods, income and raw materials, but will
also provide gainful employment engaged
in coconut farming and those in processing
industry.
Camel milk is yet another super food largely

ignored by majority of consumers in India.
Similarly, the consumption of honey is also
quite limited among Indian population,
though these foods are well within
affordable reach of a significant segment of
the population. Many locally available high
nutrition foods are consumed as a matter of
habit, though awareness of their health
benefits are limited. Although by default, the population consuming these foods are being well
served. Foods like ‘sattu’, a flour consisting of a mixture of ground pulses and cereals, though
possessing high nutrition benefits, is considered irrelevant because of its ‘low cost’ image. The
real value of such foods has not been propagated to create appropriate demand from the larger
consuming population, especially from cities.
Besides food items, there are other ignored opportunities like in case of mechanically processed
bamboo for clothing and under garments. These textiles inherit some of the anti-microbial
properties of the plant. Bamboo is reported to have twice as much water use efficiency as trees,
and better able to handle harsh weather like drought, flood and high temperatures. In
comparison, cotton is a thirsty crop taking up to 20,000 litres water to produce 1 kg of output.
Historically, bamboo was used for raw structural elements, but modern technology allows for
very hardy composite materials and bio-polymers for various industrial uses.
The above food and non-food examples constitute only an illustration, as there are various other
225
agricultural produce whose multiple uses & there potential remain unfortunately untapped.
Influencing demand, from the consumers plate to farm

Food marketing is normally undertaken by commercial producers, with the aim to capture a
larger market share, as a matter of course for business growth, when competing with other
products, or on introducing a new product. Commercial marketing inevitably focuses on
capturing value for the individual business, and is therefore a value adding activity in the value
chain of the commercial entity. Marketing is designed to create a fascination in the consumer,
focused on building brands and sales for the commercially specific food product, domestic and
foreign, and may not necessarily be relevant in its messaging.
The Access to Nutrition Index (ATNI) engaged with and evaluated the ten largest food &
beverage companies in India for the first India Spotlight Index 2016. As part of the study,
the nutritional quality of product sold and marketed were reviewed. The product quality
review used an established nutrient profiling system and corporate profiling was carried out
against international and national guidelines and norms of accepted good practices, as well
with guidance of a panel of nutrition experts.
The findings report that of the food products being sold, only 16 per cent were estimated to
be of high nutritional quality and only 12 per cent of the beverages sold met these quality
standards. Just 7 per cent of the foods and 8 per cent of the beverages were reported suitable
to be marketed to children. The report stated that most of the companies do not seem to
consider the importance of ensuring, that healthy products are affordable and accessible,
and do not appear to have developed any commitment or policy in this regard.
Among many surveys and studies, the recent ATNI report20 on India, shows a dismal picture
on the nutrient profile and marketing focus of the top food marketing companies in India. The
report recommended urgent need for widespread reformulation of many of the packaged foods
by cutting sugar, salt and saturated fats. Another recommendation was to redirect marketing
towards healthier food products and that for unhealthy ‘indulgent’ products, the messaging
should be for limiting consumption to small portion at very few occasions.
The consumers are easily influenced in their purchase by the marketing propaganda, and can
tend to ignore other more ideal options for their needs. From this perspective, there is a case
for brand agnostic publicity, as an impartial public service, to market the qualities of
indigenously produced food items.
Public service through such marketing should be target to build awareness about the nutritional
value of produce that is traditionally cultivated in India. The messaging should be trusted
20 ATNI - India Spotlight Index 2016, by Access to Nutrition Foundation
226
information, that is shared in an easily accessible manner, to bring about an accelerated change
in the already prevalent shift towards more healthy foods. Such marketing should not just be
about a clever advertising campaign, a discounted price, or a convenience package of pre-cut
ready to cook vegetables. In the context of nutrition, marketing will be about multifarious and
broad based efforts to encourage and enable people to eat more nutritiously.
Further, in context of doubling farmers’ income, the process would also need to include
identifying and sharing validated science on the high nutrition food that is readily produced,
and is ecologically in alignment with sustainable production practices.
Marketing as a public service, would not be about advertising a product to the consumer, but
about educating the consumer about their choices, and to help make the right decisions on why
and what they could eat. These decisions can include awareness on the ecological footprint of
the produce, the inherent nutritional value of the food, the impact on the farmers and the various
options to enhance their experience, such as traditional recipes that suit the domestic palate.
This can also take the form of knowledge based mass media programs, and is envisaged in the
form of knowledge marketing, as a public service, to disseminate information that with aims
to influence the consumers to add high nutrition variety of indigenously produced foods to their
daily plate.
The publicity of the nutritional value of

such farm produce could also involve
educational campaigns targeted at the
school level. The recommendations made
are also intended to generate systemic
demand for often ignored food items that
were traditionally available in the country.
Inclusion of such produce in the food
distribution programs at state level will also
be beneficial in creating awareness and
demand.
Traditional foods remain in demand, but at times the consumption is limited to specific regions,
to periods of cultural festivities or religious activities. This practice appears more like pulling
out a carefully packed museum piece to be displayed on the pedestal for demonstrating one’s
cultural moorings. The apathy to local crops is such, that many are referred to as “orphan
crops”. Orphan crops are those that are not traded internationally, and therefore tend to get less
attention in terms of agricultural research, training and extension.
Given the attention that nutri-rich cereals & other agri-produce deserve, of agricultural science,
it is possible to create miracle seeds, a la the current staple crops, namely wheat & paddy.
Success in upgrading their yield while retaining their nutritional value and acclimatisation to
227
rainfed systems, will enable them to, compete favourably in inter-crop comparison. This is the
need of the hour, considering India’s vast tracts of rainfed areas & climate change implications.
Simultaneously, these crops are well designed to alleviate the nutrition-deficiency syndrome
of the country’s population.
In a few cases, a variety of high quality traditional foods are also ignored due to sophistry that
associates them with past inequities. Social perceptions that label a food for the poor man,
ignores the king sized benefits. Such misconceived & misrepresented ideas will require to be
corrected by robust knowledge dissemination among the consumers, supported by opinion
makers & public figures as integral to marketing strategies.
Further to educating on the food value of produce, marketing efforts by the government should
also include campaigns to explain the tribulations and the costs that go into producing food.
Consumers, tend to raise undue alarm to established expected seasonal spikes in fresh food
prices. However, relatively the cost of manufactured food products such as ice cream,
beverages, canned foods, juices, etc. is correlated to the indulgence or service provided.
Consumers need to be educated that the service provided by farmers, is subject to multiple
variables and expectations of steady state pricing like in case of consumer goods, is not
consistent with reasonable logic. The consumers too, need to appreciate, that the farmers are
biological manufacturers of food, and that their magic is practiced under inclement weather
and uncharitable systems
An appreciation of the agricultural value system is missing among the consumers, and it is
therefore, invariably treated as a public sector undertaking. The understanding that farming is
actually a competitive commercial venture and farmers have a right to just returns, is important
and needs proper publicity. That the role of the government, is in regulating and alleviating
monopolistic practices, so as to protect the interests of both the consumers and farmers, and
that there is a price to good food also needs publicising.
The consumer’s plate, directly influences demand for food and this can be communicated
through the marketing network to farms. In effect, the plate impacts the demand for inputs
at farms. The DFI Committee feels there is need to emphasise on nutrient led marketing
as well as promoting appreciation of the farming system.
Interventions to educate on food choices

The food supply chain is primarily a private-sector activity, even in the world’s poorest
communities. In India, the public sector also plays a large role through the public distribution
system and in influencing the value system through various schemes that regulate and benefit
agricultural sectors.
It is thanks to PDS, that rice and wheat have steadily substituted other cereals as staple food on
the consumer’s plates across the length & breadth of the nation. It works more as a Hobson’s
228
choice, but simultaneously suggests the scope for diversifying the diet, by broad basing the
PDS channel.
The private sector comprises multiple actors, from multinational and national food businesses,
medium & small-scale processors of staple foods, traders, logistics providers to smallholder
farmers. All of them function to extract value from the end-consumer, either targeting the
existing demand, or through influencing the consumers to aspire for specific products.
As a section of the country becomes more health-aware and naturally migrates towards fresh
foods, and subsequently to organically grown foods, this shift can be encouraged by enhancing
nutrition knowledge, attitudes and practices. Interventions should be designed to allow
consumers to make educated choices linked to health and nutrition practices to address both
over and under-nutrition, through foods that are optimally produced in India. It is said, that for
a consumer the food that is produced in a radius of 100 kms of his residence is nutritionally
best suited. Of course with high degree of mobility this may not always hold good.
Figure 12.5 Food Pyramid for Indians

The government, through publications on dietary
information, also informs to influence the
consumers’ intake. An example is the Dietary
Guidelines for Indians21 (DGI), and many other
documents under guidance of the Ministry of
Health & Family Welfare.
These however, are largely perused by

academics, nutritionists and health
professionals, and none require to be
communicated effectively with the public. The
DGI needs to be decoded into aspirational
messages for the consumers and as an actionable
guidance to policy makers linked to production.
The broad based dietary guidelines and the food Source: National Institute for Nutrition - DGI
pyramid, can be rendered into usable information on specific produce and a permutation of
traditional food preparations. The line ministries such as Agriculture and Health, could
coordinate to generate the nutrition profile of oft ignored traditional crops. The well-researched
& documented books on millet cuisine published by Indian Institute of Millet Research (IIMR),
Hyderabad can serve as examples for others to follow.
The target produce could identified from those that are easily cultivated in under-irrigated
areas, and are climate resilient and hence, ecologically friendly for Indian agriculture and
farmers. Another category can be those crops, that are more efficient to be grown by the small
21Dietary Guidelines for Indians, first published in 1998. The second edition was published in 2011 by the National Institute
for Nutrition, under the aegis of Indian Council of Medical Research (ICMR), Ministry of Health & Family Welfare.
229
& marginal farmers, of short cultivation cycles not requiring intense mechanisation.
The National Food Security Act (NFSA), 2004 does provide for including cereals other than
rice & wheat too, which can be utilized to build alternate models of procurement & public
distribution. The specific nutrient requirements, assessed for each malnutrition zone, may be
translated into a supply mix of preferred produce, for the PDS in those States. The per capita
requirement for the PDS, or Mid-day meal, or ICDS etc. programs, can be estimated into
quantities and demand frequencies, which can then guide the local production, procurement
and distribution targets.
This will create a differentiated demand from each of the state food systems, for the items that
are nutritional, yet are currently left off the consumers’ plate. For example, millets can be
included in the PDS based on regional production and consumption. Likewise, many select
crops can be included in the menus of various food-based welfare schemes, implemented at
state level. As an illustration, the mid day meal scheme in Brazil, allows the local schools to
procure any foods, that is locally produced. It includes cereals, fruit, vegetables, egg, meat etc.,
there are also domestic examples, as in Odisha where egg is added to the school’s MDM and
milk in Karnataka. Such innovations generate demand for locally produced & differentiated
food items.
Nutritional promotion will need trustworthy messaging, and aspirational enough to influence
changes in consumption behaviour. Public perception of food hierarchy as superior or inferior
on the basis of cost needs to be amended. The concept of health food need not be interpreted
to mean uninteresting food. Quality of food need not be linked to its price but to the inherent
values and health benefits.
Mass media can help to influence behavioural changes and create increased demand for such
food items. A variety of interventions can be developed to increase consumer aspiration and
awareness on nutritional food choices. The home makers are nutritional gate keepers and are
vested with decision making for the health of their home. Campaigns should, therefore,
particularly target home-maker awareness through chef promotions, digital marketing
including food blogging networks, mass media out-reach, etc.
Most are acquainted with the fact that fruit is healthier than sugar confection, that vegetables
are better for them than salted chips, and that artificial preservatives and flavours are unhealthy.
Despite this awareness, food habits tend towards convenience and indulgence.
The government can also adapt food and nutrient profiling models to dietary norms, and use
the system to guide and track the nutritional value of product portfolios of packaged food
companies.
Student awareness, consumer engagement and social marketing through aspirational figures
from the world of sports, music, film, arts, politics and other arena, are other marketing
230
activities to be considered. The agenda would be best served for the diversified produce of
India, by undertaking regular and frequent consumer interaction.
Recovering the lost demand for certain traditional crops that are original to specific
geographies, over which farmers have a right, or other indigenous produce will generate greater
value, not just in terms of returns to farmers, but also in relation to the people’s nutrition, health
and wellbeing.
Annotation
Marketing of food products is largely guided by growth strategies of the organised private
sector. These strategies aim to build brands and leverage factors such as consumers’
aspirations, convenience, socio-economic status, and type of knowledge on nutrition, to
eventually influence the mix on a consumer’s plate. Review of various nutrition studies will
indicate that only a small percentage of food products marketed by large companies are suitable
for the nutritional needs of children and other general consumers.
The informal sector, a large section of the agricultural value system, relies on existing habitual
demand from consumers. The traditional learning about the value of many food types, is fading
from urban consumers, to the detriment of the country’s agricultural system.
A knowledge based marketing campaign, to share compelling information on the nutritional

profile of agricultural produce of India, the resulting health benefits from such consumption
and the value addition to sustainable living is recommended. As a public service, such
information sharing will seek to induce a change in food attitudes, to counter misconceptions
that link quality to indulgent aspirations and prices, and to help the consumer realise that ‘less
can equal more’.
Outreach campaigns may specifically target long-term eating patterns, to incorporate the
national dietary guidelines into mainstream diets. A sharing of good food habits, across regions
within the country, will also generate mutually beneficial demand and associated trade between
and among the states. This knowledge dissemination will need to be driven as a public service
and also as a farmers’ income enhancing activity.
The public marketing strategy can also focus on making the consumer realise the real value of
the food they procure, rather than quick reactions on the short term fluctuations in cost.
Accordingly, the value contributed by farmers to the quality of life, needs to also be marketed.
The NFSA provisions and government’s public distribution system can influence consumption
patterns, and sequel demand and production patterns in a major way.
Nutrition knowledge does not necessarily translate into changed food habits. Nutrition led
marketing would require to involve aspirational figures who can influence long term change in
food habits of the youth.
231
Consumers’ preference is already showing a shift towards natural produce and high nutrition
food items, the rate of change depending on their exposure to trustworthy information. The
government can accelerate this change that aspires to better health, through improved food
intake, by adopting a marketing strategy around functional foods. The strategy can include
leveraging scientific food profiling, traditional beliefs, ease of production, sustainability of
production, and value to farmers.
The newest Nobel laureate in Economics, Richard Thaller has caught the imagination of the
world through his advocacy of behavioural economics. It is not rules & regulations that matter.
People make choices based on what appeals to their mind & other sensitivities, irrespective of
what such a decision means on their wallets. For the nutrition-led marketing to succeed, it is
Thaller’s ‘nudge’ that needs to be rolled out for its full display.
Key Extracts
 Most marketing is focused on specific products and brand promotion by commercial
entities. There is little marketing of non-branded, yet nutritional, produce of India.
 Consumer awareness of large variety of indigenously produced foods, with high
nutrition profile, is fading under onslaught of commercial marketing of food products.
 The marketing of foods indigenous to India, will promote demand for the right kind of
consumption, and bring greater value to a farmers who are ecologically restricted to
the crops they can cultivate.
 Nutrition led marketing to reinvigorate demand for the ‘parampargat’ produce,
traditionally cultivated and sustainable in India, can be taken up for public service.
232
Recommendations
This chapter highlights the key recommendations that relate to agricultural marketing, and
highlight the necessary reforms in the marketing support system, relook at the market
architecture, and brings in a value system approach with participation from the private sector.
Synopsis
Growth in farmers’ income is directly related to their capacity to market the produce across
time and form at location of choice. This capacity is related to the system of marketing, the
network of markets, the inter-connectivity between these markets and the intelligence to guide
the activities. The recommendations that follow are from the discussions in this volume, are in
affirmation of the fact that the scope of agriculture is getting redefined as per contemporary
and emerging needs.
As demand driven production of agricultural produce, rather than production propelled

marketing is the need of the time, the Committee reiterates that agricultural marketing has the
function to guide the flow of produce from farm-to-fork, through the flow of information from
fork-to-farm. This should be so as to supply the demand, in a way that results in optimised
costs and maximises value realisation.
Recommendations
i. States must adopt the Model APLM Act, 2017, and promptly facilitate the provisions for
establishing of a range of markets of different models (eg. wholesale, retail, direct
markets, etc.) under a wide variety of ownerships (public and private) - see section 3.9.2.
ii. DACFW must forthwith roll out the Model APLM Rules so that the States can make the
Model Act operational.
iii. As estimated, the country needs about 10,000 wholesale and 20,000 rural retail markets
to achieve the desired market density and network them into a pan-India system. The
state governments may convert the existing principal and sub-market yards into full-
fledged and independent markets, in order to achieve the desired market density. Any
remaining requirement may be met by promoting private markets under the provisions
of the Model APLM Act. Also, as per provisions of this Act, existing warehouses, silos,
etc., may be upgraded and notified as markets.
iv. As per the new market architecture suggested in chapter 5, the effectiveness of an
efficient marketing system can be gained by upgrading the existing more than 20,000
rural periodical markets as Primary Rural (grameen) Agricultural Markets (PRAMs).
v. The Centre and the States should work concertedly to achieve a truly unified national
agricultural market (NAM) within a period of three years (ie. 2019-20). This can be
achieved by increasing the coverage of markets under e-NAM to a cumulative of 1000,
233
and promoting alternate online platforms in the public sector by the states, as well in the
private sector, besides joint venture platforms.
vi. In order to facilitate this Government of India’s e-NAM platform may serve as a common
platform with inter-operable architecture, so that all other platforms can be integrated
centrally, and with one-another. The Ministry would need to adopt open source software
at the earliest, and lay down the IT system standards and specifications to be adhered to.
vii. Both the Centre and the States/UTs may set up special purpose vehicles (SPV) to own
and operate the national agricultural market (NAM). To realise this, the DACFW may
appoint an expert to give specialist advice on the transactions involved.
viii. DACFW may constitute an inter-ministerial committee to study and suggest ways to
harmonise the various product standards and grading parameters adopted by different
agencies (BIS, APEDA, FSSAI, Agmark, etc.). This is a pre-requisite to creation of a
NAM which works on the online platform.
ix. As discussed in chapter 7, the small and marginal farmers will benefit from an efficient
marketing system, only if they are imparted withholding capacity, by offering them
pledge finance (post-harvest loan against produce as collateral). This can be facilitated
by taking measures to upgrade the storage godowns including cold-storages, to standards
as defined by WDRA, to issue NWRs. DACFW may develop comprehensive guidelines
to promote warehouse based post-harvest loans and eNWR based trading.
x. Further, the availability of post-harvest loans against NWRs, should be popularised
amongst farmers, and financial institutions oriented to participate in the pledge loan
system. The government may revisit the guidelines/eligibility criteria relating to post-
harvest sub-vented loans, so as to make it available to small and marginal farmers, even
when they may not have availed themselves of a crop loan.
xi. State governments may prepare a District and State storage plan and identify gaps before
taking up new constructions. The gaps may exist in the existing available infrastructure,
in the form of design, technology used and/or crop specificity.
xii. For integrating small and marginal farmers into the marketing system, besides improving
their external market interface, mobilising them into a large number of farmer producer
and village producer organisations (FPO/VPO) is critical. It is suggested that a minimum
target of 7,000 FPO/VPO be adopted. Each such organisation may cover 1000 farmers
and/or 1000 hectares.
xiii. In order to scale up the FPO/VPO it is suggested to liberalise, by amending the
Companies Act, to facilitate private sector shareholding in FPOs which may be allowed
upto 26 per cent. They may also be incentivised by treating at par with Cooperatives.
xiv. The FPOs/VPOs may be organically linked to the proposed national level value system
partnership platform - see chapter 8.
xv. To promote value led production system, the DACFW may develop guidelines and
launch an Agriculture Value System Partnership Platform which will function through
234
an organisational structure that comprises national level, state level and district level
platforms. The DACFW may identify interested stakeholder organisations with expertise
and experience in various production and post-production activities, who are willing to
partner with the District level value system platforms and mentor the farmer’s enterprise.
xvi. The doubling of farmers’ income strategy involves productivity gains across sub-sectors,
which will result in a higher output, and this will need to be connected with new markets,
including exports. An aggressive agricultural trade policy is recommended, to raise the
agricultural exports to USD 100 billion, a minimum of three times, by 2022-23. Further
the basket of commodities exported should be broad-based and reach beyond cereals and
meat, which currently account for the bulk of the exports. Export of both, value added
products and primary agricultural produce of farmers, should be equally promoted.
xvii. In order to adopt a track and trace system for exports, the DACFW and APEDA should
work together and partner with the state governments and promote cluster based
production and export marketing. The focus should be on fresh produce like fruits and
vegetables, which have great potential in production gains but are already facing
constraints in marketing. The initial 10 clusters, already identified, may be made
operational on priority, and in parallel, identify another 10 by the end of 2017-18 to be
operationalised in the following year. This initiative should be scaled up by linking
organically with the value system platform and FPOs/VPOs.
xviii. Indian embassy/high commission system should include the post of Advisor (Agri-trade)
to be filled by domain experts/experienced development administrators/policy makers in
agriculture and allied areas, of suitable seniority. These trade experts would be tasked to
monitor the market conditions in their host countries, interact with traders & exporters in
India and assist in resolving their market access issues.
xix. Both domestic and export markets are effected by the trade regime. It is suggested that a
long term perspective of 5-10 years be adopted, such that there are no knee-jerk reactions
that disable the associated trade relationships. Further, a permanent inter-ministerial
committee including those of commerce, consumer affairs and agriculture may be
constituted with the mandate to monitor closely the domestic and global price situation
for different commodities, and recommend interventions to government, keeping in mind
conflicting interests of both producers and consumers.
xx. The above referred committee may be supported by DMI (Directorate of Marketing &
Inspection) as its secretariat. The DMI may collect and collate data from different sources
to analyse and provide inputs to the Committee.
xxi. It is also suggested that DACFW may undertake the restructuring of DMI into the
Directorate of Marketing & Intelligence so that it is able to advise the government on
market prices as related to the farmer-producer. DMI for this purpose, may adopt a
suitable price forecasting model as discussed in chapter 9. However, this forecasting may
be initially shared with caution until its eventual robustness is verified and demonstrated.
xxii. Export promotion agencies of the govt. require restructuring with a market research and
analytics cell, so as to develop pull-based exports, and not merely to push products and
235
brands, tentatively into unstudied markets. Monitoring of market share with feedback to
make producers responsive and remain competitive in export markets should be included.
xxiii. Government should broad base and strengthen procurement operations to cover as many
crops as possible (other than wheat & paddy) and be secular across the production
regions. It is suggested that the procurement operations be conducted with view to
stabilising market prices and not as income transfers. This will require the government
to adopt a procurement threshold level of 15, 10, 5 per cents, of the marketed surpluses
for pulses oilseeds and other cereals, respectively.
xxiv. The bouquet of procurement instruments can be strengthened and made more broad-
based by adopting new initiatives like the market assurance scheme and the private
stockist scheme – see chapter 6.
xxv. All paid out costs, incurred by farmers in cash or kind, including imputed value of family
labour, when combined with assured procurement is a good income intervention in
favour of farmer. So far, notwithstanding increase in MSP year on year, no assured
procurement is observed. From perspective of equitability, a universal coverage in terms
of geography and all MSP notified crops, needs to be considered.
xxvi. The buffer stocks of pulses, built under PSF, may be linked to procurements undertaken
under PSS, MAS and private stockists. This will enable the procurements undertaken at
MSP to be off-loaded into the PSF buffer for stabilising the consumer markets.
xxvii. DACFW may re-designate the existing Marketing Division into Agri-logistics and
Marketing Division. This will bring dedicated focus on the empowering aspects of
agriculture, i.e. agri-logistics, agricultural markets and agricultural marketing. For this
purpose all agri-logistics and market related functions dispersed across different
divisions may be consolidated in the re-organised division.
xxviii. Marketing of Livestock and Fisheries produce needs to be upgraded. See Chapter 11.
xxix. While marketing is important to give appropriate price signals and help farmers to take
informed decision on their production, the latter should not be in violent departure from
the local agro-ecological and climatic demands. This implies, that certain crops become
inevitable under certain conditions of ecology, even when market signals may not favour
them. Under such situation, monetisation of the farmers produce can be triggered by
creating a demand for such produce. A cafeteria of such crops and commodities would
include hardy crops like millets, organically grown produce, indigenous animal breeds,
and certain other traditional crops that are original to specific geographies, over which
farmers have a right. These kind of crops and commodities should be encouraged, by
undertaking the analysis and authentication of their inherent nutritional values and unique
characteristics; creating awareness through aggressive marketing promotion; and, linking
them to organised retail including portal based retail.
-- X --
236
References
Agricultural and Processed Food Products Export Development Authority (APEDA)

Basic Animal Husbandry and Fisheries Statistics 2017, AHS series 18, Department of Animal Husbandry,
Dairying & Fisheries (DAHDF)
FSSAI - Food Safety and Hygiene in Unorganised Meat Sector, May 12, 2017 by Dr. Firdaus Jahan
National Action Plan for Egg & Poultry-2022 (for Doubling Farmers’ Income by 2022) – DAHDF
National Centre for Cold-chain Development (NCCD) – P. Kohli, various reports
National Fibre Policy 2010-11, Ministry of Textiles
Note on Wool and Woollen Textiles Sector, 2017, Ministry of Textiles
OECD (2018), Meat consumption (indicator). doi: 10.1787/fa290fd0-en
UNCTAD, Non-Tariff Measures to Trade: Economic and Policy Issues for Developing Countries
237
Annexures
Annexures Doubling Farmers’ Income – Volume IV
Main features of PPPIAD

At its conception, the following were the main features under PPPIAD:
• Corporates to propose integrated agricultural development projects across the spectrum of
agriculture and allied sectors, taking responsibility for delivering all the interventions through a
single window. Each project to target at least 5000 farmers, spread over the project life.
• Complete flexibility in design, but ensuring an integrated value chain approach, covering all
aspects from production to marketing. Projects can span 3-5 years.
• Average investment per farmer during project must be quantified, though an average of Rs. 1.00
lakh per farmer will be a desirable benchmark. Government support will be restricted to 50% of
the overall per farmer investment proposed, with a ceiling of Rs. 50,000 per farmer through the
project cycle. The remaining investment will be arranged by the corporate through institutional
financing and its own and farmer contributions. All subsidies will be directly routed to farmers or
reimbursed to project leaders after verification of asset distribution to farmers.
• Key interventions which must feature in each project are: a) mobilizing farmers into producer
groups and registering them in an appropriate legal form or creating informal groups as may be
appropriate to the area and Project (joint stock or producer companies, cooperatives, self-help
group federations etc.); b) technology infusion; c) value addition; d) marketing solutions; e) project
management.
• Financial assistance will be provided by State Governments directly to corporates through the
RKVY window after the project has been approved by SLSC, subject to a ceiling of Rs. 50,000
per farmer or 50% of the proposed investment per farmer, whichever is lower. Subsidy to farmer
for availing drip/sprinkler irrigation/mechanization/grading/shade nets etc. could be considered
separately as it is a large investment. Therefore, subsidy availed by farmers for drip/sprinkler/
mechanization/grading/shade nets, etc. under NMMI would not be considered as a part of this Rs.
50,000 ceiling.
• Projects can also be proposed by corporates to State Governments through Small Farmers’ Agri-
business Consortium (SFAC). This institution has been designated as a National Level Agency for
this purpose by Dept. of Agriculture and Cooperation, Govt. of India. SFAC will act as a facilitator
to link the project promoter to the concerned State Government. The role of SFAC will be to
examine the proposal from a technical viewpoint and thereafter propose it for funding to the
concerned State. SFAC will be restricted to being a support agency to facilitate the process of
technical appraisal, coordination and facilitation; it will not be involved in implementation directly
or handling funds.
• An independent monitoring agency (like NABARD or other a suitably qualified consultancy firm
with no conflict of interest with the particular project it is to monitor) will be appointed by the
State Government to closely track the performance of the project and report to all relevant
stakeholders in the State and Central government.
Objectives
Main objectives of scheme are:
Augmenting the current government efforts in agricultural development by leveraging the capabilities
of the private sector by:
• Addressing all concerns related to production and post-harvest management in agriculture/
horticulture and agriculture allied sectors.
• Enhancing production and productivity, improve nutritional security and income support to
farmers.
240
• Promote, developing and disseminating technologies for enhancing production and productivity.
• Assisting states in addressing the entire value chain, right from the stage of pre-production to the
consumers table through appropriate interventions.
• Creating employment generation opportunities for skilled and unskilled persons, especially
unemployed youth.
• Improving value addition and ensuring farmer’s profitability increases.
• Making farming a viable business proposition.
• Improving the delivery and monitoring mechanism under RKVY funded projects.
Strategy
To achieve the above objectives, the scheme will adopt the following strategies:
 Companies to submit a Detailed Project Report (DPR), to States directly or SFAC for consideration
of SLSC.
 Organise growers into Farmers Association/Groups in every project.
 Identify/select aggregators and enable tie-up with farmers/associations/groups.
 Coordinate with ICAR/SAUs/Private Sector to provide improved varieties of seeds/seedlings and
to introduce innovative technologies as required.
 Addressing issues in the credit supply chain with support from NABARD.
 Measures for production and productivity enhancement by adopting improved cultivars,
production
 technologies using precision farming techniques, protected cultivation, micro irrigation etc.
 Primary processing, sorting, grading, washing, packaging and value addition clusters.
 Logistics from farm to market including:
o Post Harvest Management, Storage and Transport infrastructure.
o Aggregators for suitable tie ups in the supply-chain.
 Support to these groups to develop warehouses, cold chains, Controlled Atmosphere (CA).
Strategy and Roadmap

Companies will identify the regions they wish to take up in 2012-13 and develop the project for
integrated agriculture development. The strategy & road map formulated by companies should
invariably contain information on geography & climate, potential of agriculture development,
availability of land, SWOT analysis, and strategy for development and plan of action proposed to be
taken to achieve goals in the identified region.
The document should focus on adoption of cluster approach for production and linking with available
infrastructure, or to be created, for post-harvest management, processing, marketing and export.
Growers/farmers would also be entitled for assistance under all schemes of DAC/other departments of
Government of India so that these schemes can ensure appropriate synergy and convergence for
maximum benefit in the field. Each DPR will also provide a Results Framework Document (RFD),
giving clearly verifiable indicators for tracking the progress of the project during its life cycle.
Implementing Agencies
1. Small Farmers Agri-Business Consortium (SFAC).
2. State Government (Agriculture Department)/State level agencies.
241
3. Private sector partner.
Proposals can be either submitted directly to States or to SFAC at the national level. In either case, the
NLA or State Government will examine the project proposal from the viewpoint of suitability to
priorities and objectives of the State and the general framework of RKVY. If found suitable, the
proposal will be forwarded to the SLSC chaired by Chief Secretary for consideration. Based on the
approval of the SLSC, the project will be rolled out after an agreement has been signed between the
State Government and Project Promoter. A standard format of agreement for PPPIAD under RKVY
will be circulated for the guidance of States. They will be free to adapt this format to their specific
needs.
All fund releases will be made directly by the State Government to the concerned private sector Project
Promoter, based on satisfactory progress reports. Funding will be in the form of reimbursement of
expenditures incurred by the Project Promoter on various approved budget heads, after these have been
duly verified by the independent monitoring agency.
A baseline survey to determine the entry level situation and end-of-project survey will also be conducted
by the independent monitoring agency to assess the impact of the project intervention. It will further
furnish monthly, quarterly and annual progress reports to DAC and the State and operationalize
Information Communication Technology (ICT) enabled Management Information System (MIS) up to
grass root level and if need be develop and host its own website.
Scheme Components and Pattern of Assistance

The Scheme will cover all project components in all agriculture and allied sector areas. All farmer
related services (i.e. not inputs or hardware) and other interventions leading to productivity
enhancement will be supported fully. There will be a 50% limit on items (like farm machinery and
irrigation infrastructure) which are to be provided on subsidy to farmers. However, there will be
flexibility as far as the community based projects are concerned. For instance, 100 per cent subsidy can
obtained by FPOs for developing warehousing infrastructure under Rural Godown Scheme.
The scheme will be demand and need based in each segment. Technology will play an important role
in different interventions. The interventions envisaged for achieving desired goals would be varied and
regionally differentiated with focus on potential vegetable crops to be developed in clusters by
deploying modern and hi-tech interventions and duly ensuring backward and forward linkages.
Performance based overhead costs will be given to the companies for meeting administrative expenses
for executing the projects. The companies would have to submit Results Framework Document (RFD)
for getting the project approved. If the company’s performance if excellent, it can be entitled to
maximum overheads of 8 per cent, similarly, if it is average, it would be entitled to overheads of 5 per
cent. If the company’s performance is poor, it would be only entitled to overheads of 2 per cent.
The release of funds would be done in a phased manner as per the approved project proposal. The entire
project would be divided into five phases with a specific financial allocation for each phase. Amount
pertaining each phase would be released during the beginning of each phase. For availing funds of the
subsequent phase, the company would have to submit a detailed utilization certificate from the company
auditor and interim project report of that phase.
242
Auto Regressive Moving Average (ARMA) Models

These are class of models widely used these days to forecast complex data series. It basically consists
of two parts an Auto Regressive part denoted as AR and a Moving Average part, MA. Mathematically,
AR is captured by Pt = b1Pt-1 and the MA by Pt = c1et-1, where Pt is the series under study, et is the error
term, calculated as Pt- Et, and Et, is the ARMA estimated value of the series, Pt.. b1 and c1 are the
parameters to be estimated. When the model is fitted to empirical data an ARIMA, which is a
combination of AR and MA is fitted for purposes of parsimony. The popularity of ARIMA model is
due to its statistical properties as well as use of well-known Box-Jenkins methodology in the model
building process.
a) The model is checked for stationary, a condition of absence of a trend and if a trend is observed it
is removed by differencing the series appropriately till the trend is removed. The order of the auto
regressive and moving average processes is critical for the success of the model building process.
The order is determined by computing the auto correlation and partial auto correlation function of
the stationary series. The tentatively identified model is then specified and the parameters are
estimated. The errors of the fitted model are checked for their randomness and if found adequate
the model is used for forecasting the series. The forecasted series is again checked for their
forecasting accuracy using measures like Root Mean Square Error (RMSE), Mean Absolute Percent
Error (MAPE), etc. The stages of fitting an ARIMA model includes model identification,
diagrammatic depiction of the GARCH forecasts, actual forecasting, validating the model, neural
networks and modelling volatility (Engle 1982 and Bollerslev 1986).
b) Neural network is essentially a machine learning technique. Neural network architectures can be
trained to forecast the future values of the dependent variables, after it studies past behaviour of the
series. It is a multi-layer feed-forward neural network approach consists of an input layer, one or
several hidden layers and an output layer. Another approach is known as the partially recurrent
neural network that can learn sequences as time evolves and responds to the same input pattern
differently at different times, depending on the previous input patterns. However, an additional
dampened feedback, that possesses the characteristics of a dynamic memory, will improve the
performance of forecasts.
C) Artificial Neural Networks (ANN): These are composed of multiple nodes, which imitate
biological neurons of human brain. The neurons are connected by links and they interact with each
other. The nodes can take input data and perform simple operations on the data. The result of these
operations is passed to other neurons. The output at each node is called its activation or node value.
1) Each link is associated with weight. ANNs are capable of learning, which takes place by
altering weight values. The fig. ANN-1. shows a simple ANN.
Fig. ANN-1. Simple ANN
243
2) Every linkage calculation in an Artificial Neural Network (ANN) is similar. In general, a

sigmoid relationship is assumed between the input variables and the activation rate of hidden nodes
or between the hidden nodes and the activation rate of output nodes.
3) For each observation, ANN does multiple re-calibrations for each linkage weights. Hence, the
time taken by the algorithm rises much faster than other traditional algorithm for the same increase
in data volume. ANN technique is an iterative process as shown in Fig. ANN-2.
Fig. ANN-2. ANN Process
4) ANN is generally used in cases where the data in past is repeated almost exactly in same way
and useful when used as the learning model for commodity price projection (Zhang et. al. 1998)
d) Volatility is a serious problem affecting agricultural commodities as it introduces uncertainty into

the system. A number of models have been developed in empirical finance literature to investigate
volatility across different regions and countries. The most commonly applied models to estimate
exchange rate volatility are the autoregressive conditional heteroscedastic (ARCH) model introduced
by Engle (1982) and the generalized (GARCH) models developed independently by Bollerslev (1986).
244
Details of wholesale, Rural Primary and Regulated Markets in Different States/UTs

(As on 31.03.2015) and number of markets per lakh gross cropped area
Number of Markets Regulated Markets
Regulated
Total
Rural Sub markets per
Whole- markets per Principal
States/UTs Primary Total Market Total lakh gross
sale lakh gross markets
Retail Yards cropped
cropped area
area
Andhra Pradesh 190 157 347 4.3 190 157 347 4.3
Bihar 325 1469 1794 23.7 - - - -
Chhattisgarh 2 1132 1134 19.9 69 118 187 3.3
Goa 4 24 28 17.7 1 7 8 5.1
Gujarat 205 129 334 2.7 213 187 400 3.2
Haryana 281 195 476 7.4 107 174 281 4.3
Himachal Pradesh 42 35 77 8.2 10 44 54 5.7
Jammu & Kashmir 0 8 8 0.7 11 0 11 1.0
Jharkhand 201 602 803 48.0 28 173 201 12.0
Karnataka 315 730 1243 10.1 157 356 513 4.2
Kerala 348 1014 1362 52.1 - - - -
Madhya Pradesh 0 0 0 0.0 254 284 538 2.2
Maharashtra 881 3500 4381 18.8 305 603 908 3.9
Odisha 398 1150 1548 30.0 54 382 436 8.4
Punjab 424 1390 1814 23.1 150 274 424 5.4
Rajashthan 446 312 758 2.9 134 312 446 1.7
Tamil Nadu 0 0 0 0.0 277 6 283 4.8
Telangana 150 110 260 4.1 150 110 260 4.1
Uttar Pradesh 584 3464 4048 15.6 250 365 615 2.4
Uttarakhand 36 30 66 6.0 26 32 58 5.3
West Bengal 279 3250 3529 36.7 20 464 484 5.0
N.E States
Assam 405 735 1140 27.8 20 206 226 5.5
Arunachal Pradesh 5 66 71 24.0 0 0 0 0.0
Manipur 24 95 119 31.6 - - - -
Meghalaya 35 85 120 35.0 2 0 2 0.6
Mizoram 7 218 225 197.6 - - - -
Nagaland 19 174 193 38.7 18 0 18 3.6
Sikkim 7 12 19 12.9 - - - -
Tripura 84 470 554 - 21 0 21 -
Union Territories
A & N Islands 0 28 28 115.3 - - - -
Chandigarh 1 0 1 51.2 1 0 1 51.2
D & N Haveli 0 0 0 0.0 - - - -
Daman & Diu 0 0 0 0.0 - - - -
Delhi 30 0 30 84.9 7 8 15 42.5
Lakshadweep 0 0 0 0.0 - - - -
Pudducherry 4 5 9 35.6 4 5 9 35.6
Note: - Based on Information received from various States/UTs Authorities
245
Marketed Surplus Ratio (MSR) and Production Growth of Important Agricultural

Commodities in India
Production growth Marketed Surplus Ratio
(2004-05 to 2013-14) 1999-00 2004-05 2014-15
I. Foodgrains : Cereals
Rice 2.0 60.32 71.37 84.35
Wheat 4.3 54.48 63.33 73.78
Maize 6.4 62.79 76.22 88.06
Jowar -3.8 46.83 53.44 66.64
Bajra 1.6 65.22 69.39 68.42
Ragi -2.8 41.15 57.74 47.60
II. Pulses
Arhar 1.1 62.93 79.52 88.21
Gram 6.5 65.63 93.76 91.10
Urad 4.4 80.91 85.76 85.56
Moong 4.6 70.13 76.79 90.65
Lentil 1.7 59.87 85.86 94.38
III. Oilseeds
Groundnut 0.5 63.34 88.75 91.63
Rapeseed & Mustard -1.1 71.57 89.66 90.94
Soybean 8.0 94.95 94.99 71.00
Sunflower -12.3 99.30 98.32 89.14
Sesamum 1.3 84.45 87.38 93.80
Safflower -26.5 86.80 91.34 100.0-
IV. Other Commercial Crops
Sugarcane 3.7 82.5 98.23 18.94
Cotton 10.3 94.58 94.94 98.79
Jute 1.0 97.5 90.72 98.59
V. Vegetables
Onion 12.9 - 82.91 91.29
Potato 10.6 45.90 85.00 71.51
Source: DACNET & Agricultural Statistics at a Glance
There is a steady increase in the ratio between the output-marketed to output-produced over
the years. However, the marketed surplus may not be finding optimal value and is monetised
at nearby markets which may not have sufficient demand from its consumer catchment.
246
Production & Market Arrivals of Major Foodgrains,

Oilseeds & Vegetables
Production Agmarknet Arrivals Agmarknet Mandi

Commodity during 2016-17 01/07/2016-30/06/2017 Arrivals wrt
(in tons) (in tons) Production (%)
PULSES
TUR 45,98,800 18,98,077 41
URAD 29,26,400 9,60,298 33
MOONG 20,69,600 8,55,729 41
CHANA 90,75,100 19,69,567 22
Sub Total 186,69,900 56,83,671 30
CEREALS
PADDY 10,91,50,000 3,88,28,247 36
WHEAT 9,74,40,000 2,98,48,947 31
MAIZE 2,61,40,000 51,64,929 20
BAJRA 98,55,700 12,81,247 13
JOWAR 47,40,300 3,84,457 8
RAGI 14,30,300 1,28,832 9
BARLEY 25,80,000 3,72,266 14
Sub Total 25,13,36,300 7,60,08,925 30
MAJOR OILSEEDS
GROUNDNUT 76,50,200 12,11,256 16
MUSTARD 79,76,600 25,47,868 32
SOYBEAN 1,40,08,000 54,99,918 39
SUNFLOWER 2,32,300 54,142 23
SAFFLOWER 63,800 3,014 5
NIGER 85,400 7,167 8
Sub Total 3,00,16,300 93,23,365 31
MAJOR VEGETABLES
ONION 216,00,000 129,03,835 60
POTATO 466,00,000 117,94,079 25
TOMATO 197,00,000 36,52,258 19
Sub Total 879,00,000 283,50,172 32
Source: Production of Major Food grains & Oilseeds as per DES 3rd AE 2016-17 and Production of Major Vegetables as
per DAC&FW Hort Stat Division 2nd AE 2016-17
247
Table A1: Number of In-Milk Animals during 2015-16 & 2016-17 (In 000 nos.)
Cattle
States/UTs Non- Non-
Exotic Exotic Crossbred Crossbred Indigenous Indigenous
Descript Descript
2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
2015-16 2016-17
1 Andhra Pradesh 2.4 3.0 913.5 1,038.0 118.8 131.2 727.7 801.2
2 Arunachal Pradesh - 0.6 7.1 7.0 65.2 69.0 - -
3 Assam - - 163.5 154.9 - - 1,309.4
1,155.0
4 Bihar - - 1,104.0 1,162.6 1,941.2 1,976.1 - -
5 Chhattisgarh 4.2 4.4 46.0 47.6 416.4 418.9 759.9 780.5
6 Goa - - 10.3 9.8 - - 8.8 8.3
7 Gujarat - - 806.5 877.3 1,286.3 1,319.0 560.1 581.2
8 Haryana 38.9 40.9 364.9 383.1 127.0 133.0 53.5 55.9
9 Himachal Pradesh 7.7 8.1 404.7 431.0 2.7 3.3 217.4 215.5
10 Jammu & Kashmir - - 505.0 526.4 - - 275.2 281.7
11 Jharkhand 12.5 13.3 147.7 195.4 192.0 224.9 1,179.0
1,259.0
12 Karnataka - - 1,391.1 1,370.7 924.3 886.7 598.9 732.6
13 Kerala 0.4 - 668.1 630.5 2.6 2.0 21.3 19.2
14 Madhya Pradesh 18.4 21.0 428.1 483.1 635.4 700.3 4,218.4 4,363.5
15 Maharashtra 11.9 12.4 1,536.2 1,491.9 332.9 364.8 1,325.1
1,339.4
16 Manipur 1.0 1.0 14.6 14.8 - - 44.7 45.5
17 Meghalaya - - 15.2 15.0 116.7 121.7 - -
18 Mizoram - - 7.6 8.1 - - 3.5 3.9
19 Nagaland - - 28.9 30.3 - - 18.6 17.8
20 Odisha - - 368.1 384.0 193.8 129.5 1,402.4 1,640.9
21 Punjab 114.4 115.8 505.0 513.6 74.7 76.9 22.1 21.4
22 Rajasthan * - - 785.0 721.3 1,445.9 1,710.1 1,592.7 1,868.2
23 Sikkim - 29.4 32.5 0.1 0.8 - - -
24 Tamil Nadu 19.4 29.3 2,424.6 2,587.1 621.5 126.8 - 463.0
25 Telangana 12.0 11.9 192.3 204.7 86.1 90.2 894.9 878.2
26 Tripura - - 30.1 30.4 - - 136.5 141.3
27 Uttar Pradesh 123.6 140.8 1,103.2 1,162.9 3,040.7 3,181.6 1,682.3
1,735.4
28 Uttarakhand 5.8 6.5 215.5 227.8 34.0 35.7 333.7 319.4
29 West Bengal - - 768.5 786.1 2,680.4 2,730.0 - -
30 A&N Island s 2.9 2.8 1.4 1.4 3.3 1.4 3.7 2.4
31 Chandigarh - - 3.4 3.9 - - 0.4 1.2
32 D.& N. Haveli - - - - - - - -
33 Daman & Diu - - 0.2 0.0 - 0.1 - 0.1
34 Delhi - 22.1 23.1 -
35 Lakshadweep - - 0.2 0.2 - - 0.3 0.4
36 Puducherry - - 20.9 21.0 - - 0.6 0.6
All India 375.53 441.05 15036.09 15521.59 14365.58 14432.93 17391.11 18732.7
Continued…
248
Table A2: Number of In-Milk Animals during 2015-16 & 2016-17 (In 000 nos.)
Buffalo
Non- Non- Goat Goat
States/UTs Indigenous Indigenous
Descript Descript 2015-16 2016-17
Buffalo Buffalo
Buffalo Buffalo
2015-16 2016-17
2015-16 2016-17
1 Andhra Pradesh 2,101.7 2,326.1 1,591.4 1,100.6 7 0.33 73.8
2 Arunachal Pradesh 0.4 0.5 - - 0 .00 -
3 Assam 96.1 86.4 - - 497.0 344.7
4 Bihar 2058 .97 2,138.5 - - 3,220.8 3,287.4
5 Chhattisgarh 52.9 59.0 136.8 137.7 612.2 630.7
6 Goa - - 12.6 11.4 3 .17 2.7
7 Gujarat 2,781.5 2,793.6 839.4 907.6 1,776.8 1,844.4
8 Haryana 1,900.8 2,000.9 358.5 372.6 140.6 133.8
9 Himachal Pradesh 141.9 147.5 145.3 133.4 234.4 251.9
10 Jammu & Kashmir 50.9 54.7 187.6 190.8 491.2 515.1
11 Jharkhand 73.2 89.2 187.5 191.1 1,684.5 1,685.3
12 Karnataka 988.0 853.9 710.6 749.0 1513 .8 0 1,348.4
13 Kerala 4.7 5.0 2.3 1.5 508.4 503.7
14 Madhya Pradesh 824.0 893.7 2,879.1 3,048.9 2,786.2 3,176.8
15 Maharashtra 928.6 932 .96 1,268.7 1,218.2 2,727.0 2,658.0
16 Manipur - - 11.5 11.7 - -
17 Meghalaya 2.5 2.0 - - - -
18 Mizoram - - - - - -
19 Nagaland - - 4.2 4.9 19.5 21.9
20 Odisha 29.9 30.7 144.6 149.5 98.2 103 .11
21 Punjab 1,874.5 1,878.9 810.0 811.9 115.2 116.5
22 Rajasthan * 2,766.8 2,899.9 1,818.5 2,040.3 7,513.8 7,404.3
23 Sikkim - - - - - -
24 Tamil Nadu 168.0 157.5 96.0 106.6 2,681.8 2,681.9
25 Telangana 779.9 818.1 1,036.2 1,034.8 154.4 155.4
26 Tripura - - 1.8 1.8 125.2 127.9
27 Uttar Pradesh 8,249.2 8,521.3 2,387.0 2,405.1 4580 .00 4,686.0
28 Uttarakhand 204.6 213.4 251.6 243.0 347.9 357.5
29 West Bengal 120.5 123.5 - - 2,332.1 2,377.4
30 A&N Islands 0.8 1.1 - - 11.5 11.3
31 Chandigarh 12.4 7.3 - 0.0 0.2 0.1
32 D.& N. Haveli - - -
33 Daman & Diu - 0.0 0.3 0.0 0.6 0.1
34 Delhi 95.2 - -
35 Lakshadweep - - - - 13 . 35 13.3
36 Puducherry - - 0.9 1.1 - -
All India 26307.89 27035.39 14882.19 15534.07 34259.99 34513.15
Source: State/UT Animal Husbandry Departments
"-" not received/not available
*estimates are projected on the basis of existing growth rates and previous year estimates due ta non-availability af data Nate: estimated
number of animal of rural and urban area are taken together
249
Table A3: Milk Production during 2012-13 to 2016-17 (numbers in ‘000 tonnes)
SN States/UTs 2012-13 2013-14 2014-15 2015-16 2016-17

1 Andhra Pradesh# 12761.7 13007.1 9656.2 10817.0 12177.9
2 Arunachal Pradesh 22.7 43.4 46.1 50.1 52.5
3 Assam 799.7 814.5 829.5 843.5 861.3
4 Bihar 6844.8 7197.1 7774.9 8288.4 8711.1
5 Chattisgarh 1164.1 1208.6 1231.6 1277.3 1373.6
6 Goa 61.2 67.8 66.6 54.3 51.4
7 Gujarat 10314.6 11112.2 11690.6 12262.4 12784.1
8 Haryana 7040.2 7441.7 7901.4 8381.3 8974.8
9 Himachal Pradesh 1138.6 1150.8 1172.2 1282.9 1329.1
10 Jammu & Kashmir 1630.6 1614.7 1950.9 2273.4 2376.1
11 Jharkhand 1679.0 1699.8 1733.7 1812.4 1893.8
12 Karnataka 5718.2 5997.0 6120.9 6344.0 6562.2
13 Kerala 2790.6 2654.7 2711.1 2649.8 2520.3
14 Madhya Pradesh 8837.8 9599.2 10779.1 12148.4 13445.3
15 Maharashtra 8733.7 9089.0 9542.3 10152.6 10402.2
16 Manipur 80.0 81.7 82.2 79.0 78.8
17 Meghalaya 80.5 82.2 83.0 84.0 84.0
18 Mizoram 13.6 15.3 20.5 22.0 24.2
19 Nagaland 78.7 80.6 75.7 77.0 79.4
20 Odisha 1724.4 1861.2 1903.1 1930.5 2003.4
21 Punjab 9724.3 10011.1 10351.4 10774.2 11282.1
22 Rajasthan * 13945.9 14573.1 16934.3 18500.1 20849.6
23 Sikkim 42.2 46.0 50.0 66.7 54.4
24 Tamil Nadu 7004.7 7049.2 7132.5 7243.5 7556.4
25 Telengana 4207.3 4442.5 4681.1
26 Tripura 118.0 129.7 141.2 152.2 159.6
27 Uttar Pradesh 23329.6 24193.9 25198.4 26386.8 27769.7
28 Uttarakhand 1478.4 1550.2 1565.4 1655.8 1692.4
29 West Bengal 4859.2 4906.2 4961.0 5038.5 5182.6
30 A&N Islands 21.5 14.2 15.6 15.4 16.1
31 Chandigarh 44.0 44.4 44.0 43.2 36.4
32 D.& N. Haveli* 11.0 11.0 8.5 8.5 7.5
33 Daman & Diu 1.0 0.8 0.8 0.8 0.6
34 Delhi* 286.6 284.3 280.1 280.8 279.1
35 Lakshadweep 2.2 6.1 4.2 3.3 3.2
36 Puducherry 47.2 47.3 47.6 48.0 48.3
All India 132430.59 137685.89 146313.55 155490.51 165404.38

*estimates are projected on the basis of existing growth rates and previous year estimates due ta non-availability af data Nate: estimated
number of animal of rural and urban area are taken together
250
Table A4: Estimates of Egg Production during 2012-13 to 2016-17 (numbers in lakh)
SN States/UTs 2012-13 2013-14 2014-15 2015-16 2016-17

1 A&N Islands 741.32 1193.12 861.18 989.10 1032.27
2 Andhra Pradesh # 222973.83 227874.76 130958.24 141743.16 158274.36
4 Assam 4709.58 4717.34 4727.94 4740.48 4770.75
5 Bihar 8371.86 9308.19 9844.95 10021.04 11116.68
6 Chandigarh 170.27 172.69 169.28 166.66 154.12
7 Chhattisgarh 13704.06 14330.30 14731.73 15028.45 16637.69
8 D.& N. Haveli * 73.00 72.99 72.99 72.99 72.99
9 Daman & Diu 20.00 12.98 19.46 17.83 17.83
10 Delhi * - - - 0.00 0.00
11 Goa 457.87 59.67 74.52 352.09 292.19
12 Gujarat 14558.39 15550.74 16564.99 17215.92 17940.34
13 Haryana 42342.66 43590.99 45789.80 49133.39 52139.05
15 Jammu & Kashmir 6715.41 6649.19 4957.63 2309.47 2305.29
16 Jharkhand 4238.95 4444.99 4663.17 4832.84 5103.37
17 Karnataka 36773.33 41300.99 43968.40 47660.42 50671.45
18 Kerala 22375.28 24768.77 25036.11 24424.82 23443.83
19 Lakshadweep 139.99 129.27 125.53 143.91 146.88
20 Madhya Pradesh 8710.78 9671.00 11775.55 14414.28 16939.63
21 Maharashtra 45661.07 48314.57 50792.31 52858.26 54774.17
22 Manipur 1162.19 1163.81 1129.37 1037.40 992.00
23 Meghalaya 1028.18 1049.36 1056.99 1063.66 1063.90
24 Mizoram 352.02 362.31 377.33 391.13 408.07
25 Nagaland 617.98 223.34 352.77 464.52 397.35
26 Odisha 23229.84 23609.35 19245.00 19273.00 19744.74
27 Puducherry 112.89 112.95 113.32 113.50 116.34
28 Punjab 37911.01 43375.57 42642.21 44218.23 47825.57
29 Rajasthan 10334.90 11902.98 13202.01 13852.98 13632.52
30 Sikkim 146.00 99.35 57.53 101.57 68.49
31 Tamil Nadu 119333.55 141235.38 159253.15 161251.99 166823.99
32 Telangana 106185.33 112058.23 118186.35
33 Tripura 1565.17 1794.28 1979.49 2160.84 2294.26
34 Uttar Pradesh 17073.67 18122.15 20775.69 21928.52 22889.49
35 Uttarakhand 3079.14 3369.74 3697.42 3906.51 4119.12
36 West Bengal 47114.91 47460.12 48135.68 60108.19 65536.49
All India 697307.2 747518.8 784838.7 829294.4 881385.8
# Includes Telangana till 2013-14

*estimates on basis of existing growth rates / previous year estimates due to non-availability of data.
251
Table A5: Estimated Egg Production from Commercial Poultry Farms (numbers in lakh)
Desi Desi Improved Improved Desi Desi Improved Improved

SN States/UTs Fowls Fowls Fowls Fowls Ducks Ducks Ducks Ducks
2015-16 2016-17 2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
1 Andhra Pradesh - - 1,33,098.5 1,49,168.0 - - - -
2 A&N Islands 6.4 11.6 250.8 254.0 - - 14.9 18.6
3 Arunachal Pradesh - - - - - - - -
4 Assam - - - - - - - -
5 Bihar - - 220.5 607.0 - - - -
6 Chandigarh - - 163.5 151.5 - - - -
7 Chhattisgarh - - 12,680.7 14,222.9 - - - -
8 D.& N. Haveli - - - -
9 Daman & Diu - - - - - - - -
10 Delhi - - - -
11 Goa - - 285.4 247.0 - - - -
12 Gujarat - - 14,804.1 15,666.7 - - - -
13 Haryana - - 48,996.9 51,994.9 - - - -
14 Himachal Pradesh - - 226.0 384.3 - - - -
15 Jammu & Kashmir - - 126.4 123.2 - - - -
16 Jharkhand - - 2.6 17.8 - - 1.2 6.1
17 Karnataka - - 43,193.8 45,877.3 - - - -
18 Kerala - - 28.0 38.4 3.8 4.6 - -
19 Lakshadweep - - 16.7 17.1 - - - -
20 Madhya Pradesh - - 9,931.3 11,829.9 - - 0.8 0.9
21 Maharashtra - - 40,806.5 43,603.1 - - 0.3 0.6
22 Manipur - - - - - - - -
23 Meghalaya - - - - - - - -
24 Mizoram - - 9.5 10.2 - - - -
25 Nagaland - - 1.2 0.3 0.4 0.1 0.7 0.1
26 Odisha - - 16,614.4 17,042.1 - - - -
27 Puducherry - 2.8 - 2.8 - - - -
28 Punjab 172.8 - 29,357.6 47,264.4 - - - -
29 Rajasthan - - 9,247.9 11,138.1 - - - -
30 Sikkim - - 9.8 7.9 - - - -
31 Tamil Nadu - - 1,55,693.6 1,60,767.8 - - - -
32 Telangana - - 1,04,835.2 1,10,899.9 - - 79.0 81.8
33 Tripura - - 12.0 8.7 - - 1.5 0.6
34 Uttar Pradesh - - 14,751.6 16,021.3 - - - -
35 Uttarakhand - - 3,139.4 3,290.9 - - - -
36 West Bengal - - 12,421.5 16,328.3 - - - -
All India 179.2 14.4 650925.2 716985.7 4.15 4.73 98.29 108.73
Note : estimated production of egg from rural and urban area are taken together
252
Table A6: Estimated Egg Production from Backyard Poultry Farms (numbers in lakh)
Improved Improved Desi Desi Improved Improved

Desi Fowls Desi Fowls
SN States/UTs Fowls Fowls Ducks Ducks Ducks Ducks
2015-16 2016-17
2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
1 West Bengal 29494.9 30353.2 12971.1 13480.7 4742.0 4872.3 478.7 502.1
2 Kerala 8077.2 6017.1 15046.6 16128.1 696.6 693.5 572.7 562.1
3 Maharashtra 10620.8 9784.3 1430.6 1386.1 - - - -
4 Bihar 6780.7 7191.1 2466.2 2714.8 404.7 440.4 149.0 163.3
5 Andhra Pradesh 6442.7 6730.1 1517.0 1663.7 204.0 210.1 480.9 502.5
6 Telangana 5998.8 6001.7 1134.4 1170.3 10.9 11.9 0.0 20.8
7 Uttar Pradesh 3737.3 3699.7 3310.9 3038.9 86.3 90.3 42.5 39.4
8 Tamil Nadu 5558.4 5980.7 - - - 75.5 - -
9 Madhya Pradesh 3703.4 4188.3 778.1 918.1 0.7 2.3 - -
10 Jharkhand 3671.2 3927.6 871.3 868.0 237.5 235.7 49.1 48.1
11 Karnataka 3094.8 3231.5 1371.8 1562.7 - - - -
12 Assam 3278.9 3411.9 136.4 176.8 1204.4 1035.5 120.9 146.6
13 Odisha 2204.8 2238.4 363.1 371.7 87.0 88.7 3.6 3.9
14 Rajasthan 3079.2 2031.9 540.0 462.6 - - - -
15 Chhattisgarh 1788.0 1882.5 498.7 471.6 57.3 57.2 3.6 3.6
16 Tripura 898.1 975.6 768.2 804.7 364.2 382.5 116.9 122.2
17 Gujarat 2411.9 2273.6 - - - - - -
18 Jammu & Kashmir 1693.1 1681.6 449.8 439.5 40.2 60.4 - 0.7
19 Meghalaya 863.7 895.5 175.9 155.7 23.2 12.4 0.9 0.3
20 Manipur 309.8 287.3 475.0 458.6 95.1 91.2 157.5 155.0
21 Uttarakhand 234.1 245.4 533.1 582.9 - - - -
22 A&N Islands 439.0 374.9 178.3 249.2 75.9 69.9 23.9 54.2
23 Himachal Pradesh 275.0 285.8 310.7 288.9 - - - -
24 Punjab 346.2 561.2 14341.7 - - - - -
25 Arunachal Pradesh 283.6 380.0 143.7 115.2 - - - -
26 Mizoram 260.6 265.7 121.1 132.2 - - - -
27 Nagaland 263.4 214.9 159.7 158.0 16.9 14.6 22.4 9.2
28 Haryana 102.6 107.0 33.9 37.2 - - - -
29 Lakshadweep 16.6 16.9 100.3 103.9 2.3 2.1 8.0 7.0
30 Puducherry 57.0 57.0 56.6 53.8 - - - -
31 Sikkim 65.7 60.6 26.1 - - - - -
32 Goa 51.2 34.9 15.5 10.3 - - - -
33 Chandigarh 3.2 2.6 - - - - - -
34 Daman & Diu - - 17.8 - - - - -
35 D.& N. Haveli - - - -
36 Delhi - - - -
All India 106105.6 105390.3 60343.2 48003.9 8349.1 8446.4 2230.7 2340.9
253
Table A7: Estimates of Meat Production {in 000 tons)
Cattle Cattle Buffalo Buffalo Sheep Sheep

SN States/ UTs 2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
1 Andhra Pradesh - - 79.83 87.12 139.26 177.94
2 Arunachal Pradesh 9.48 10.15 1.84 1.66 0.53 0.38
3 Assam 3.16 3.20 0.10 0.11 1.47 1.53
4 Bihar 34.54 32.02 68.31 74.29 1.65 1.87
5 Chhattisgarh - - - - 1.20 1.49
6 Goa 0.04 0.09 - - - -
7 Gujarat - - 1.19 1.33 0.56 0.50
8 Haryana - - - - 6.87 6.63
9 Himachal Pradesh - - - - 0.93 0.99
10 Jammu & Kashmir - - 6.05 6.06 17.19 19.59
11 Jharkhand - - 3.19 2.99 1.32 1.36
12 Karnataka 27.93 41.34 14.94 9.52 28.55 22.59
13 Kerala 146.73 146.05 110.16 106.07 - -
14 Madhya Pradesh - - 23.54 25.78 0.73 0.81
15 Maharashtra 1.82 - 139.86 165.43 11.32 14.97
16 Manipur 8.54 8.65 4.23 4.52 0.10 0.11
17 Meghalaya 23.63 22.63 0.61 0.56 - -
18 Mizoram 4.01 5.07 0.12 0.20 - -
19 Nagaland 11.51 8.50 5.58 4.41 - -
20 Odisha - - - - 16.18 15.52
21 Punjab - - 130.96 124.49 2.84 3.12
22 Rajasthan - - 22.48 24.83 46.03 57.32
23 Sikkim 0.84 1.55 0.71 0.29 - -
24 Tamil Nadu 43.70 43.16 0.99 2.57 36.48 45.23
25 Telangana - - 87.68 96.03 135.36 145.53
26 Tripura - - - - - -
27 Uttar Pradesh - - 846.19 694.64 15.77 17.32
28 Uttarakhand - - 4.05 4.01 2.16 2.22
29 West Bengal 11.56 13.97 16.88 13.94 17.59 17.94
30 A&N Islands 0.09 0.08 0.06 0.05 - -
31 Chandigarh - - - - 0.24 0.21
32 D.& N. Haveli - - -
33 Daman & Diu 0.16 0.17 - - 0.36 0.39
34 Delhi - 41.36 -
35 Lakshadweep 0.04 0.04 - - - -
36 Puducherry 1.55 1.26 0.10 0.09 0.83 0.89
All India 329.34 337.91 1611.01 1450.98 485.52 556.44
Note: estimated production of meat from rural and urban area are token together Source: State/UT Animal Husbandry Deportments
254
Table A8: Estimates of Meat Production (in 000 tons) Contd..

Goat Goat Pig Pig Poultry Poultry
SN States/ UTs
2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
1 Andhra Pradesh 43.16 47.57 2.57 2.08 301.47 317.80
2 Arunachal Pradesh 2.23 2.40 4.87 5.33 0.42 0.57
3 Assam 14 .54 14.60 17.49 18.72 8.00 8.69
4 Bihar 77.74 85.38 72.48 79.38 47.02 53.32
5 Chhattisgarh 9.14 10.86 1.65 2.10 29.39 34.71
6 Goa 3.40 3.33 0.91 0.85 3.53 2.93
7 Gujarat 1.16 1.01 0.23 0.09 30.80 30.41
8 Haryana 6.35 6.24 7.13 6.86 382.45 407 .75
9 Himachal Pradesh 2.37 2.25 0.12 0.11 0.58 1.05
10 Jammu & Kashmir 12.10 14.74 - - 39.74 44.71
11 Jharkhand 17.87 18.71 17.62 19.00 10.71 12.67
12 Karnataka 19.51 28.65 22.13 19.85 83.54 87.12
13 Kerala 19.72 21.17 14.41 6.80 175.02 188 .76
14 Madhya Pradesh 21.28 23.96 1.50 1.67 22.78 26.41
15 Maharashtra 54.98 102.50 17.02 44.66 450.11 517.45
16 Manipur 0.25 0.28 6.61 6.85 6.55 7.06
17 Meghalaya 1.33 1.37 11.39 13.84 4.17 2.61
18 Mizoram 0.09 0.13 7.50 7.37 1.84 2.03
19 Nagaland 0.76 0.67 17.14 17.01 0.94 0.78
20 Odisha 65.01 69.48 8.74 9.14 74.83 82.37
21 Punjab 7.18 8.00 0.86 0.96 108.08 112.07
22 Rajasthan 75.63 73.98 12.87 15.57 22.92 8.40
23 Sikkim 0.08 0.18 0.27 1.01 3.95 1.36
24 Tamil Nadu 48.26 52.24 2.88 2.11 412 .15 427 .53
25 Telangana 53.98 58.30 2.98 3.17 262.06 288.00
26 Tripura 1.65 1.77 11.23 12.43 24.48 25.48
27 Uttar Pradesh 130.78 143.60 90.91 137.06 334.23 353.49
28 Uttarakhand 9.67 10.15 3.13 3.16 8.58 8.86
29 West Bengal 226.24 232.09 30.26 30.78 383.80 397.16
30 A&N Islands 0.10 0.12 0.37 0.48 4.28 4.32
31 Chandigarh 0.45 0.40 0.30 0.33 - -
32 D.& N. Haveli - - -
33 Daman & Diu - - - - - -
34 Delhi 11.08 - 17.37
35 Lakshadweep 0.06 0.06 - - 0.68 0.32
36 Puducherry 4.78 4.94 - 0.01 7.35 7.43
All India 942.91 1041.11 387.55 468.80 3263.81 3463.65
Nate: 1. Meat production from young and adult animals has been considered separately during 2015-16
2. estimated production of meat from rural and urban area are taken together
255
Table A9: Estimates of Wool Production during 2012-13 to 2016-17 (in 000 kg.)
SN States/UTs 2012-13 2013-14 2014-15 2015-16 2016-17

1 Andhra Pradesh# 5030.50 5036.83 778.23 788.63 791.62
3 Bihar 267.45 270.60 278.42 240.16 280.87
4 Chhattisgarh 106.61 105.95 115.53 90.15 87.29
5 Gujarat 2663.96 2578.06 2577.41 2282.65 2267 .32
6 Haryana 1369.96 1390.41 1428.69 702.17 691.22
8 Jammu & Kashmir 7680.61 8709.70 8371.01 6865.65 7265.51
9 Jharkhand 158.89 156.13 160.76 165.82 177.65
10 Karnataka 8019.89 7754.53 8821.44 8191.42 6588.25
11 Madhya Pradesh 442.23 466.34 483.83 442.39 406.22
12 Maharashtra 1502.61 1538.62 1385 .78 1389 .89 1406.65
13 Punjab 557.73 557.73 460.89 472.69 489.64
14 Rajasthan 14007.18 15026.77 14463.36 13414.61 14321.27
15 Sikkim 1.00 1.00 - - -
16 Tamil Nadu 1.09 1.83 1.20 1.36 2.08
17 Telangana 4422.97 4562.41 4658.11
18 Uttar Pradesh 1456.10 1472.55 1493.71 1264.98 1286.10
19 Uttarakhand 399.89 440.14 468.93 513.33 538.24
20 West Bengal 722.08 725.17 740.40 748.47 753.07
All India 46054.87 47908.88 48139.88 43581.34 43544.37
# Includes Telangana till 2013-14
256
Annexure A10
Enforcement of Quality Standards right at Cluster level: Learnings from Global Players
Case example: Thailand

In Thailand, several farm-level accreditation schemes have been in operation. The “Pesticide Safe” vegetable
program, run by the Department of Agriculture, involved inspection and crop testing. Farmers could still use
pesticides and mineral fertilizers but products had to contain pesticide residues lower than the maximum
level set by Codex Alimentarius. The “Hygienic Vegetables” programme is promoted by the Medical
Sciences Department. This places responsibility on the packer for sourcing vegetables with safe pesticide
residue levels. Thailand has now developed the “Q Mark” with the objective of consolidating the various
codes that presently exist. The system of Q standards covers different steps of the supply chain. Q GAP is
for farm-level certification; Q-GMP is for packing plants; while QFood Safety (Q-GAP plus Q-GMP) is for
packers sourcing only from farmers who are QGAP certified
Case example: Malaysia

Malaysia has introduced a commodity branding programme called “Malaysia’s Best.” This is an umbrella
brand for the country’s horticultural products that guarantees quality and safety in accordance with
Malaysian Standards and the Malaysian Good Agricultural Practice System. It was initiated for carambola,
papaya, pineapple, mango and watermelon, but is targetted to be extended to all other commodities. All
farmers can apply to be certified, although initially, most certified farmers are contracted to the Federal
Agricultural Marketing Authority (FAMA) for delivery to supermarkets.
Case example: Indonesia

In Indonesia, the Government has also responded to a lack of quality incentives in the marketing system by
introducing commodity and location-specific certification systems. Prima III is the lowest standard, with
produce required to meet MRLs. Prima II incorporates Prima III and quality attributes. Prima I broadly
complies with Eurep GAP standards.
Case example: New Zealand

The detection of spray residues on New Zealand kiwifruit, was essentially being used as a trade barrier in
some European markets. The New Zealand Kiwifruit Marketing Board (NZKMB) responded in 1991 by
developing a pest management strategy that would enable the production of fruit with no detectable residues.
This IPM program, called `KiwiGreen' focused on pest management and agrochemical issues, was launched
in 1992.KiwiGreen' is an example of the successful development and implementation of an IPM program
across an entire fruit industry. `KiwiGreen' consists of a documented and audited program of pest control
measures that can only be applied in response to a demonstrable need. It was an important precursor to later
developments when this program was broadened to encompass all the principles of IFP that became a major
component within a broader GAP program called the ZESPRI™ System.
Building Export Competiveness

i. Developing Geographical Indication (GI) products in a cluster based model
Geographical Indication (GI) is a sign used on products, that have a specific geographical origin
and possess qualities or a reputation that are due to that origin. In order to function as a GI, a
sign must identify a product as originating in a given place. In addition, the qualities,
characteristics or reputation of the product should be essentially due to the place of origin.
257
Since the qualities depend on the geographical place of production, there is a clear link between
the product and its original place of production.
The unique blue cheese from France is aged in natural caves around the Roquefort-sur-Soulzon
region and protected using geographical indications. Geographical indications have helped the
ancient Georgian wine industry to unlock its potential. The Pinggu district north of Beijing,
China, bills itself as the biggest peach farm in the world, providing employment to over
150,000 people.GI applies also to agricultural and extractive industries and to all manufactured
or natural products, such as “wines, grain, tobacco leaf, fruit, cattle, minerals, mineral waters,
beer, flowers and flour. Since GI applies to products originating from a typical geographical
zone bearing homogenous attributes, farm production at the cluster level would facilitate the
development of new GI products across farm clusters.
ii. Developing clusters with focus on super foods
A super food can essentially be classified as any food item, that contains an extremely dense
concentration of vital nutrients, vitamins and/or minerals, as well as anti-oxidants, good fats,
healthy enzymes, or other healthy properties that help to treat, lower the risk of or prevent
specific diseases and maladies. It has been witnessed that farmers’ income can easily be
enhanced if the production focus is shifted from traditional products to new emerging concepts
of super foods. Hence, it is suggested that a team may be constituted to identify the import
demands of super foods globally and the same may be mapped with the relevant agro zones
towards promoting professional production at large scale, processing, marketing and branding
of the same along with the possibilities of GIs attached to super foods produced in these
clusters. Some of the examples of the super foods include quinoa seeds, drumstick seeds,
moringa powder etc. which are in great demand in the developed country markets.
Suggested modus operandi for implementation
State governments identify a specific agricultural product whose export is to be promoted. The
production of this good or set of related goods would have to be based in a particular area
(ranging in size from a single block to a group of districts) that would become the Agri- Export
Zone (AEZ). The export of the good would then be promoted in a comprehensive fashion by
looking at and assisting all the different processes within the value chain, as well as the links
between them. Assistance on different elements of the cluster can include fiscal incentives as
well as financial assistance for activities such as training, research and development (R&D)
and infrastructure development.
Towards the process of identifying product clusters, ‘one-village-one-product’ similar to the

model used in Japan may be adopted for promoting regional development. Villages or local
areas will be encouraged to concentrate on one value-added and local product, with product
development and marketing assistance being provided. The products will then be sold
nationally and internationally. Thailand, for example, now has a “One-Tumbon-One-Product”
scheme. Spice export villages in Sri Lanka are another example of agglomeration and provision
258
of facilities in specific locations.
Once the product clusters are identified, FPOs can be formed. These FPOs will be a voluntary
alliance of firms with the objective of promoting the goods and services of its members abroad,
and facilitating the export of agricultural products through joint actions. Members of the FPOs
would retain their financial, legal, managerial and commercial autonomy but cooperate to
promote their exports through schemes such as joint marketing, R&D and, in some cases, sales.
They will work as formal institutions and the farmers involved in them will not necessarily
share geographical proximity.
These clusters need to be developed in partnership with private exporters who will have a
natural incentive to promote such clusters. This will be key to ensure surplus produce with
standard physical and quality parameters which meet export demands. The possibility of
developing agri-export SEZs may also be explored, mainly aimed at producing agricultural
commodities for certain countries which are largely dependent on import of agricultural
products. The interest of some countries having substantial gap in domestic availability of
grains, vegetables, fruits etc can be explored for bringing in foreign direct investments into
agri-export SEZ in order to ensure food and nutrition security of the country. There can be
complete buyback arrangements by the countries which are bringing in FDI, thus providing
stable market for Indian exports.
There is increasing demand for organic produce. India too is building credibility in this space
in the global markets. Government may consider policy initiatives for promoting export of
organic produce by keeping then outside the domain of export restrictions such as minimum
export price (MEP) etc.
259
Annexure A11
Tariffs: Bound rates and Applied rate in India
Trade Policy
HS No Item Bound Rate Applied Rate
Export Import
Pulses
071310 Peas* 50 0'
071320 Chickpeas 100 0'
071331 Moong &Urad 100 0'
071340 Lentils* 100 0'
071360 Pigeon Pea* 100 10'
Cereals
1001 Wheat 80 10
1006 Rice 80 80
Oilseed
1201 Soya Beans 100 30
1202 Ground Nuts Shelled 100 30
1205 Rape/mustard Seeds 100 30
1206 Sunflower Seeds 100 10
120740 Sesasum Seeds 100 30
120750 Mustard Seeds 100 30
Edible Oil
1507 Soyabean oil 45 12.5-20
1508 Ground nut oil 300 12.5-20
151110 Palm Oil 300 7.5
151411 Rapeseed/Mustard Oil 75 12.5
170111 Cane Sugar 150 40
*import for value addition & subsequent export under Advance Authorisation Scheme allowed since 14/11/2013
Source: IIFT
Imports allowed through
Prohibited Free
State Trading Enterprise
The import duty or applied rates (AR) are quite insignificant for maby of the commodities. Also in
situations where AR had been raised, there were incidences of under-invoicing done by the importers.
To resolve this issue, duty rates on volume (specific rate of duty) instead of on value (ad-valorem duty),
is used and also bring in transparency in trade. This is applied on some dried fruits. Other major
commodities like apples, pulses and oilseeds can also come in the ambit. The government can evaluate
the duty rate annually, depending on global prices of the commodity. This eliminates managing of the
product import and valuation process and lets the trade compete against each other purely on the basis
of product quality and marketing abilities. To stop related corruption, such a measure is also adopted in
countries like South Korea for sesame seeds and USA for cheese and in EU which has fixed duty on
rice imports at Euro 175 per tonne.
--- X ---
260

DFI Volume 4

Uploaded by

Copyright:

Available Formats

DFI Volume 4

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

DFI Volume 4

Uploaded by

Copyright:

Available Formats

Ministry of Agriculture &

Report of the Committee on

Capturing Value from every Grain, every Ounce,

Document prepared by the Committee on Doubling Farmers’ Income,

Notwithstanding the many faces of challenges, India’s agriculture has demonstrated

12th August, 2017 Ashok Dalwai

--- --- ---

Doubling Farmers’ Income

Contract farming ........................................................................................................................... 31

New Market Architecture ......................................................................57

Integrating the physical, derivatives and input markets .......................................................... 83

Network Project on Market Intelligence ..................................................................................... 137

Status of domestic fish marketing .......................................................................................... 210

Figure 10.3 Managing the export supply chain .................................................................................................. 169

Agricultural marketing as a term, is used to refer to different facets, as an academic study, as a

1 Agricultural Marketing in India, SS Acharya & Agrawal, 6 th Edn 2016

Understanding the market, means comprehensive forecast of demand by locations, compliance

The Agricultural Marketing System refers to other governmental systemic interventions in

A recent addition to the objectives of agricultural marketing, is to contribute to the doubling

3 Report of the National Commission on Agriculture, 1976

Outcomes from Agricultural Marketing

iv. Capital formation and investment in technology: Marketing is no longer a simple

Subsistence to Surplus Food Economy

Role of Marketing in Monetisation

 The flow of agricultural produce, mediated by transportation, storage, processing, etc.

4 Census India, 1961

Monetary exchange can be directed through instrumented arrangements such as vertically

To monetise agricultural products, the marketing system has to be effective, so as to promote

Government’s role in Marketing

Transitions in the Marketing System

Table 1.1 Five major transitionary stages witnessed in Indian agriculture

so as to make the other functions more demand linked and be efficient.

Marketing Effectiveness & Market Efficiency

Effective Marketing System

An effective marketing system is not deterred by operational inefficiencies in the flow of

From perspective of enhancing farmers’ income, to demonstrate the efficiency and

Unified market – a well organised domestic marketing system will integrate by

Increased competitiveness – a vibrant marketing network will create a competitive

Efficient market operations for farm products ensures that8:

Importance of Effective & Efficient Markets – the Cobweb

Figure 2.1 Cobweb relationship

Containing the Inequity

Indicator of Marketing Efficiency

A measure of the efficacy of the

The graph indicates the ratio

Equation 2-1: Natural price dispersion

Crop specific examples of Market Efficiency

9 Economic Survey 2015-2016

Figure 2.3 Price wedges between farmgate and wholesaler

Figure 2.4 Price wedges between wholesaler and retailer

Extracted from Economic Survey of India, 2015-16

Therefore, agricultural marketing, besides having function of managing market information,

Evolution of Agricultural Marketing

emergence of State regulated markets.

Historical Interventions in Agricultural Marketing

Table 3.1 Major Policy Interventions in marketing

Year Major Policy & Legislative interventions

Year Major Policy & Legislative interventions

Year Major Policy & Legislative interventions

Table 3.2 Milk Production and share in market channels