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The entry of private sector in Agriculture Marketing

1. As a step towards liberalisation of agricultural trade, the union government issued an order on 15 February 2002, which removed licensing requirements and all restrictions on buying, stocking and transporting specified commodities, including wheat, rice, oilseeds and sugar. They were further decontrolled after this.
2. Similarly, the dairy sector was liberalised through various amendments to the Milk and Milk Product Order, beginning in 1992. The main purpose of these changes was to allow increased participation by the private sector in marketing agricultural commodities.
3. In response, private-sector investments in the dairy sector have increased, and it has a healthy competition between cooperatives and the private sector.
4. However, the experience of liberalising grain trade has not been very encouraging. The 2002 change in the ECA attracted big domestic and multinational players like ITC, Cargill, Australian Wheat Board, Britannia, Agricore, Delhi Floor Mills and Adani Enterprises to the grain trade.
5. This came after the government had accumulated excessive foodgrain during 2001-03. But soon, the domestic foodgrain demand and supply balance, particularly for wheat, turned adverse and India had to import more than 6 million tonnes of wheat in 2006-07.

Successful Alternative Models of Agriculture Marketing in India

Some other Innovative Marketing Mechanisms

Some innovative marketing mechanisms have been developed in some states, which involve the direct sale of farm produce to consumers, the sale of produce to buyers without routing it through mandis, and group marketing. Many states have attempted to promote direct contact between producers and consumers by making arrangements for sale at designated places in urban areas.

Farm producers’ organisations (FPOs) of various kinds are emerging as a new model for organised marketing and farm business. Such models include informal farmers’ groups or associations, marketing cooperatives and formal organisations like producers’ companies. Producers can benefit from getting together to sell their produce through economies of scale in the use of transport and other services, and raise their bargaining power in sales transactions, while marketing expenses get distributed. This results in a better share of net returns. Such models are particularly required for small farmers to overcome their constraints of both small size and modest marketable quantities.

Organised Retail Outlets: The direct purchase of farm produce by retailers has been steadily increasing with the growth of organised retailing in India. This is expected to accelerate if the entry of foreign direct investment (FDI) to the field is allowed further.

Food World (of the RPG group) is the leader among organised food retail chains, and there are many more such as Fab Mall, Monday to Sunday, Family Mart, More for You, Heritage, Reliance Fresh and Big Bazaar.

Most food chains are regional in nature, having one or two outlets in the main cities, but no big presence outside their states. Rapid urbanisation, urban population growth, increase in incomes and consumer spending, changing lifestyles, and access to technology have been the important factors behind the expansion of food retail chains in India. Despite several factors favouring organised retail trade, it is still in a nascent stage in the country.

Crop Insurance in India

PM Fasal Bima Yojana: An Analysis

The PMFBY is in line with the concept of the ‘one nation one scheme’ theme. The purpose of PMFBY is to remove the shortcomings of the previous agriculture insurance schemes and incorporates the best features of previous insurance schemes. The PMFBY has replaced the National Agricultural Insurance Scheme and Modified National Agricultural Scheme. The PMFBY has been introduced with the following objectives:

1. To provide insurance coverage and financial support to the farmer in the event of crop failure or any natural calamity
2. To stabilise the income of the farmers
3. To encourage farmers to undertake innovative and modern agricultural practices
4. To ensure flow of credit to farmers

Features of the scheme

1. The Scheme covers all Food & Oilseeds crops and Annual Commercial/Horticultural Crops.
2. The scheme is compulsory for loanee farmers obtaining Crop Loan /KCC account for notified crops. However, it is voluntary for other/non loanee farmers who have insurable interest in the insured crop.
3. The scheme provisions have been simplified for easy understanding and the Maximum Premium payable by the farmers will be 2% for all Kharif Food & Oilseeds crops, 1.5% for Rabi Food & Oilseeds crops and 5% for Annual Commercial/Horticultural Crops.
4. The difference between premium and the rate of insurance charges payable by farmers shall be shared equally by the Centre and State.
5. The Scheme shall be implemented on an ‘Area Approach basis’. The unit of insurance shall be Village/Village Panchayat level for major crops and for other crops it may be a unit of size above the level of Village/Village Panchayat.
6. Claims for wide spread calamities are being calculated on area approach. However, losses due to localised perils (hailstorm, landslide & inundation) and Post-Harvest losses due to specified perils, (cyclone/cyclonic rain & unseasonal rains) shall be assessed at the affected insured field of the individual insured farmer.
7. There is no upper limit on government subsidy. Even if balance premium is 90%, it will be borne by the Government.
8. Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. This capping was done to limit Government outgo on the premium subsidy. This capping has now been removed and farmers will get claims against full sum insured without any reduction.
9. The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments.

Table 1: A Comparison of PMFBY and other Insurance Schemes

Source: Report of CAG on Performance Audit of Agricultural Crop Insurance Scheme, 2017

Table 2: Challenges faced by the MNAIS/NAIS and PMFBY

Agricultural Marketing in India

Definition:

In a very narrow sense, Agriculture marketing means delivering farm product from farmers to the final consumers. The National Commission on Agriculture defined agricultural marketing as a process which starts with a decision to produce a saleable farm commodity, and it involves all aspects of market structure of system, both functional and institutional, based on technical and economic considerations and includes pre- and post-harvest operations, assembling, grading, storage, transportation and distribution.

The Broader role of Agriculture Marketing in India.

The prerequisites to attain these goals are:

These conditions cannot come up on their own, particularly in a developing country like India. Therefore, agricultural market policies are treated as an integral part of development policies and their functioning has remained an important part of public policy in India.

Government Intervention in Agriculture Markets

Policy interventions in agricultural markets in India have a long history. Till the mid-1960s, it was mainly meant to facilitate the smooth functioning of markets and to keep a check on hoarding activities that were considered unfriendly to producers and/or consumers.

Subsequently, the country opted for a package of direct and indirect interventions in agricultural markets and prices, initially targeted at procuring and distributing wheat and paddy. This gradually expanded to cover several other crops/products and aspects of domestic trade in agriculture.

The present policy framework for intervention in agricultural markets and prices can be broadly grouped under three categories –

(a) regulatory measures;

(b) market infrastructure and institutions; and

(c) agricultural price policy.

Regulatory Measures

Regulatory measures include development and regulation of wholesale markets in Indian; and, adoption of legal instruments for regulation of agriculture marketing and trade.

Agriculture Produce Marketing Committee Regulation (APMC) Act.

All wholesale markets for agricultural produce in states that have adopted the Agricultural Produce Market Regulation Act (APMRA) are termed as “regulated markets”. With the exception of Kerala, J & K, and Manipur, all other states have enacted APMC Act.

The working of the APMC

The Act is implemented and enforced by APMCs established under it.

1. It mandates that the sale/purchase of agricultural commodities notified under it are to be carried out in specified market areas, yards or sub-yards. These markets are required to have the proper infrastructure for sale of farmers’ produce.
2. Prices in them are to be determined by open auction, conducted in a transparent manner in the presence of an official of the market committee.
3. Market charges for various agencies, such as commissions for commission agents (arhtiyas); statutory charges, such as market fees and taxes; and produce-handling charges, such as for cleaning of produce, and loading and unloading, are clearly defined, and no other deduction can be made from the sale proceeds of farmers. Market charges, costs, and taxes vary across states and commodities.

The Advantages of APMC Act

Besides improving the way markets functioned, the Acts created an environment that freed producers-sellers from exploitation by traders and mercantile capital.

The APMC act in recent years have developed certain inefficiencies, and the opponents have strongly argued to revamp the act as per the needs of the current situations. The main argument for the changes are:

Because of all this, the Inter-Ministerial Task Force on Agricultural Marketing Reforms (2002) recommended that the APMC Acts be amended to allow for direct marketing and the establishment of agricultural markets in the private and cooperative sectors.

The rationale behind direct marketing is that farmers should have the option to sell their produce directly to agribusiness firms, such as processors or bulk buyers, at a lower transaction cost and in the quality/form required by the buyers.

On the recommendation of the committee, the government had come up with a Model APMC Act in 2003.

Model APMC Act, 2003

1. Under the model APMC Act, the private sector and cooperatives can be licensed to set up markets.
2. The model act also provides for contract farming and direct marketing by the private players.
3. Except for few states, all the States and UTs have either fully or partly adopted the model APMC Act.
4. As a result of the model act, the proportion of private trade and contract farming had increased manifold in some part of the country.
5. However, The Model Act, so far, has not succeeded in persuading the private sector or cooperatives to set up agricultural marketing infrastructure as an alternative to the state-owned mandi system.

How the APMC act started benefiting Middleman

Initial situation: When the APMC Act was enacted by various states in the mid-1960s, the country was facing a serious food shortage and desperately seeking to achieve a breakthrough in food production. It was strongly felt that it would not be possible to attain and sustain food security without incentivising farmers to adopt new technology and make investments in modern inputs.

Therefore, high priority was attached to enabling farmers to realise a reasonable price for their produce by eradicating malpractices from markets, protecting them from exploitation by middlemen, and creating a competitive pricing environment. Simultaneously, the hold traders and commission agents had over them by providing credit was diluted by increasing the supply of institutional credit. This, along with technology-led output growth, resulted in increased farm incomes, making farmers less dependent on the trading class for credit and cash requirements. It also gave farmers the freedom to choose markets and buyers for their produce.

The Green Revolution Era: The spread and success of the green revolution during the 1970s and 1980s led to an increase in the political power of the farming class and their clout in policymaking. This was reflected in the creation and strengthening of farmer-friendly institutions and a policy environment favourable to farmers.

Marketing institutions like market committees, state-level agricultural marketing boards and many others in the public and cooperative sectors served the interests of the farming community.

The entry of Middlemen’s Post 1991: Over time, as the country moved closer to food self-sufficiency, public policy began losing its focus. The marketing system and marketing institutions were plagued by inefficiencies, bureaucratic control, and politicisation.

The growth in market facilities did not keep pace with the growth in market arrivals, forcing producers to seek the help of middlemen in the market, which, in turn, led to dependence on them.

There was also a reversal of the credit situation after 1991, making farmers more dependent on commission agents and traders for loans. The trading class quickly regained its marketing power over farmers by meeting their credit requirements with interlocked transactions, robbing producers of the freedom to decide where they would sell and whom they would sell to. Taking advantage of the lax attitude of state governments towards marketing, the trading class consolidated their power in mandis.

Middlemen successfully turned marketing policies to their benefit, dictating terms to producers, and thwarting modern capital from entering agricultural marketing.

Some examples of this are:

1. increasing the commission rates of arhtiyas without any justification;
2. Rejecting direct payment to producers, which would bypass commission agents; and
3. Determining prices through non-transparent methods.

The various problems facing the agricultural marketing system were summarised by the Twelfth Plan Working Group on Agricultural Marketing (Planning Commission 2011).

• Too many intermediaries, resulting in high cost of goods and services;
• Inadequate infrastructure for storage, sorting, grading, and post-harvest management;
• Private sector unwilling to invest in logistics or infrastructure under prevailing conditions;
• Price-setting mechanism not transparent;
• Ill-equipped and untrained mandi staff;
• Market information not easily accessible; and
• Essential Commodities Act (ECA) impedes free movement, storage and transport of produce.

Laws regulating agriculture marketing in India

Essential Commodity Act: Almost all agricultural commodities, such as cereals, pulses, edible oilseeds, oilcakes, edible oils, raw cotton, sugar, gur, and jute, are included in the list of essential commodities.

The Act provides for instruments like licences, permits, regulations and orders for

(a) price control,

(b) storage,

(c) stocking limits,

(d) movement of produce,

(e) distribution,

(f) disposal,

(g) sale,

(h) compulsory purchase by the government, and

(i) sale (levy) to the government.

Agriculture Produce Grading and Marketing Act: The act defines standards of quality and prescribes grade specifications for a number of products. The Act authorises an agricultural marketing adviser in each state to grant a certificate of authorisation to persons or corporate bodies who agree to grade agricultural produces as prescribed by it.

There are AGMARK grade specifications for 212 agricultural products, but the use and awareness of it have remained low despite a better understanding of quality attributes among consumers.

Cropping Systems/ Combinations 

Monocropping: Example Planting Wheat year after year in the same field. Monocropping is when the field is used to grow only one crop season after season.

Disadvantages: it is difficult to maintain cover on the soil; it encourages pests, diseases and weeds; and it can reduce the soil fertility and damage the soil structure.

Crop Rotation: Example Planting maize one year, and beans the next. Crop Rotation means changing the type of crops grown in the field each season or each year (or changing from crops to fallow).

Crop rotation is a key principle of agriculture conservation because it improves the soil structure and fertility, and because it helps control weeds, pests and diseases.

Sequential Cropping: Example- Planting maize in the long rains, then beans during the short rains. Sequential Cropping involves growing two crops in the same field, one after the other in the same year.

In some places, the rainy season is long enough to grow two crops: either two main crops, or one main crop followed by a cover crop.

Growing Crops two crops may also be possible if there are two rainy seasons, or if there is enough moisture left in the soil to grow a second crop.

Intercropping: Examples- Planting alternating rows of maize and beans, or growing a cover crop in between the cereal rows. Intercropping means growing two or more crops in the same field at the same time.

Mixed Intercropping: Distribution of the seeds of both the crops, or dibbling the seeds without any row arrangement. This process is called mixed intercropping. It is easy to do but makes weeding, fertilization and harvesting difficult. Individual plants may compete with each other because they are too close together.

Planting the main crop in rows and then spreading the seeds of the intercrop (such as a cover crop).

Row Intercropping: Planting both the main crop and the intercrop in rows. This is called row intercropping. The rows make weeding and harvesting easier than with mixed intercropping.

Stir Cropping: Example Planting alternating strips of maize, soybean and finger millet. Stir Cropping involves planting broad strips of several crops in the field. Each strip is 3–9 m wide. On slopes, the strips can be laid out along the contour to prevent erosion. The next year, the farmer can rotate crops by planting each strip with a different crop.

Advantages:

• It produces a variety of crops, the legume improves the soil fertility, and rotation helps reduce pest and weed problems.
• The residues from one strip can be used as soil cover for neighbouring strips.
• At the same time, strip cropping avoids some of the disadvantages of intercropping: managing the single crop within the strip is easy, and competition between the crops is reduced.

Relay Cropping: Example- Planting maize, then sowing beans between the maize rows four weeks later.

Relay Cropping the process of growing one crop, then planting another crop (usually a cover crop) in the same field before harvesting the first. This helps avoid competition between the main crop and the intercrop. It also uses the field for a longer time, since the cover crop usually continues to grow after the main crop is harvested.

Cropping Pattern in India

Back to Basics: Cropping Pattern mean the proportion of area under different crops at a point of time, changes in this distribution overtime and factors determining these changes.

Cropping pattern in India is determined mainly by rainfall, climate, temperature and soil type.

Technology also plays a pivotal role in determining crop pattern. Example, the adoption of High Yield Varieties Seeds along with fertilisers in the mid 1960’s in the regions of Punjab, Haryana and Western Uttar Pradesh increased wheat production significantly.

The multiplicity of cropping systems has been one of the main features of Indian agriculture. This may be attributed to following two major factors:

1. Rainfed agriculture still accounts for over 92.8 million hectares or 65 percent of the cropped area. A large diversity of cropping systems exists under rainfed and dryland areas with an overriding practice of intercropping, due to greater risks involved in cultivating larger area under a particular crop.
2. Due to prevailing socio-economic situations (such as; dependency of large population on agriculture, small land-holding size, very high population pressure on land resource etc.), improving household food security has been an issue of supreme importance to many million farmers of India, who constitute 56.15 million marginal (<1.0 hectare), 17.92 million small (1.0-2.0 hectare) and 13.25 million semi-medium (2.0-4.0 hectare) farm holdings, making together 90 percent of 97.15 million operational holdings.
3. An important consequence of this has been that crop production in India remained to be considered, by and large, a subsistence rather than commercial activity.

Factors Determining Cropping Pattern in India

Cropping Pattern in India

30 most important cropping patterns in India

Specific Issues Related to the Cropping Pattern

Horticulture Crops in India

India has made a good place for itself on the Horticulture Map of the World with a total annual production of horticultural crops touching over 1490 million tones during 1999-00.

The horticultural crops cover about 9 percent of the total area contributing about 24.5 percent of the gross agricultural output in the country. However, the productivity of fruits and vegetables grown in the country is low as compared to developed countries.

Vegetable Crops

Vegetable crops in India are grown from the sea level to the snowline. The entire country can broadly be divided into six vegetable growing zones:

Low productivity is the main feature of vegetable cultivation in India as farm yields of most of the vegetables in India are much lower than the average yield of the world and developed countries.

The productivity gap is more conspicuous in tomato, cabbage, onion, chilli and peas. The preponderance of hybrid varieties and protected cultivation are mainly responsible for high productivity in the developed countries.

Constraints in vegetable production:

1. Lack of planning in Production

2. Non-availability of seeds of improved varieties.

3. High cost of basic production elements

4. Inadequate plant protection measures and non-availability of resistant varieties.

5. Weak marketing facilities

6. Transportation limits

7. Post-harvest losses

8. Abiotic stresses.

Indian Agriculture: A brief Outlook

1. Agriculture accounted for 14% of India’s GDP in 2016-17 and provided employment to more than half a billion people. The share of Agriculture in employment is close to 54% as on 2016-17.
2. Indian Agriculture is dominated by the small-scale farming and is characterised by low productivity.
3. The average size of land holding in Indian Agriculture is less than 2 hectares.
4. The low land holding size means that most of the Indian farmer practices subsistence farming, where they consume the majority of what they produce and sell whatever is left.
5. The Indian Agriculture remains the largest employer of the female labour force in India. The share of women labour force out of total women labour force employed in agriculture is close to 65%.
6. The Indian agriculture suffers from the twin problem of low productivity and excess workforce employed in it. Due to which the per capita productivity of workforce is very low.
7. The low productivity results in depressing the wages in the agriculture sector leading to high level of poverty.
8. Agriculture’s importance in India’s Trade is declining, but it still has a share of about 10% in India’s total exports.
9. Compare to the high growth in other sectors of the Indian economy, the performance of the Indian agriculture remains poor due to slow and erratic growth rates. The average growth rate of India’s agriculture over the past decades remains low at less than 2%.
10. At such a low growth rate of the agriculture sector, it is impossible to uplift millions of rural poor out of poverty.
11. The agriculture sector in India has undergone very limited liberalisation. The state still plays a predominant role in the Indian agriculture.
12. Concerns about food security and poverty with respect to the second largest population in the world lead the government to remain strongly involved in regulating India’s agriculture through fixing prices for key agricultural products at the farm and consumer levels, high border protection, bans on or support for exports, and massive subsidies for key inputs such as fertilisers, water and electricity.
13. The Indian agriculture remains one of highly subsidised sector of the economy.
14. Total foodgrains production in India is estimated to be 272 million tonnes in the year 2016-17.
15. The estimated production of key cereals like wheat, rice and pulses will be 96.6 million tonnes, 106.7 million tonnes and 22.1 million tonnes respectively in the year 2016-17.
16. The other major crops grown in India are oilseeds with an estimated production of 33.6 million tonnes, sugarcane at 309 million tonnes, cotton at 32.5 million bales.
17. As per the land use statistics 2013-14, the total geographical area of the country is 328.7 million hectares, of which 141.4 million hectares is the reported net sown area and 200.9 million hectares is the gross cropped area with a cropping intensity of 142 %.
18. The net sown area works out to be 43% of the total geographical area. The net irrigated area is 68.2 million hectares.
19. The sharp deceleration in the growth of the agricultural sector against the backdrop of an impressive growth of the larger economy is widening disparities between the incomes of workers in non-agricultural and agricultural activities.

Role of Agriculture in Indian Economy

• A growing agriculture sector is a prerequisite for the development of India.
• The growing surplus form the agriculture sector is needed to feed the millions of people who live below poverty line and can hardly sustain themselves.
• The agriculture sector has to maintain a very high growth rate of above 4% in order to sustain the pressure of rising population.
• A growing agriculture sector controls inflation because increased food supplies and agricultural raw materials keep the prices down and stable.
• The agriculture sector has an important backward linkage with the industrial sector. The rural consumers are an important source of demand for the industrial goods.

Privatisation of Public Sector Enterprises in India

Privatisation is a process by which the government transfers the productive activity from the public sector to the private sector.

Privatisation offers many advantages.

Methods of Privatisation adopted in India.

Initial Public Offers (IPO).

IPOs are the most favoured method of privatisation followed in the developed countries of Europe and OECD. Under this method, the shares/equity holdings of the PSUs are sold to the private retail investors and institutions like Mutual Fund houses, Pension Funds and Insurance Companies etc.

The prerequisite for the IPOs to be successful is that a country must have a well-developed and well-functioning Capital Market.

The main advantages of the IPO method are:

• It ensures wide participation of retail investors.
• It is likely to face less resistance from the PSUs stakeholders like employees, as the method involves only selling of PSUs shares without any change in the management and policies.
• It can be used to offer shares to the employees.
• The method is best suited when the government wanted to raise financial resources without losing on the management and control of the PSU.

Strategic Sale.

Strategic Sale is a method in which the government decides to sell PSU shares to a strategic partner. The management in all such cases passes to the strategic buyer.

The various advantages of the method are:

• The performance of the PSU is expected to improve as the private player selected will already have an expertise in the management and operation of the PSU.
• The strategic partner will be willing to pay a better price for the PSU as his business interest lies in combining his own business with that of PSU.
• The method helps in infusion of capital and modernisation of the PSUs.
• The method also helps the government in transferring the loss making PSU which could not have been attractive to retail buyers otherwise. The strategic partner will acquire such business as he has the prerequisite skills to turnaround the PSU.
• The method is very important for countries having less developed capital market.

Disadvantages:

Sale to Foreign Firms.

The method is a variant of the strategic sales method where the government decides to sell the PSUs to the foreign firms.

Management and Employees Buy outs.

In this route, management and employees come forward to but the shares and equities of the PSUs.

Disinvestment.

The method is followed in India from time to time. The method involves the sale of the Public sector equity to the private sector and the public at large.

Methods of Disinvestment

There are primarily three different approaches to disinvestments (from the sellers’ i.e. Government’s perspective)

• Minority Disinvestment

• Majority Disinvestment

• Complete Privatisation

1. The Role of Public Sector Enterprises in the Indian Economy.
2. Disinvestment Policy in India.
3. Categories of Public Sector Enterprises: Maharatnas; Navratnas; Miniratnas.