Agricultural Marketing in India

Marketing, Trade, and Aid – Marketing and Marketing Services INDIA

The agricultural marketing system in India operates primarily according to the forces of supply and demand in the private sector. Indian Government intervention is limited to protecting the interests of producers and consumers and promoting organized marketing of agricultural commodities. In 1991 there were 6,640 regulated markets to which the central government provided assistance in the establishment of infrastructure and in setting up rural warehouses. Various central government organizations are involved in agricultural marketing, including the Commission for Agricultural Costs and Prices, the Food Corporation of India, the Cotton Corporation of India, and the Jute Corporation of India. There also are specialized marketing boards for rubber, coffee, tea, tobacco, spices, coconut, oilseeds, vegetable oil, and horticulture.

A network of cooperatives at the local, state, and national levels assist in agricultural marketing in India. The major commodities handled are food grains, jute, cotton, sugar, milk, and areca nuts. Established in 1958 as the apex of the state marketing federations, the National Agricultural Cooperative Marketing Federation of India handles much of the domestic and most of the export marketing for its member organizations.

Large enterprises, such as cooperative Indian sugar factories, spinning mills, and solvent-extraction plants mostly handle their own marketing operations independently. Medium- and small-sized enterprises, such as rice mills, oil mills, cotton ginning and pressing units, and jute baling units, mostly are affiliated with cooperative marketing societies.

In the late 1980s, there were some 2,400 agro processing units in India in the cooperative sector. Of all the cooperative agroprocessing industries, cooperative sugar factories achieved the most notable success. The number of licensed or registered units remained at 232, of which 211 had been installed by March 1988. During the October 1987-September 1988 sugar season, 196 cooperative sugar factories were in production. They produced nearly 5.3 million tons of sugar, accounting for about 57.5 percent of the country’s total production of 9.2 million tons. The National Federation of Cooperative Sugar Factories ( India ) rendered advice to member cooperatives on technical improvement, financial management, raw materials development, and inventory control.

In the early 1990s, the cooperative marketing structure comprised 6,777 primary marketing societies: 2,759 general-purpose societies at the mandi (wholesale markets in India ) level and 4,018 special commodities societies for oilseeds and other such commodities. There were also 161 district or central societies covering nearly all important mandis in the country and twenty-nine general-purpose state cooperative marketing federations. The total value of agricultural produce marketed by cooperatives amounted to about Rs54.2 billion in FY 1988, compared with Rs18 billion in FY 1979. The total value of food grains handled by marketing cooperatives increased from Rs5 billion in FY 1979 to about Rs11.3 billion in FY 1986.

The Indian Ministry of Agriculture’s Directorate of Marketing and Inspection is responsible for administering federal statutes concerned with the marketing of agricultural produce. Another function is market research. The directorate also works closely with states to provide agricultural marketing services that constitutionally come under state purview.

Under the Agricultural Produce (Grading and Marketing) Act of 1937, more than forty primary commodities are compulsorily graded for export and voluntarily graded for internal consumption. Although the regulation of commodity markets is a function of state government, the Directorate of Marketing and Inspection provides marketing and inspection services and financial aid down to the village level to help set up commodity grading centers in selected markets.

By the 1980s, warehouses for storing agricultural produce and farm supplies played an increasing role in government price support and price control programs and in distributing farm commodities and farm supplies. Because the public warehouses issue a receipt to the owners of stored goods on which loans can be raised, warehouses are also becoming important in agricultural finance. The Central Warehousing Corporation, an entity of the central government, operates warehouses at major points within its jurisdictions, and cooperatives operate warehouses in towns and villages. The growth of the warehousing system in India has resulted in a decline in weather damage to produce and in loss to rodents and other pests.

Most agricultural produce in India is sold by farmers in the private sector to moneylenders (to whom the farmer may be indebted) or to village traders. Produce is sold in various ways. It might be sold at a weekly village market in the farmer’s own village or in a neighboring village. If these outlets are not available, then produce might be sold at irregularly held markets in a nearby village or town, or in the mandi . Farmers also can sell to traders who come to the work site.

The Indian government has adopted various measures to improve agricultural marketing. These steps include establishing regulated markets, constructing warehouses, grading and standardizing produce, standardizing weights and measures, and providing information on agricultural prices over All India Radio (Akashvani), the national radio network.

The government’s objective of providing reasonable prices for basic food commodities is achieved through the Public Distribution System, a network of 350,000 fair-price shops that are monitored by state governments. Channeling basic food commodities through the Public Distribution System serves as a conduit for reaching the truly needy and as a system for keeping general consumer prices in check. More than 80 percent of the supplies of grain to the Public Distribution System is provided by Punjab, Haryana, and western Uttar Pradesh.

The Food Corporation of India was established in 1965 as the public-sector marketing agency responsible for implementing government price policy through procurement and public distribution operations. It was intended to secure for the government a commanding position in the food-grain trade. By 1979 the corporation was operating in all states as the sole agent of the central government in food-grain procurement. The corporation uses the services of state government agencies and cooperatives in its operations.

The Food Corporation of India is the sole repository of food grains reserved for the Public Distribution System. Food grains, primarily wheat and rice, account for between 60 and 75 percent of the corporation’s total annual purchases. Food-grain procurement was 8.9 million tons in FY 1971, 13.0 million tons in FY 1981, and 17.8 million tons in FY 1991. Food grains supplied through the Public Distribution System amounted to 7.8 million tons in FY 1971, 13.0 million tons in FY 1981, and 17.0 million tons in FY 1991. The corporation has functioned effectively in providing price supports to farmers through its procurement scheme and in keeping a check on large price increases by providing food grains through the Public Distribution System.