Q2. [Solved] What are the main constraints in transport and marketing of agricultural produce in India (UPSC GS-3 Mains 2020)

By | June 11, 2021

Indian farmers now can sell their produce at the regional market (haat), APMC (agricultural produce market committee), to the government at the minimum support price (MSP). However, all three selling options are marred by several issues. Main constraints in the transport and marketing of agricultural produce in India are discssed below

Problems in Agriculture Marketing

Main constraints

Skewed Risk Distribution:

  • Globally, enhanced food production has changed the market dynamics leading to pressure on prices of our produce. Input costs are constantly on the rise, severely impacting farmers’ incomes, debt repayment capacity and their livelihood.
  • What makes matters worse is that all the risks in the farm-to-market cycle are borne by the farmer — these include, among others, production, storage, and transport risks, outbreak of pests, and price uncertainty.
  • Urgent steps need to be taken to minimize the risk for farmers and distribute the risk equitably across the agro-value chain.

Quality of Produce:

After Green Revolution and with various Lab to Land Programmes we have amplified the quantity of produce but the rising income and standard of life, sanitary and phytosanitary standards, mushrooming of processing industries there is a call for enhancing the quality of produce not only quantity of produce which has restricted the potential of agriculture marketing both at national and international market.

Transaction and Marketing Costs:

 Price spread (is defined as the difference between the price paid by consumers and the net price received by the producer for an equivalent quantity of farm produce) is much higher due to traditional marketing system like APMC, though digital marketing government has been launched to minimize the price spread but in country like India it is a distant dream, as when the overall agriculture market in India would be integrated into one nation one market.

Better Price discovery:

At right time and right place is not streamlined in our country, may be a consumer is paying 80/- per kg of tomato but farmer may be selling to intermediaries at 20/- per kg. So due to in efficient price discovery mechanism agriculture marketing is not efficient as it should be.

Poor Agriculture Logistics:

Storage and transportation of bulky and perishable agriculture produce is an issue. Agriculture marketing cannot be developed until and unless agriculture logistics is developed.

Poor Infrastructure of Agriculture Market:

 Though APMC markets are decades old and every transaction is levied with tax and cess to develop the market infrastructure but still the overall infrastructure is outdated without any sound system.

Main constraints :Consumer Satisfaction

It  is top most priority in any marketing system, with lack of grading, sorting, standardization, hygiene farmers produce fetch less price in international market during export.

Main constraints :Selling at Local Market

  • The supply chain in agriculture is affected by several issues owing to the infrastructure deficit. The lack of cold storage, metalled or pucca road, forces a farmer to go for distress sale.
  • Also, the lack of proper warehousing facilities leads to uncontrolled cycles of excesses and shortages, which in turn leads to price volatility.

Selling To Government at MSP:

  • The government announces MSP for 23 crops but its purchases are limited to only 3 crops. (Wheat, Rice & Sugar).
  • Also, government procurement facilities are not available throughout the country.
  • Due to this, the farmers engaged in dairy products, vegetables, fruits, etc., have no security of selling their produce at competitive prices.

Main constraints :Selling at APMC

  • In most APMCs, buyers have to route all purchases through licensed aadhatiyas (middlemen).
  • These middlemen charge a commission for their “services” — many times, both from the buyer and seller.
  • The aadhatiya is also often a moneylender, supplying seeds, fertilizers and pesticides to farmers on credit. They, then, are forced to sell through him and settle their dues in perpetuity.

Importance of Agriculture Marketing:

  • Agricultural products are perishable; therefore, a failure to sell on-time results in a wasted harvest. All wasted harvest represents a cost of land, water, labour, storage – and no income to show for it.
  • Agricultural prices can be quite variable, impacted by changes in weather and harvests in far corners of the world.
  • For farmers, better marketing can ensure higher prices for the produce, and protection from price fluctuations.
  • Manufacturers want the least cost, best quality produces from the farmer so that he can sell it at competitive, but profitable, prices.
  • Traders and retailers want high quality and reliable supplies from the manufacturer or farmer, at the most competitive prices.
  • Consumers are interested in obtaining high-quality products at low prices.
  • Reduced subsidy burden for government: An efficient marketing mechanism will reduce the need for government procurement at MSP and thus help it in fiscal consolidation.

Steps were taken to improve marketing: to abate Main constraints

  • electronic national agriculture market (eNAM): The government has created eNAM to connect all regulated wholesale produce markets through a pan-India trading portal.
  • e-governance portal AGMARKNET: It facilitates generation and transmission of prices, commodity arrival information from agricultural produce markets, and web-based dissemination to producers, consumers, traders, and policymakers transparently and quickly.
  • Kisan Credit Card scheme: to provide term loans for agricultural needs.
  • Formation and Promotion of FPOs(Farmer Producer Organizations): FPOs will be promoted under the “One District One Product” cluster to promote specialization and better processing, marketing, branding & export by FPOs.
  • Market Intelligence and Early Warning System(MIEWS) Portal: To provide advisories to farmers to avoid cyclical production as well as an early warning in situations of gluts.

Further measures to improve marketing:

  • Promotion of cluster-based organisations.
  • Encourage Public-Private Partnership
  • Promote Direct selling- farm gate model.
  • Use of Artificial Intelligence: It can aid them in a range of decisions on matters pertaining to crop inputs to those related to markets and prices.
  • AgTech startups should be roped in for price discovery mechanism, so that price volatility can be controlled.

Centre recently enacted three agriculture-related legislation, despite agriculture being a State subject, given that trade and commerce fall under the Central jurisdiction. They are:

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020:

Provides for contract farming, under which farmers will produce crops as per contracts with corporate investors for a mutually agreed remuneration.

Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020:

Liberates farmers by giving them the freedom to sell anywhere.

Essential Commodities (Amendment) Act, 2020:

To remove cereals, pulses, oilseeds, edible oils, onion, and potatoes from the list of essential commodities.

Way Forward

  • Promote FPOs in Marketing: Farmer producer organizations/companies should be encouraged to take up direct marketing of their members’ produce to large buyers and processors. It will result in more competition and better prices at APMCs.
  • Integrating Agri-Markets: The government has taken a step in the right direction by creating an electronic national agriculture market (eNAM) to connect all regulated wholesale produce markets through a pan-India trading portal.

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