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 Ind. in. of Agri. Econ.
Vol. 53, No. 3. July-Sept. 1998

SUBJECT II -

AGRICULTURAL MARKETING:ISSUES AND CHALLENGES

Agricultural Marketing in India:

Some Facts and Emerging Issues*
S.S.Acharyat

In a dynamic and growing economy, the agricultural marketing system provides important
linkages between the farm production sector and the non-farm sector(Acharya, 1997c). Apart from
performing physical and facilitating functions of transferring the goods from the producers to con-
sumers, the marketing system also performs the function of discovering the prices at different stages
of marketing and transmitting the price signals in the marketing chain. The issues in agricultural
marketing relate mainly to the performance of the marketing system, which depends on the structure
and conduct of the market. The performance of the marketing system has remained under continuous
scrutiny and t4 government took several initiatives to influence the structure and conduct of
agricultural produce markets. The objective of this paper is to discus,s some key issues of current
interest relating to the structure, conduct and performance of agricultural produce markets in India.
The paper has been divided into five sections. In the first section, a brief review of the current policy
environment within which agricultural markets operate has been presented. Some broad features of
the structure of market for major agricultural products are discussed in Section II. Some concerns
relating to the current stage of agricultural development are identified in the third section. In the
fourth section, we have identified some issues in agricultural marketing which need consideration
for making Indian agriculture mere vibrant and competitive. Concluding observations are given in
the last section.

CURRENT FRAMEWORK

The present structure and framework is the outcome of many years of experimentation in state
intervention.' Based on the objectives, nature of instruments and programmes of intervention and
development, the current framework under which the agricultural produce markets function can be
divided into six components, viz.,(a)regulatory measures;(b) marketing infrastructure;(c) admin-
istered price regime;(d)direct entry of public agencies;(e)export and import regime; and (1) macro
economic policies.

* Keynote paper.
*.* Director, Institute of Development Studies, Jaipur-302 004 (Rajasthan).
312 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

Regulatory Measures

mandatory
The government keeps a watch and monitors the market conduct through several
y framewo rk in India is unique and consists of two distinct sets of mea-
regulations. The regulator
developm ent and regulatio n of primary markets, popularl y called 'Regu-
sures. One of these is the
the second set is the regulatio n of market conduct through a series of legal
lated Markets' and
instruments.
ion of
Regulation of primary markets was taken up as an institutional innovation and construct
of
well laid-out market yards was considered as an essential requirement of effective implimentation
it took consid-
the regulation programme. As the programme was a development-cum-legal measure.
extend it on a wider scale. The program me got momentu m after the mid-sixties and
erable time to
under the market
now, out of 7.169 wholesale markets in the country, as many as 7,001 are covered
62.000 crores were
regulation programme. During 1992-93. agricultural commodities worth Rs.
traded in these wholesale markets.'
cture at the first
Regulated markets are in the nature of physical and institutional infrastru
cture depends on the ex-
contact point for farmers to encash their surpluses. The type of infrastru
level infrastru cture has been
pected scale of arrivals. Out of 7,001 regulated markets. a higher
physical facilities in 4,720. which are
provided in 2,281% which are called yards and a lower level of
primary wholesal e markets, there are
called sub-yards. It may be mentidned here that apart from the
the rural areas where farmers and other rural
around 27,040 locations (haats, shaties or shandies) in
requirements. Of these.
people congregate periodically to sell their surpluses and buy their essential
with needed physical infrastructure so far.
only about 15 per cent are reported to have been provided
under Agricultu ral Produce Market Acts of various
While the primary markets are regulated
by the legal instrume nts promulga ted by the centre.
states, several other activities are regulated
These included the following:
Agriculture Produce(Grading and Marking)Act, 1937,1986.
Prevention of Food Adulteration(PFA)Act. 1954.1964.1976.1986.
Essential Commodities Act, 1955.
Solvent Extracted Oil, Deoiled Meal and Edible Oil(Control) Order. 1967.
Meat Food Products Order. 1973.
Standards of Weights and Measures Act. 1976.
Pulses. Edible Oilseeds and Edible Oils(Storage Control) Order. 1977.
Vegetable Oil Products(Control) Order, 1977.
ies Act. 1980.
Prevention of Black Marketing and Maintenance of Supply of Essential Commodit
The Cold Storage Order, 1964.198 0 (rescinde d in 1997).
Consumer Protection Act. 1986.
Bureau of Indian Standards Act, 1986.
Milk and Milk Products Order, 1992.
Fruit Products Order(FPO). 1955.1997.
n measures. are used
The provisions under the legal instruments. most being consumer protectio
traders and processo rs pertainin g to trading. stocking. , maintenance of
to regulate the activities of
processi ng, blending .and movemen ts. These instrume nts are adminis-
quality, grading, packing,
tered by different Ministrie s and Departme nts.
 AGRICULTURAL MARKETING: ISSUES AND CHALLENGES 313

The futures trading in agricultural commodities is also regulated by the Government. Till
recently, the futures trading was permitted in izur, black pepper, turmeric and hessian. However, in
1993, the Kabra Committee, appointed by the Government of India recommended for permitting
futures trading in 17 major agricultural commodities. The Government has now notified .the intro-
duction of futures trading in cotton, kapas, raw jute and jute goods; all major oilseeds and their oils
and cakes; rice bran oil; and coffee.

Marketing Infrastructure

The second component which affects structure, condua and performance of the marketing
system is the physical and institutional infrastructure. Adequate infrastructure is important not only
for the performance of various marketing functions and expansion of the size of the marker but also
for transfer of appropriate price signals leading to improved marketing efficiency. Creation of physi-
cal infrastructure is a capital intensive activity with long pay back period. The government, there-
fore, had to take an active stance in the expansion of market infrastructure. Apart from the construc-
tion of well laid out yards and sub-yards in the primary markets, considerable public investment
went into the creation of storage, transportation and communication facilities. The scientific storage
capacity which was negligible at the time of Independence went up to 391 lakh tonnes at the end of
March 1996. Between 1950-51 and 1996-97, the length of surface roads went up from 1.6 lakh km
to 12.0 lakh km, the number of goods carriers went up from 0.8 lakh to 18.0 lakhs, route length of
electrified railways increased from 0.4 lakh km to 12.7 lakh km and the haulage of goods by railways
went up from 44 billion tonnes km to 277.6 billion tonnes km.The increase in telephones, telegrams
and postal facilities has been even more sharp both in terms of quantity and quality.
These apart, there was considerable expansion in the infrastructure for grading of agricultural
commodities. While for export goods, the grading according to prescribed standards has been com-
pulsory. for the commodities sold in the domestic market, grading has remained voluntary. The
Directorate of Marketing and Inspection (DMI) has established a network of central and regional
laboratories for certification of 157 commodities under AGMARK.The State Governments were also
encouraged to establish such laboratories. There are now 700 laboratories and 400 authorised pack-
ers for AGMARK productsArr cotton growing areas, cotton grading centres have been .established.
The grading of farm products at farm/producer level before sale is also being encouraged. For this
purpose. grading facilities have been created at 1,014 markets.
Agro-processing industry provides a ready market for agricultural rawmaterials such as cotton,
jute. sugarcane. oilseeds. pulses and several others. Since 1991, along with other industries. agro-
based industry has also been liberalised to a great extent. A recent development in this regard is the
delicensing of sugar industry. An important segment of agro-based industry is the food processing
sector. Recognising that a strong food processing sector plays a significant supporting role in
promoting diversification. value addition, employment generation and expansion of markets for
farm products. the expansion of this sector is being encouraged through liberalisation and invest-
ment promotion. The rice milling industry has been delicensed. The licensing for setting up of new
roller flour mills and expansion in the existing capacity has been abolished and pricing and distri-
bution of wheat products decontrolled.
314 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

ucture has been created.

Apart from the physical infrastructure, a strong institutional infrastr
into co-operatives, public
Depending on the objectives and the role, the institutions can be grouped
evolved into network s linking na-
sector organisations and statutory bodies. Most of these have
tional level organisations with the grassroot level units.'

Administered Prices
e in agricultural, produce
The second set of instruments used by the government to interven
tered prices and making arrangements for
markets consists of fixation and announcement of adminis
currentl y in vogue includes (a) minimum
their implementation. The administered price regime
cereals, four pulses, eight oilseeds, copra, raw
support prices (MSP) for 23 commodities (seven
m prices for sugarca ne; (c)levy prices for
cotton, raw jute and VFC tobacco);(b) statutory minimu
wheat and coarse cereals for sale under public
rice and sugar; and (d) central issue prices for rice,
m price support policy is to reduce price uncertainty
distribution system. The objective of minimu
to adopt new technol ogy and increase the production of
faced by the farmers and to induce them
d to be announc ed before the sowing season and made
agricultural commodities. These are expecte d to the
of the country. ' A statutor y status has been assigne
uniformly applicable in all the regions a view to
the buyers of sugarca ne are sugar factorie s. With
minimum support prices of sugarcane as these
at reasona ble prices, the Govern ment of India supplies
providing staple cereals to consumers
-determ ined prices which are called central issue prices.
cereals to State Governments at pre

Direct Intervention
agencies in the market with a view
The third set of instruments consists of direct entry of public
entry in the market has taken various,
to influencing its structure, conduct and performance. Direct
ance of stocks of rice and wheat;
forms. Some of these, which are currently in vogue include mainten
market prices; and open market
rationing and distribution of cereals and sugar at prices lower than
both buffer and operational stocks.
operations. The stocks maintained by the government include
from millers at prices derived from the
The stocks of rice are built up by procuring rice on levy
agencies from the paddy pur-
minimum support prices of paddy. The rice obtained by the public
In the case of wheat, the stocks
chased at the minimum support price also adds to the public stocks.
r,in some years when the stocks of
are built up mainly by price support purchase operations. Howeve
the grains are imported to replen-
wheat deplete to the levels below the minimum prescribed norms,
ish the stocks to the minimum levels.
a part of the cereals required by
The public distribution system (PDS) has been used to supply
Sugar, collected through levy on
the consumers at prices considerably lower than the market prices.
the PDS at below market prices.
sugar factories, is also distributed to the ration card holders through
State Governm ents also resort to purchase of
Apart from the Central Government's operations, some
consume rs under the PDS. In West Bengal, the
these cereals from the market for distribution to the
g scheme for rice and wheat in Calcutta.
State Government is implementing a statutory rationin
trade is not allowed to deal in rice and wheat.
Under the provisions of this scheme, the private
the governm ent also interven es directly in the markets in
Apart from buffer stocking and PDS,
 AGRICULTURAL MARKETING: ISSUES AND CHALLENGES 315

some other forms. Open market sales of wheat and rice are undertaken during specific periods and
kept limited to pre-decided quantities. The State Government in Maharashtra purchases entire kapas
sold by the farmers under its monopoly purchase scheme. The traders are thus not allowed to operate
in raw cotton market within Maharashtra. The other form of intervention in this category is the
market intervention scheme(MIS)of the Union Agricultural Ministry. The MIS is applicable to the
commodities not covered by the minimum price support scheme. The objective of MIS is to provide
price support to the farmers but it is not a regular or recurrent operation. The open market purchase
operations are also undertaken by Cotton Corporation of India, National Agricultural Co-operative
Marketing Federation (NAFED), Jute Corporation of India, and state-level federations. Apart from
The direct entry of public agencies in agricultural produce markets, the government has also pro-
moted farmers' co-operatives for undertaking marketing functions on behalf of the farmers. The co-
operatives have played an important role in influencing the structure and conduct of markets for a
few commodities in specific regions.

External Trade Regime

The policies relating to exports and imports affect the performance of the marketing system by
influencing the average level of prices and inter-crop price ratios in the domestic market. Till the end
of the eighties,imports and exports of major.agricultural commodities were kept restricted. The trade
flows were generally residual in nature and controlled through quantitative restrictions and canali-
sation. Since 1991, the trade policy regime has undergone considerable changes. Canalisation has
been almost abandoned. Negative lists of both imports and exports have been pruned. In the EXIM
policy for the period 1997-2002, most of the important agricultural commodities have been deleted
from the negative lists of imports and exports. The agricultural commodities which do not appear in
the negative list are exportable without restrictions and importable under open general licence
(OGL). The import duties on major commodities have been brought down considerably. For ex-
ample, raw cotton is importable without duty. The duty on imports has been reduced to a negligible
level of 5 per cent for pulses and 10 per cent for edible oils. Recently the imports of soyabean and
-sunflower seeds have been placed under OGL.

Fiscal and Monetary Policies

Another important set of factors that affect the performance of agricultural marketing system
relates to fiscal and monetary policies. The taxes imposed by the government affect the cost of
performing various marketing functions and add to the cost. For example, the mandi fee, purchase
tax, rural development cess and other taxes imposed by the State Governments become important
components of the marketing cost. The rates of such levies increase the returns to evasion. With the
evasion offormal marketing channels,even the statistics on market arrivals gets distorted. Further, as
the public or co-operative agencies are not able to evade formal marketing channels, the comparison
of costs of marketing in alternative channels becomes difficult.
The interest rates comprise an important component of marketing cost. These influence the
investment in marketing facilities and activities. In recent years, the interest rate regime has been
316 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

liberalised. The Reserve Bank of India had been applying selective credit controls on trade in
agricultural commodities as a part of its credit policies announced from time to time with a view to
encouraging/discouraging stocking and/or hoarding of farm products. Credit controls, however,
were withdrawn in 1996.

II

SOME STRUCTURAL ASPECTS OF AGRICULTURAL MARKETS

The conduct and performance of the market depend on the structure which varies from commod-
ity to commodity. Notwithstanding the direct intervention by the government, the markets for
one
agricultural products in India have remained dominated by the private sector. According to
of agricultura l produce handled by the governmen t agencies has been not
estimate, the quantity
cent of the total value of marketed surplus. Further, around 10 per cent of the
more than 10 per
of the mar-
marketed surplus was handled by the co-operatives (Acharya, 1994). Thus 80 per cent
of agricultura l products in India is handled by the private trade. Even in the case of
keted surplus
surplus of
cereals, the share of private trade is quite large and increasing. Of the estimated marketed
ending (TE) 1982-83
cereals, the share of private trade which was 72.5 per cent during triennium
of 57.4 million tonnes
went upto 74.0 per cent during TE 1996-97. Out of the incremental output
agencies was around 8
between TE 1982-83 and TE 1996-97, the quantity handled by the public
private trade, the size and
million tonnes. With larger quantities required to be handled by the
structure of the market have considerably expanded.
retailers.
The trade in foodgrains is handled by.around two million wholesalers and five million
shops, of which nearly three-fourt hs
In the area of retailing, there are more than 4.10 lakh fair price
On an average, there is one retail shop of foodgrains
are in the private sector, operating under PDS.
also enter the
for a population of 200. Apart from traders, processors play an important role as they
case of paddy/rice, there are 91,801 hullers, 4,538 shellers,
market as bulk buyers and seller.s. In the
rice mills, which process the entire output of around 120
8,365 huller-cum-sellers and 34,688
market, the roller flour millers command considerab le share of
million tonnes of paddy. In the wheat
now 812 roller flour millers who buy, process and sell 10.5 million
total quantity handled. There are
tonnes of wheat and wheat products. Out of the total output of pulses, nearly 75 per cent is processed
now more
in the organised as well as unorganised sector. The number of organised pulse(dal) mills is
than 10,000.
Nearly 98 per cent of the fruits and vegetables produced in India are traded as fresh products.
the
The commercial processing segment accounts for only 1.8 per cent of the total output. Though
has gone up to 19.1 latch'. tonnes, due to the seasonality in production and lack
processing capacity
of farmer-processor linkages, only half ofthe capacity is being utilised.
urbanisa-
The food processing sector is assuming increasing importance owing to the increased
is only 10
tion and rise in the income levels. Of the total Indian food market the processed segment
segment. The food
per cent,. semi-processed 15 per cent and remaining 75 per cent is fresh food
The organised processing
processing in India is presently dominated by the unorganised sector.
The processing
sector comprises 18,000 units producing Rs. 9,000 crores worth of processed foods.
 AGRICULTURAL MARKETING: ISSUES AND CHALL
ENGES 317

segment of the food market is growing rapidly and projec

ted to increase by 200 per cent by the year
2005 with high investment potential which is being
placed at Rs. 1,40,000 crores. The segment is
attracting massive inyestment and since July 1991, severa
l ventures in the private, joint and co-
operative sectors, some with foreign collaboration and
100 per cent export oriented units, have been
approved, sanctioned or commissioned.
The market structure for meat includes 3,600 slaugh
ter houses, six modern abattoirs and 25
meat processing plants, besides several poultry dressi
ng units. There are 104 licencees functioning
under the Meat Food Products Order, 1973. The
structure of the processing capacity needs to be
examined in relation to the total meat output in the count
ry which is estimated at 3.9 million tonnes.
Oilseeds and vegetable oils constitute another impor
tant segment of the Indian agricultural
markets. The oilseed processing industry -consists of
mechanical crushing and solvent extraction
units. The mechanical crushing units include 20,000 expell
ers and 1,31,600 cottage level crushers
(ghanies). The number of solvent extraction units is 761.
In addition, there are 130 oil refining and
145 hydrogenation units. The capacity utilisation of the
industry is less than half. One important
structural change observed in oilseed processing sector
is that the share of cottage level units in the
total volume of crushing is going down. The capacity
utilisation in cottage units is reported to be
around 10 per cent whereas it is 30 per cent for expellers,
34 per cent for solvent extraction units,50
per cent for oil refining and 37 per cent for hydrogenation
units.
Some preliminary information,presented here indicates some
general features of the agricultural
produce markets, viz.,(a)the market size is already large
and expanding;(b)it is dominated by the
private sector;(c) by and large, unorganised segment is much
larger than the organised sector and
the share of organised sector is increasing; and(d)despite
the market being large,due to infrastructural
bottlenecks coupled with geographically dispersed marke
t Places, the possibilities of localised
monopolies or oligopolies cannot be ruled out.

III

CURRENT CONCERNS IN AGRICULTURAL DEVELOPMEN

T

The basic issues in agricultural marketing and related polici

es flow from the emerging needs of
the. agricultural sector and in turn of the economy. As
is well known, the creation of a conducive
marketing environment was considered as one of the three
components of agricultural development
strategy launched in the country during the mid-sixties.
The outcome of the strategy in terms of
perceptible improvement in food security is well docum
ented (Vyas, 1987; Tyagi, 1990; World
Bank, 1991; and Acharya, 1994, 1997a, 1998a). The count
ry not only achieved self-sufficiency in
cereals but even some surpluses have started emerging. It
has also been shown (Acharya, 1997a,
1997d) that the inter-year variability in.the availability of cereal
s from domestic sources declined
and the physical access of the masses to food increased. Even
the economic access to cereals im-
proved as the real prices of staple food particularly rice
and wheat have continued to decline.
Further, with the improved availability of staple cereals at
declining real prices, the farmers in
several regions diverted the resources from low yielding coarse
cereals to other crops which helped
in increasing the output of oilseeds/edible oils, cotton,
sugarcane, vegetables, fruits, spices and
318 INDIAN JOURNAL OF AGRICULTURAL ECONOMIcS

ation in the net barter terms of

condiments. Along with these, it has also been shown that the deterior
s got arrested in the second
trade for the agricultural sector which had set in during the early,seventie
d somewha t during the nineties. Thus the agricultural marketing and
half of the eighties and improve
improvement in the physical and
price policy subserved the objectives of self-sufficiency in cereals,
the cropping pattern consistent
economic access of the masses to food, and needed diversification of
and dryland regions. Neverthe-
with the emerging pattern of demand and development of backward
addressed in the coming decade
less, there is no room for complacency. The issues which need to be
are easily discernible.
commodities need to be acceler-
(0 The growth of production of foodgrains and other agricultural
of the economy. Further, the
ated for further improvement in food security and balanced growth
tion of growth in productiv-
growth of production in future will entirely depend on the accelera
ment for farmers to induce
ity which calls for, inter alia, creating a favourable marketing environ
yield-enhancing assets on the
them to upgrade their production technologies and invest in
on areas decelerating, the
farms. Moreover, with the growth of productivity in green revoluti
areas, the physical and
attention would need to be given to hitherto left-out areas. In these
the needed price signals.
institutional marketing infrastructure continues to be weak to transmit
product and only a marginal shift in
(ii) Given the declining share of agriculture in gross domestic
the widenin g of the gap in the
the population dependent on agriculture to the non-farm sector,
y would need to be not only
per capita incomes between the farm sector and rest of the econom
ure and rural areas.
arrested but even reversed for attracting larger investment in agricult
the poverty line, which sug-
(iii) A considerable part of the population continues to remain below
populati on to food, the options
gests that for continued economic access of these sections of the
trade for the agricultu ral sector are
of allowing food prices to go up for improving the terms of
limited.
have continued to remain devoid of
(iv) Nearly two-thirds of the gross cropped area in the country
irrigation facilities resulting in considerable inter-year variatio ns in output, employment and
incomes of the people in the dryland and rainfed areas. Since the mid-eighties, the availability'
coupled with conduci ve marketin g policies had led to
of better technologies for dryland crops
oilseeds and helped in improvi ng the farm economy
a considerable expansion in the area under
inter alia, be necessar y to create better marketing
in these regions. For these areas; it would,
cereals and other non-foo d high value crops which are
environment for oilseeds, pulses, coarse
predominantly grown under unirriga ted conditio ns.

Iv

SOME I§SUES IN AGRICULTURAL MARKETING

and the need to make

Keeping in view the emerging concerns in agricultural development
in agricultural marketing which
agricultural sector more vibrant and competitive, the key issues
require attention can be grouped as follows:
A. Trade Policy for Major Farm Products.
B. Price Policy Instruments and Direct Market Intervention.
 AGRICULTURAL MARKETING: ISSUES AND CHALLENGES 319

C. Marketing System Improvement.

Trade Policyfor Major Farm Products

The trade policy for farm products in India is increasingly being liberalised. As trade flows have
considerable effect not only on the average level of prices but also on the relative prices in the
domestic market, there is a need to dovetail the trade policy with the domestic price policy. Even
within the framework of agreement under World Trade Organisation (WTO), there is considerable
space to achieve this. The issues in trade policy now revolve around degree of liberalisation of
exports and levels of import tariffs rather than on quantitative restrictions. Though the world market
in farm products has continued to remain distorted, the evidence so far indicates that the country has
a comparative advantage in exporting rice, raw coiton and wheat. No doubt, while freeing the
exports, the implications for the domestic price level cannot be ignored. But, it has been shown that
in the case of these commodities, the domestic price policy considerations also warrant allowing
some quantities for export on a regular basis (Government of India, 1997b). However, the export
poliOy for these commodities so far has continued to be ad hoc in nature. It may be mentioned that
an ad hoc policy which is formulated and announced on month to month basis is not conducive to
the improvement of the quality to international standards and developing our own markets by
establishing the country as a reliable supplier. Such a policy, which is announced after the peak
arrival period is over, also does not help the farmers in realising a better price. In the matter of
imports, the most contentious issue relates to level of tariff on edible oils and pulses. As these crops
tre grown generally in rainfed and unirrigated regions, low tariffs on imports of these commodities
are bound to adversely affect the relatively poor farmers. Keeping these considerations in view, it is
being argued that it will be in the overall interest of the country to permit regular export of one to two
million tonnes of rice and wheat and raise the level of lariff on imports of pulses and edible oils to 40
and 70 per cent respectively (Acharya, 1997b, 1997d, 1998b).

Price Policy Instruments and Direct Market Intervention

Though there has been considerable change in the extent and form of intervention in recent
years, there is a need for a fresh look at some of the instruments because(a)the production of several
agricultural commodities has increased upto reasonably satisfactory levels;(b) while the industry
and other sectors of the economy have been considerably liberalised, the farm sector cannot remain
insulated from the rest of the economy, otherwise it may harm not only the farm sector but in turn
even the whole economy; and(c) with the liberalisation of external trade in farm products, unless the
domestic market is liberalised first, the gains of trade liberalisation may not reach the grassroot level.
These coupled with the emerging concerns in agricultural development call for the following:

(I) Phasing out of irrelevant instruments

Some of the instruments which were launched in a scarcity syndrome have lost their relevance.
In this context a case has been made out for phasing out the following provisions which impinge on
the efficiency of the domestic market (Acharya, 1997b, 1998a):
320 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

(i) Levy on sugar factories,

(ii) State monopoly in raw cotton market in Maharashtra,
(iii) Statutory rationing of rice and wheat in Calcutta,
(iv) Stocking limits imposed under the Essential Commodities Act, particularly during the
peak arrival period,
(v) Public distribution of sugar at below market prices,
(vi) Public distribution of rice and wheat to non-poor families,
(vii) The system of state advised prices for sugarcane currently in vogue in Bihar, Uttar Pradesh,
Punjab and Haryana.
Further, it is being argued that for deriving the gains or minimising the burden from trade
liberalisation, these structural changes in the domestic market should precede the trade policy
changes(Acharya, 1998c).

(2) Minimum price support

The machinery and system for effective implementation of the policy of minimum support
prices which is currently in vogue for 23 commodities should be strengthened. The experience
shows that while in most of the surplus producing regions, the State Governments and their agencies
remain activc. for effective implementation of the policy of assuring minimum support prices, in
those areas where the need for price support arises only once in two or three years, the public
agencies have not been able to provide effective support to the farmers as they could not tie up with
the central nodal .agency for making necessary purchase arrangements in time. Such failures on the
part of the state agencies lead to a setback to the production programmes. Most of the upcoming
cereal producing regions like Eastern Uttar Pradesh, Madhya Pradesh, West Bengal, Orissa, Bihar
and parts of other states are likely to experience such situations more frequently. And these are the
areas.where there is considerable scope for increasing the yield levels. It is in this context that for
accelerating the production of foodgrains and other agricultural commodities, not only the market
infrastructure needs to be strengthened but the price support policy also needs to be effectively
implemented in all the regions of the country.

(3) Price supportfor other crops

There are several commodities which have not been included under the minimum price support
policy as they occupy small proportion of the gross cropped area in the country. At the regional
level, however, these crops are of considerable importance. For these crops, the need for price
support does not arise every year in all the regions. However, once in two or three years, owing to a
good harvest, the prices crash and as a consequence, the tempo of increasing their production gets
thwarted. The Market Intervention Scheme(MIS)of the Government of India is intended to provide
price support in such cases. However,this instrument has not been used at a required scale. The crops
for which this type.of support is best suited include onion, potato, chillies, cumin,coriander, isabgol,
fenugreek, saunf, azwain, turmeric, garlic, moth and guar. Keeping in view the flexibility in MIS as
compared to that in the policy of MSP,there is a need for effective use of this instrument so long as
the inter-year fluctuations in output continue to be wide (Table 1).
 AGRICULTURAL MARKETING: ISSUES AND CHALLENGES 321

TABLE I. DIFFERENCE BETWEEN MINIMUM PRICE SUPPORT POLICY AND MARKET INTERVENTION SCHEME

Particulars Minimum price support policy Market intervention scheme

(1) (2) (3)
Commodities Fixed(23+1) Not fixed
Regularity Regular every year Not regular, ad hoc
Support prices Decided by Union Government Decided jointly by Union and
on the recommendations of CACP individual State Government
Quantum of support purchases All which is offered by the farmers Pre-decided,limited quantities
Applicability Throughout the country Specified limited markets
Time of operation Throughout the year Specified period
Incidence of losses, if any Union Government Equally shared between state
and Union Government
Infrastructure required for Large scale Limited scale
implementation

(4) Buffer stocking

The policy of maintaining buffer stocks of foodgrains is being questioned in some circles owing
mainly to the cost involved in carrying these stocks. In this connection, it may be mentioned that
the
cost of carrying buffer stocks in India has remained around 29 per cent of the economic cost at
the
godown (Acharya, 1997a). As against this, the private trade would carry foodgrains from one year
to
the other only if it is assured of a return of 35 per cent (Tyagi, 1990). Further, the buffer
stocks of
foodgrains have played a positive role in stabilising returns to the farmers in the face of fluctuations
in production by preventing a fall in the prices to unremunerative levels during the
years of bumper
production and checking undue price rise even during the years when domestic output declined
very sharply (Krishnaji, 1991). Due to countervailing role of the policy of buffer stocking,
the inter-
year fluctuations in prices reduced considerably (Vyas, 1987).-There has also been a.
decrease in
intra-year price rise from the peak marketing period to the lean seasons (Bhalla et al.,
1989). Not-
withstanding the advantages and compulsions of maintaining buffer stocks of staple
cereals and
considering that the inter-year fluctuations in output have tended to decline, the size of
the buffer
stock necessary to stabilise the availability of these grains needs to be reviewed every five
years.
(5) Input marketing: The question ofsabsidies
An important issue. which affects the farmer's net realisation from his surpluses, pertains
to the
prices of purchased farm inputs. The administered prices of fertilisers and user
charges for canal
irrigation and electricity for irrigation and associated subsidies have remained a matter of
debate for
quite some time.' It has been separately argued that the gains of farm input subsidies
are widely
shared by all the sections of the society. On the issue of the erosion of the capacity of the
government
to finance public investment in agricultural and rural infrastructure, it has been
suggested that
322 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

resources can be found by reducing implicit or hidden and explicit subsidies or leakages in the non-
farm sector where the costs of withdrawal and tightening are much less. The subsidies in the non-
farm sector are many times more than the aggregate subsidies on farm inputs. In recent years, in the
wake of liberalisation, the leakages in revenues have considerably multiplied which alone perhaps
exceed the total subsidies in the farm sector on critical inputs, which in fact, are not subsidies to the
farmers. For example, according to some reports, under the Duty Exemption Entitlement, import
duty valued at Rs. 1000 crores has been evaded on a single item by under-invoicing imports and
over-invoicing exports from a single port during 1992-97. Further, there are several cases of excise
duty evasion. The small scale industrial units have been granted exemption in excise duty accord-
ing to the scale of turnover. As the rate of duty payable by them is inversely related to their annual
turnover, several units tend to under-report their turnover to save excise duty. Several such examples
are available for other sectors also.

Marketing System Improvement

(1) Marketing margins and costs

One of the most important issues which affects all the stakeholders is the efficiency of the
system. Obviously, it has received considerable attention of the researchers. Out of 330 studies on
marketing aspects of agricultural commodities in India during the last ten years, nearly half focused
attention on analysing marketing costs, margins and farmer's share in the consumer's rupee.' The
scholars compared the efficiency of alternative channels of marketing or agencies selected by the
farmers for sale of their surpluses. These also include the comparison of net price received by the
farmers for sale in the market yards and villages and to co-operatives or private traders. Some studies
have also reported the change in the situation over time. No doubt such studies provide useful
information at the micro level, their results are not comparable because of the differences in the
market segment covered by them.7 The concept of marketing efficiency is so broad and the market-
ing systems so diverse that no single approach to the assessment or comparison of marketing effi-
ciency can prove satisfactory (Acharya and Agarwal, 1998).
Given the overall demand and supply situation, the prices received by the farmers and those
paid by the consumers depend on the gross marketing margins. The estimates of gross marketing
margins available from micro studies show considerable divergence as most of these are not able to
capture all the channels of marketing upto their full length. An alternative approach to the estima-
tion of gross marketing margin is based on the national accounts. We used the difference between the
total consumer expenditure on a particular farm'product and the value of output at the farm level for
estimating the gross marketing margins, after correcting for exports and imports. The estimates of
gross marketing margins obtained by us along with the range of estimates compiled from some of the
micro studies are shown in Table 2. According to our results, the gross marketing margin as a
percentage of consumer's price is 19.2 per cent in cereals, 32.9 per cent in fruits and vegetables, 7.2
per cent in oilseeds, 6.7 per cent in milk/milk products and 37.2 per cent in sugarcane/sugar.
The gross marketing margin can be broken down into three components. viz., net margins of the
middlemen; cost of performing various functions; and statutory taxes or levies imposed by the
government and local institutions. As regards the net margins of middlemen, the distinction needs to
 AGRICULTURAL MARKETING: ISSUES AND CHALLENGES 323

TABLE 2. GROSS MARKETING MARGINS IN INDIAN AGRICULTURE

Crops/crop groups Based on micro studies(range)* Based on aggregate accounting**

(1) (2) (3)

Cereals 2 to 33 19.2
Pulses 15 to 23 N.A.
Fruits and vegetables 0 to 41 32.9
Oilseeds 16 to 69 7.2
Milk and milk products 0 to 46 6.7
Sugarcane/sugar/gur - 37.2
Overall N.A. 19.3

* These are not averages. They also do not represent all possible channels. For some more evidence, see Rai and
Gangwar (1997): .and Singh (1995).
** These are based on the data for 1986-87.

be made between some reasonable margin as a return for the services provided by them including the
risk and a component over and above the reasonable margin. The first component is sometimes
considered a part of the marketing cost. The size of total net margins depends on the nature of
competition and scale of the business and in turn on the structure of the market. As regards the
general structure of market for agricultural products, it may be mentioned that contrary to the
general belief, it has remained dominated by the private trade. With a large number of firms operat-
ing in foodkrains trade and government and co-operative agencies intervening at different points of
time, the competition is quite conspicuous. That is why most of the empirical studies do not find any
evidence of excessive net margins retained by the middlemen.
The second component of the gross marketing margin is the cost of performing various market-
ing functions. The costs depend on several factors including the type of commodity and the nature
of functions necessary in its marketing. The period of storage at different stages of marketing, the
distance upto which the commodities are transported and the nature and extent of processing and
packaging affect cost. All these differ among channels and commodities. These factors are assuming
increasing importance owing to (a) increase in urbanisation;(b) increase in marketed surplus on
account of not only increase in the output but also changes in cropping patterns in different regions
according to the comparative advantage;(c) the opening up of trade in agricultural commodities
leading to expansion in the size of the market; and (d) increase in consumer incomes leading to
higher demand for processed, packaged and branded commodities. With the increase in the duration
of storage, distance of transportation and additional processing and packaging, the cost component
would increase and in turn the farmer's share in the consumer's rupee is bound to go down.
The third component of gross marketing margin- is statutory taxes and levies payable at different
stages of marketing. The market players have no control over this component. It varies from state to
state and incltkdes octroi, mandi fee, purchase or sales tax, special duty or cess on commercial crops,
324 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

development or rural development cess or tax, and even the commission of the commission agents.
As most of these are levied ad valorem, the share of this component in the gross margin goes up with
a rise in the price of the product. In some states, these add upto 10 or 12 per cent of the exchange
price. Further, as the size of this component is positively associated with the returns to evasion of the
formal marketing channel, the market conduct is considerably affected by the level of taxes on
agricultural products. While comparing the efficiency of the alternative marketing channels (over
time or across states), great care is needed in accounting for this component of gross marketing
margin. For example, the obligatory charges paid by the Food Corporation of India for purchasing
wheat from the farmers under price support scheme went up from Rs. 12.12 in 1988-89 to Rs. 31.62
per quintal in 1994-95(Acharya, 1997a). During 1994-95, these charges added upto 9 per cent of the
support price for wheat. The State Governments through this instrument exert considerable influ-
ence on gross marketing margins.
A related aspect which needs attention is the options available to reduce the marketing costs.
Obviously, this.can be done by reducing losses during storage, handling and transportation. Reduc-
tion in losses on account of storage and handling at the farm level would require training of the
farmers in correct handling and grading techniques and providing them storage bins or pucca kothas
for scientific storage. However, major losses are observed in the marketing chain. The losses on
account of deterioration in quality and wastage add up to a considerable part of the value of the
produce. The obvious and best way to reduce such losses is to establish farmer-retail outlet linkages.
But our retail network is unique. Of the 5 million retail outlets for food, nearly 90 per cent are family
owned micro-business units which run on low operational cost. The market share of individual retail
firms is, however, likely to decline over time as retail-chains or super markets, which are able to
reduce marketing costs owing to technology and scale economies,expand. Establishment of farmer-
retailer or farmer-processor linkages can be promoted by grower's co-operatives which would not
only increase the farmer's realisation from their surpluses but would also increase employment in
rural and sub-urban areas.9 It may be mentioned here that even in developed countries like the
United Kingdom, farmers' co-operatives handle 80 per cent of milk, 54 per cent of oilseeds, 40 per
cent of peas, 36 to 80 per cent of fruits and 27 per cent of cereals (Bawcutt, 1996). In India, the
Agricultural Produce Market Committee (APMC) should take initiatives in organising such co-
operatives and establishing the needed linkages. The APMCs may play a catalytic role on the basis
of Mobilise, Organise, Operate and Transfer(MOOT),in establishing these linkages. Till such time
that farmer-retail outlet linkages are established on a large scale, the regulated market yards would
need to continue to function as an intermediate point in such linkages.

(2) Regulated markets and yards

Another most intensively researched area in agricultural marketing is the development of
primary agricultural produce markets and their impact.'" The studies" have shown that though
initially there is resistance from the traders, once the business shifts to new yards, there is a consid-
erable reduction in physical losses during handling and storage. In regulated market yards, the
process of price discovery is visibly open, weighing is more accurate and reliable and the marketing
charges are rationalised and standardised. The payments to the farmers are ensured within the stipu-
lated time. There is an effective machinery to settle the disputes arising between the buyers and
 AGRICULTURAL MARKETING: ISSUES AND CHALLENGES 325

sellers. However, this is not to suggest that every thing is fine in all the regulated markets. As the
emphasis in most of the regulated markets has remained on construction activities and collection of
market fees, several weaknesses and malpractices are still reported in many yards (Srivastava and
Shukla, 1995). Even in Punjab, apart from the physical losses during unloading, cleaning, sieving,
loading and transportation, excess weighment in market yards has been reported(Singh and Dhillon,
1996). Further, there is considerable loss of waiting time to the farmer on account of congestion in
the market yards(Chahal and Singh, 1997). One of the reasons for prevalence of malpractices is the
bureaucratisation of the management of regulated markets. Nearly 80 per cent of the market commit-
tees have been superseded and are being managed by local administrators.
As regards the use of the new market yards by the farmers for selling their produce, the evidence
available shows that the situation differs from time to time, area to area and from commodity to
commodity. There is enough evidence to suggest that the sales by the farmers in the yards have
increased (Acharya, 1985, 988; Agarwal and Meena, 1997; Suryawanshi et al., 1995). However,
some studies also report preponderance of village sales or sales outside the yards by the farmers
(Acharya, 1988; Chandrasekaran et al., 1987, Sukhpal Singh, 1997; Bansil, 1997).
Some scholars on the basis of low arrivals in some market yards have even inferred that the
market yards have benefited only the traders. In this connection it may be mentioned that most of
the studies which reported low arrivals in market yards have also observed that the prices received
by the farmers for village sales were either the same or even higher than those prevailing in
market yards (Acharya, 1985; Chandersekaran et al., 1987). It is in this context that the reasons
for the low arrivals of produce in the market yards should be sought in the quantum of surplus
with the farmers, distance from the market, nature and direction offlow of the produce and other such
factors like lack of awareness of the farmer-sellers about the advantages and facilities available in
the regulated market yards. If the taxes payable by the buyer in the regulated market add up to a
sizeable amount, the incentive for the trader to evade the formal marketing channel is bound to be
high. Even otherwise, the emphasis on the movement of all the marketed surpluses ofthe market area
through specified market places should be avoided as it unnecessarily adds to the cost of marketing.
It must also be recognised that regulation and establishment of markets are not the panacea for
solving all the problems of marketing. The problems oflow marketable or marketed surplus, distress
sale, cash needs or debt obligations of the farmers resulting in post-harvest and village sales and
socio-economic relationships between the farmers and traders are related to marketing but extend
beyond the sphere of marketing. There is very high degree of variability in marketing and produc-
tion conditions and many of the observed changes in marketing practices may be due to or in spite
of the market regulation programme. However, the mandies and haats in India have traditionally
been the hub around which rural India gravitates and rural economy functions in and around these
market places. While the programme has generally reached 7,001 primary wholesale markets, there
is a need to link all of these and 27,040 rural haats or smaller market places with the wholesale and
terminal markets by not only providing appropriate physical facilities at the sites but also through
providing link roads and communication facilities. In fact, secondary wholesale, primary wholesale
(market yards'and sub-yards)and rural haats(or rural markets)should be developed as a hierarchy of
growth centres. Raju and von Oppen (1982) have reported that more number of regulated markets
not only increases marketing efficiency but also enhances productivity in the hinterlands. For
326 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

increasing marketing efficiency, the number of markets with roads and telephones in the vicinity of
farmers is more important than the number.of traders in each market.
It is reported that the market infrastructure in 85 per cent of the 27,040 rural haats is yet to be
developed. The investment required for these rural haats has been estimated at two levels, viz.; Rs.
115 lakhS and Rs. 30 lakhs per haat(Prasad, 1993). Considering that 5,000 haats are developed at a
higher- level Of investment and remaining 17,000 at a lower level of investment, the total outlay
required is around Rs. 10,850 crores. Keeping in view the tremendous advantage of linking remote
areas with the national markets and providing growth impulses through the marketing link-ups,
there is a case for finding resources for this aspect of market development from the on-going rural
employment or development schemes

(3) Marketing infrastructure

As already mentioned,' the availability of infrastructure affects the choice of technology, re-
duces transaction costs and stimulates market operations which produce powerful impetus to pro-
duction. It also has a positive effect on income distribution because low per capita infrastrudture
limits the access of small and marginal farmers to the market(Ahmed, 1992). While construction of
market yards is important, it must be realised that it is the linkage of these yards with other market
centres through paved roads, railways, transport vehicles and communication network which influ-
ences the price formation in these market yards.The studies have revealed that the inter-market price
differences are a consequence of imperfection in mobility rather than the monopolistic element of
private trade (Lele, 1971). The studies have also shown that. wherever these linkages have been
established, there was considerable increase in horizontal and vertical integration of agricultural
produce markets which improved the proeess of price discovery and transmission of price signals
from deficit to surplus areas(Acharya, 1985, 1988).
The investment in rural infrastructure, which integrates local niarkets with national markets,
raises the aggregate supply response in agriculture(IFPRI, 1994). Even in the contextofliberalisation
of trade, it is being suggested that for deriving full benefits from the trade liberalisation, the devel-
oping countries must invest, inter alia, in domestic infrastructure and agricultural ouiput and input
markets (Anderson et al., 1997). The creation of infrastructure is a capital intensive activity. The
government has so far taken an active stance in the expansion of marketing infrastructure. However,
in several regions, the infrastructure continues to be weak. In recent years, the private sector is also
taking interest in infrastructure development. There is a need to provide incentives to attract the
private sector to make investment in rural market yards and linking these with primary and second-
ary wholesale markets.
Sometimes concerns are expressed about the low utilisation of such infrast:uctural facilities as
warehouses by the farmers. In this connection, it must be recognised that the returns to storage
depend on the cost of storage and intra-year price rise. While the cost of storage is necessarily
positive, the price rise may not be. Further, one of the most important items of storage cost is the
interest on the value of the produce. The rate of interest in the informal market during the recent
years has remained above 20 per cent. In such a situation, the returns to storage would be positive
only if the price during the intervening period rises by more than 20 per cent. When the probability
of inter-year price rise of this magnitude is not very high, it will not be advisable for an ordinary
 AGRICULTURAL MARKETING: ISSUES AND CHALLENGES 327

farmer to store his produce for later sale. The traders are able to cover their storage cost and earn some
margin by astute trading and properly timing the decisions to stock and de-stock. All the farmers
cannot be expected to perform the function of trading with the same efficiency as that of a trader. But
growers' co-operatives with professional managers can do.

(4) Grading and quality control

Maintenance of quality is becoming increasingly important owing to the growing consumer
awareness in both domestic and international markets. It requires attention not only at different
stages of marketing but also during the crop growth period at the farm. Excessive use of chemicals
leads to the problem of residues in farm products. After harvest, the produce gets damaged or con-
taminated unless handled carefully. It is well known that the cotton gets contaminated by foreign
matter at all the stages of handling. In the case of paddy, it is reported that over the years, while the
proportion of damaged and immature grains has declined, the moisture content in the produce
brought for sale has increased (Balwinder Singh, 1993).
The studies have shown that graded produce fetches,on an average,a higher price. The DMI has
made efforts to popularise grading at the producer's level but a very small proportion of the produce
sold by the farmers is graded before sale. Out of Rs. 62,000 crores worth of produce sold through
regulated markets during 1992-93, only 7.3 per cent was the graded produce. Thus a small propor-
tion of benefits of grading is reaching the producers.Amongst the commodities graded at the producer's
level, cereals accounted for as much as 50.7 per cent, pulses 10.5 per cent and oilseeds 18.3 per cent.
The high value crops like fruits and vegetables, cotton and spices accounted for only 15.9 per cent,
3.4 per cent and 1.2 per cent of the total value of graded products respectively. Statewise distribution
of grading at the producer's level shov'vs that Tamil Nadu and Maharashtra together account for
nearly half and Uttar Pradesh,Andhra Pradesh and Karnataka account for 42 per cent of the value of
goods graded at the producer's level.''In other states, grading at the producer's level does not appear.
to have picked up. With the increase in quality consciousness amOng consumers, there is a need for
stepping up of the efforts for creating grading facilities as well as sensitising the farmers for selling
the graded produce which will help them in realising higher prices.
Apart from grading at the producer's level, grading and quality control at subsequent stages are
even more important. Though the DMI has notified grade standards for 157 commodities for the
purpose of grading under AGMARK,issued licences to 4,000 packers for using AGMARK labels and
the value of commodities graded under the voluntary scheme has gone up to Rs. 2,663 crores during
1996-97, there is considerable scope for expansion and improvement. This requires creating con-
sumer awareness on the advantages of using, standardised products, on the one hand and
stringent measures to discourage the flouting of quality standards, on the other. Adulteration of
mustard oil with argemone mexicana,leading to epidemic dropsy in recent months is a case in point.
The processors or packers, on the basis of AGMARK label, popularise their products. Once their
brand is established in the market, they take advantage of the consumer acceptance and neglect the
quality standards. The DMI in such cases serves repeated notices and even cancels the permission to
use AGMARK label. But, as the brand is well established in the market, these firms have no fear of
losing the market. In this connection, the important issue is whether making AGMARK grading
compulsory in the domestic market would help in avoiding such large scale malpractices. Whether
328 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

or not AGMARK is made compulsory,there is a need for a re-examination of existing quality control
regulations for.their effective implementation and tightening. The involvement of voluntary social
service organisations and Right to Information campaign can contribute significantly in this en-
deavour.

(5) Marketing research

Another important area which needs attention is the research input in agricultural marketing.
The public support for research in agricultural marketing continues to be weak. Except for the
research wing of the Directorate of Marketing and Inspection and some cells established by various
research-cum-teaching institutes, there is 'no organisation with exclusive mandate in agricultural
marketing research. The National Institute of Agricultural Marketing is yet to take-off as far as its
research contribution is concerned. The studies by individual researchers have a micro focus which,
though important, do not provide even a static view of the system operation in its entirety. For major
initiatives, whether by the policy makers, planners, development functionaries, interest groups and
individuals, ex ante studies are more useful. Such studies are, no doubt, conducted by the private
sector, but these are meant for their in-house use and not accessible to other stakeholders. A survey
of the studies on agricultural marketing reported in the literature during the last ten years reveals that
(a)60 per cent of the studies adopted commodity approach;(b) 22 per cent focused on fruits and
vegetables;(c) most of the commodity studies focused on assessment of marketing costs and mar-
gins upto primary.market level; and (d) in recent years, a very large proportion of studies concen-
trated on fruits and vegetables marketing and issues related to trade. There were very few attempts on
looking at the movements of commodities across space upto retailers, storage pattern, demand and
supply of marketing services and nature of changes in the market structure for farm products and
marketing services in the wake of liberalisation of the domestic market and opening up of interna-
tional trade.

(6) New role of marketing organisations

With the increase in surpluses to handle, liberalisation of domestic markets and opening up of
the trade in agricultural commodities, the mandate of the existing marketing organisations also
needs a fresh look. No doubt, in the initial phases, the attention was needed on establishment of
market yards and evolving systems and prOcedures for regularisation of trading practices. The
emphasis should now shift from fee collection and associated policing to promotional marketing
activities. Some of the activities which should receive increasing attention of Agricultural Produce
Market Commitees, State Marketing Boards and State Directorates of Agricultural Marketing in-
clude the following:(i) Creating grading facilities_and training of farmers and market functionaries
in grading;(ii) Encouraging packaging and branding of local produce and promoting these brands
in the market;(iii) Ensuring implementation of price support programme in their area;(iv)Promot-
ing farmer-retail outlet, linkages through co-operatives on MOOT basis; and(v) Regular assessment
and monitoring of prices, costs, margins, patterns of expansion of marketing channels and terms of
trade for the produce of their areas and take suitable pro-active measures for improving the market-
ability and size of the markets for them.
 AGRICULTURAL MARKETING: ISSUES AND CHALLENGES 329

CONCLUDING OBSERVATIONS

The markets perform both allocative and distributive roles. The performance of the market
depends on its structure and conduct. The structure, conduct and performance of the markets are
influenced by regulatory measures, infrastructure, administered price regime,.direct entry of public
agencies, export and import regime and macroeconomic policies. The structural characteristics of
the agricultural produce markets show that the size is large and expanding; it is dominated by the
private sector; unorganised segment is much larger than the organised segment;the share of organised
sector is increasing; and despite the large size, the possibilities of localised monopolies or oligopo-
lies are not ruled out.
There is a need to dovetail trade policy with'domestic price policy. The domestic price policy
considerations warrant that export of one to two million tonnes of rice and wheat and 5 lakh bales of
cotton be allowed regularly and duties on imports of pulses and edible oils be raised to 40 and 70 per,
cent.respectively. In the area of domestic market intervention policies, several instruments like levy
on sugar factories, state monopoly in raw cotton in Maharashtra, statutory rationing of rice and
wheat in Calcutta, stocking limits, public distribution of sugar and that of rice and wheat to non-
poor families and the system of state advised prices of sugarcane in some states should be phased
out. However, the minimum price support policy be not only continued but effectively implemented
in all the regions of the country. Further, the price support scheme for other commodities should be
launched in a different form. The instruments of buffer stocking and input subsidies should be
continued for food security and accelerated growth of the agricultural sector. The liberalisation in
the domestic market should precede trade liberalisation.
Great care is needed in analysing marketing costs and margins as a tool for assessing the
performanceof the marketing system. For improving the performance of the market, farmer-retail
outlet linkages need to be promoted on MOOT basis. This apart, necessary infrastructure needs to be
created at all the rural haats and their linkages with national markets established. Grading and
quality control aspects also need more attention for increasing the market performance.
The marketing organisations like APMCs should shift their role from tax collectors to market
promoters for the produce of their area. Responsibility of effective implementation of price support
policy should also be shared by these organisations. The role of research in public domain in
influencing the market structure and conduct for improving the efficiency of the marketing system
should be recognised and agricultural marketing research should receive adequate support from the
government both at the centre and state levels.

NOTES

I. For a detailed discussion of history of government intervention in agricultural marketing, see Acharya. 1994:
Acharya and Agarwal, 1994; Acharya. 1995, 1997d;•Pursell and Gulati, 1993; and Acharya and Agarwal, 1998.
2. This works out to 34.8 per cent of gross domestic product from agriculture. But this should be used with
caution as there is considerable multi-trading and several commodities like milk are not traded in these markets.
3. For details of the network, see Acharya, 1997d.
330 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

4. As far as the farmers are concerned, in the present administered price policy regime. there is no compulsion
to sell at a fixed price to the government. For more details on administered price regime, see Acharya and Agarwal.
1994; Acharya, 1997a, 1998a.
5. For a comprehensive analysis of the arguments in favour of and against withdrawal of farm input subsidies
in India, see Acharya, 1997.e.
6. The details of the studies were compiled from the issues of Indian Journal of Agricultural Marketing and
Bihar Journal of Agricultural Marketing...
7. The studies conducted by DMI (Government of India, 1984,1985) are more comprehensive. However, these
pertain to the situation prevailing during the early eighties.
8. This was the average for all the FCI purchases. If the figures for individual states are analysed, it is revealed
that in Punjab, this component of the FCI's cost is close to 12 per cent of the support price.
9. In some areas, the co-operatives are playing a useful role, but in totality, their share in total trade is very low.
For some recent evidence, see Subrahmanyam et al., 1994; Doshi, 1997; and Prasad. 1997.
10. Of the 330 studies surveyed by us, more than ten per cent focused directly on this theme, apart from 60 per
cent others which though followed commodity approach but included one or the other aspect of functioning of
regulated markets.
11. For details, see BISR, 1983; Acharya, 1985; Acharya and Meena, 1987; and L.P. Singh, 1993.
12. The data for this analysis were taken from DMI (Government of India, 1997a).

REFERENCES

Acharya, S.S. (1985), "Regulation of Agricultural Produce Markets - Some Observations on Its Impact", Develop-
nzent Poli0 and Administrative Review, Vol. 11, No. 2, July-December.
Acharya, S.S. (1988), Agricultural Production, Marketing and Price Policy in India, Mittal Publications, New Delhi.
Acharya, S.S. (1994), ."Marketing Environment for Farm Products - Emerging Issues and Challenges", Indian.
Journal of Agricultural Marketing, Vol., 8, No. 2, July-December, pp. 162-175.
Acharya, S.S. (1995), "Marketing, Trade and Price Policy for Farm Products in the Context of New Economic
Policy", in Harish Nayyar and P. Ramaswamy (Eds.)(1995), Globalisation and Agricultural Marketing, Rawat
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