Transcript Prospects and Changes required in the system of

GENERAL BODY MEETING OF
NATIONAL COUNCIL OF STATE
AGRICULTURAL MARKETING
BOARDS (COSAMB), GUAWAHATI,
ASSAM
3-4TH APRIL, 2008
PROSPECTS & CHALANGES
REQUIRED IN THE SYSTEM OF
AGRICULTURAL MARKETING
N.S.Ranawat
Deputy Director
NIAM, Jaipur
INTRODUCTION
• Small & marginal farmers 80%
• Traditional marketing-Long marketing channel, low
share in consumer’s rupee, high costs and margins,
irrational marketing fees etc.
• Direct marketing (for farmers)-economies of scale,
vertical integration, traceability, assured marketing
etc.
• Beneficial for the agricultural economy-reduces
distribution losses, motivates farmers for grading at
producers’ level, improved technology support
7/17/2015
• Different hurdles for
including infrastructure;
direct
marketing
• low per capita infrastructure limits the access
of small and marginal farmers to the market
• Need for reforms for congenial policy for
private investment in infrastructure
INDIAN AGRICULTURE - PRESENT
SCENARIO
• Diversified agro-climatic condition ,potential to cultivate vast range
of agricultural produce, a large and varied raw material base for
food processing.
• Increase in production from 50 million tonnes (1951) to 204
million tonnes (2004-05).
• Significant increase in marketed surplus.(110.04 million tonnes,
2001-02).
• Subsistence to commercial agriculture.
• First in pulses, tea, jute & milk and second in rice, wheat, fruit &
vegetables.
• Agriculture is free from control, same is not true with agricultural
marketing.
• WTO regime- Global market access opportunities.
MARKET SCENARIO
•India is the second largest producer of fruits and vegetables
•Its processing level is estimated to be around 2 %, as compared to about
80 % in Malaysia, 30% in Thailand, and 60-70% in UK and USA.
• The food processing industry is still nascent: only two per cent of fruit
and vegetables; and 15 per cent of milk produced are processed.
•Despite these low volumes, the processed food industry ranks fifth in
size in the country, representing 6.3 per cent of GDP.
• It accounts for 13 per cent of the country's exports and 6 per cent of
total industrial investment.
•The industry size is estimated at US$ 70 billion, including US$ 22 billion
of value added products.
Present Scenario in Value Chain
o Producer’s Share in Consumer’s Retail Price
Mere
25% to 60% depending on the commodity
o Only 25% of Produced Food-grains Utilise Scientific
Storage
o Less Than 2% of Fruits and Vegetables Production Is
Processed
o Post-harvest Losses estimate 10% of Food Grain and
25% of Fruits and Vegetables Production
Area & Production of
Agri Products
Area and production of Agricultural products
(Production in million tonnes)
India
Arable Land (Million ha)
India’s Rank in
World Production
151
2
Irrigated Land (Million ha)
55
1
Wheat
72
2
124
2
Coarse grains (including maize)
29
3
Milk
91
1
Fruits
47
2
Vegetables
82
2
Edible Oilseeds
25
3
Pulses
15
1
Sugarcane
245
2
Tea
0.85
1
Cattle (million)
186
2
Rice, Paddy
Percentage of P H Losses in
Agricultural sector
• Food grains & oil seeds 10%
( Cereals, Millets , Pulses and Oilseeds)
• Horticultural produce
Farm
30-40%
Consumer
LEVEL OF PROCESSING, VALUE ADDITION ETC
• Fruits & Vegetables Sector at 2%,
• Poultry 6%,
• Milk 35% (only 13% in modern dairies),
• Marine products 8%,
• Buffalo meat 21%.
• Wastage – Rs. 58,000 crore
Present Scenario in Value Chain
COST BUILD UP FOR ONE Kg. OF AVERAGE BASKET OF FRUIT
11.6
2.5
1.7
4.1
3.3
FARMER
TRADER
WHOLESALER
RETAIL MARKUPS
100
FARM GATE PRICES
160
MILK
RETAILER
CONSUMER
PRICE
350
220
FISH
FRUITS &VEGETABLES
PRESENT MARKETING SYSTEM
• Agricultural Marketing in State list.
• Serviced through a network of 7,521 Wholesale
Regulated Markets and 27,294 Rural Primary Markets
(15% Regulated).
• Except few States, all States/UT’s enacted APMR Acts.
• Limited success – Once panacea, now revenuegenerating agencies.
• Only State Governments can set up markets.
• Several studies indicate APMC add to cost, keeping
producers and consumers apart.
Amenities available
•
•
•
•
•
•
•
Auction platforms only in 2/3rds markets
Drying platforms in 1/4th markets
Traders modules in 63%
Cold storage only in 9%
Grading facilities in 1/3rd markets
Internal roads in 80%
Farmers amenities in 50% of markets
CONSTRAINTS
• Long and multiple marketing channels.
• Farmers share in consumer’s Rupee
- Fruit and vegetables – 32 to 68%
- Paddy – 56 to 89%
- Wheat – 72 to 88%
- Coarse grains – 72 to 86%
- Pulses – 79 to 86%
• Hidden marketing cost and margins are also common –
Rs. 15/- for 20 Kg. box of apple and Rs. 12/- for 50
cabbage bag from Shimla to Delhi by road – a study
reveals.
Contd…..
• Infrastructural Bottlenecks- Rs. 11172 crore investment
requirement
• Density of markets vary from State to State. Farmers to
travel markets beyond 5 Kms for sale of their
agricultural produce.
• Fledgling Rural Primary Markets.
• Absence of common trade language and multiple Food
Laws.
• Variation in market fees and other market charges.
• Controls under Essential Commodities Act, 1955.
• Poor Pledge Financing and Marketing Credit. Farmers
dependent on money lenders for their credit need.
MARKETING INFRASTRUCTURE
• A.O. Hirschman- four characteristics of
infrastructure
i) the services facilitate economic activity
ii) the services are public goods because of economic
externalities
iii) the services cannot be imported;
iv)investments tend to be indivisible or lumpy
• In this context, marketing infrastructure consists
of a combination of national assets, sustaining the
addition of place, time and form utilities
Marketing Infrastructure
• Can be classified as physical facilities and
institutional facilities;
– physical facilities-roads, railways,transport, postal,
telecommunication, facilities,electrification,storage
structure,market yard and processing facilities etc;
– institutional infrastructure—cooperatives,banking
institutions,
extension agencies,
marketing
Organisations and marketing intelligence network
Marketing Infrastructure-Gaps
• Reefer Vans/ Containers- During next ten years 3000 units with
a capacity of 8 tonnes each; Investment requirement is Rs.600
crore
• Cleaning,grading and packaging:- Grading facility available in
only1321 markets out of the 7300 regulated markets. Rs.2000
crore investment during the next 10 years.
• Export oriented Agri-zones and Food Parks:- estimated public
investment (common facilities)-Rs 200 crore and private
investment is Rs.400 crore on 50 EOAZs.
• Processing and value addition:- Now 7% value addition and 2%
processing; Target 355 Va. Addi. and 10% processing;
investment of Rs150000 cr.
Direct Marketing & Reforms
– Promotion of public-private partnership in the
management and development of agricultural
markets in the country;
– Rationalisation of market fees and substitution of
licensing of market functionaries with simple
registration
– Separate constitution for special markets for
commodities like onions, fruits, vegetables,
flowers etc;
– A separate chapter to regulate and promote
contract
farming
arrangement
in
the
country;(dispute redressal mechanism,
MODEL ACT ON ARICULTURAL MARKETING
• Formulated in Order to:
Assist States in moving away from a regime of
Controls to one of Regulation and Competition.
To put in place adequate safeguards to avoid any
exploitation of farmers by Private Trade and
Industries.
MAIN FEATURES OF MODEL ACT
Development of Competitive Markets
• Legal Persons, Growers and Local Authorities permitted
to Establish New Markets for agricultural produce in
any area.
• Consequently, in a Market Area, more than one
market can be established by Private Persons, Farmers
and Consumers.
• Provision for Special Markets in any market area for
specific commodities viz. onion, fruit and vegetables,
flowers, etc.
• Provision for Establishment of Consumer/Farmers
Markets to facilitate direct sale of agricultural
produce to consumers.
Contd…
Liberalized operations and registration
• Provision for purchase of agricultural produce through
Private Yards or directly from agriculturists in one or
more than one market area.
• Provision for Resolving of Disputes, if any, arising
between Private Market/Consumer Market and Market
Committee.
• Licensing of market functionaries dispensed with and
a time bound procedure for registration laid down.
• Registration for market functionaries provided to
operate in one or more than one market areas.
Contd…
Removable of Middlemen
• Commission agency in any transaction relating to
notified agricultural produce involving an
agriculturist to be prohibited.
• There will be no deduction towards commission
from the sale proceeds payable to agriculturist
seller.
Market Fee
• Single point levy of market fee in entire process
of marketing.
• Graded Levy of market fee on different types of
sales. No market fee in consumer/farmers market.
• May exempt levy of fee for export, processing and
sale outside the State.
To Promote
–Direct purchasing
–Contract farming
–Private yards/markets
–Processing and value addition
–Export
Market Committee to Promote
– Alternative marketing system, contract farming,
direct marketing and farmers/consumers
markets.
State Marketing Boards to Promote
– Standardization, grading and quality certification.
– Market led extension and training of farmers
and market functionaries.
– Constitution of State Marketing Standards
Bureau
for
promotion
of
grading,
standardization and quality certification of
agricultural produce.
Reforms done so far
• Schemes of central Government for
infrastructure
– MRIN scheme (Agmarknet)
– Rural Godown Scheme (back-ended subsidy
25% and 33% for Hilly areas and SC/ST)
– Reforms-linked scheme of “Development of
Marketing Infrastructure, Grading and
standardizations”.
REFORMS DONE SO FAR-Conti.
• National Conference held at New Delhi on 07.01.2004 and
at Bangalore on 19.11.2004.
• Reforming States:
Madhya Pradesh, Himachal Pradesh, Nagaland, Punjab,
Sikkim, Andhra Pradesh, Kerala, Manipur, Tamilnadu
• States with partial reforms:
Karnataka, Maharashtra, Rajasthan, Haryana and Gujarat.
• Draft Warehouse Development and Regulation Bill
finalized and will be introduced in the coming session of
Parliament.
• EC Act, 1955 – restriction removed by Central Govt. Now
State Govt. required to remove Control Orders
implemented under the Act.
Contd…
• Futures trading for almost all commodities now
permitted.
• Integrated Food Law – Draft Food Safety and
Standards Bill prepared and will be placed before the
next session of Parliament.
• Pledge Financing – RBI issued instruction for
categorizing marketing credit to agriculture as “priority
sector” lending. Limit of credit increased to Rs. 5 Lacs
from Rs.1 Lac.
• RBI/NABARD requested to evolve simplified
procedure for sanction of pledged loan to farmers at
Rural Godowns.
REFORMS IN AGRICULTRAL MARKETING
SECTOR
•
Necessary to :
 Enable producers to undertake market-driven
production planning.
 Facilitate integration of farm production with
domestic and Global markets.
 Attract massive investments needed
building Post-Harvest infrastructure.
for
ROAD MAP OF REFORMS
• Promote competitive agricultural markets in private and
co-operative sector.
• Encourage Direct Marketing and Contract Farming
programmes.
• Facilitate procurement of agricultural produce directly
from farmer’s fields.
• Establish effective linkages between farm production
and Retail Chains.
Contd….
• Facilitate Private Investment in owning, establishing
and operating markets.
• Public-Private-Partnership to promote professionalism
in existing markets.
• Stepping-up of Pledge Financing and Marketing Credit.
• Introduction of Negotiable Warehousing Receipt
System in Rural Storage Projects.
• IT to Promote Trade and Market led Extension
Services.
World Trade Organization
The international trading environment has
changed considerably in the light of agreements
reached under the auspices of GATT, and the
subsequent establishment of the World Trade
Organization.
Two Agreements are of particular interest as they
introduce a measure of discipline in international
trade and are extremely relevant to food safety
and quality issues. These are:
Agreement on Application of Sanitary and Phytosanitary Measures (SPS).
Agreement on Technical Barriers to Trade (TBT).
Agreement on Agriculture
WTO- AoA into came into existence from 1 Jan 1995.
The Agreement aims to promote:
• Fair and market oriented trading system
• Commitments on support and protection
• Operationally effective GATT Rules & Disciplines
• Equitable Trade Reform process
• Greater opportunities and Terms of Access to
developing countries
• Concern for LDCs
• Concern on Non-trade issues such as Food Security,
environment, health, etc.
TBT Agreement
• The Technical Barriers to Trade
Agreement (TBT) tries to ensure that
regulations,
standards,
testing
and
certification procedures do not create
unnecessary hurdles in international trade.
SPS Agreement
Protection of human, animal and plant’s
health and life
It allows countries to set their own
standards
The Agreement covers all relevant laws,
regulations; inspection and certification
packaging and labeling requirements
directly related to food safety
This agreement also promotes developing
countries to adopt international standards.
Codex Alimentarius Commission
(CAC)
• The Codex Alimentarius Commission was
created in 1963 by FAO and WHO to develop
food standards, guidelines and related texts
such as codes of practice under the Joint
FAO/WHO Food Standards Programme.
• The main purposes of this Programme are
protecting health of the consumers and
ensuring fair trade practices in the food trade,
and promoting coordination of all food
standards work undertaken by international
governmental
and
non-governmental
organizations.
Food safety
Farm
•GAPS
•Pesticide use
•Manure use
•Harvesting
•Processing
•Packaging
•Storage
•Transport
•Worker Hygiene
FROM FARM TO FORK
APMC
HACCP
•Grading and
Sorting Tables
•Elevated auction
platforms
•Washing and
Disinfection
•Washing of Crates
•Worker Hygiene
•Cold Storage
Retail Market
HACCP
•Grading and
Sorting Tables
•Washing and
Disinfection
•Worker
Hygiene
•Cold Storage
Table
•Consumer
Education
•Consumer
Awareness
New Role of Extension Agencies
•
•
•
•
•
•
Marketing starts with customer
Market-led extension
Service products-intangibility ,simultaneity
Promotion of grading and standardisation
Making the traders association responsible
GAP, HACCP, GHP, traceability etc. especially
from export point of view
• Professionalisation of management
• Transparency in dealing
• Providing infrastructure
Inadequacies/weaknesses
• Policy Related
– Competition
– Direct Marketing
– Contract Farming
• Physical facilities
– Inadequate functional Infrastructure
– Limited Value addition
– Loss of value
Inadequacies/weaknesses
• Managerial Issues
–
–
–
–
–
Malpractices
Low functional efficiency
Time loss to farmers
Lengthy value chain
Organised intermediaries
• Knowledge related
– Price Discovery
– Marketing intelligence
Challenges Ahead
o Modern Agriculture becoming Knowledge Intensive
o Farmers need static and dynamic info on Farm
Operations & Markets
o Change in Consumption Preferences
o
Necessity of Modern Agricultural Markets for
Sustainable Agriculture Development
o Urgent
need for
Economic Policies
Liberalized
Market
Oriented
o Reforms Needed in Domestic market to Capitalize
on Emerging Market Access Opportunities in Post
WTO World.
Main Finding: Logistics and Intermediation
costs are much higher than production cost
23.50
Retail Price119.20
CIF 95.70
Rs.per Kg
53.60
24.20
5.40
13.50
FOB 42.10
Wholesale Price 18.90
Farm Gate 13.50
Different Stages of Supply Chain
Source: World Bank
Factors Impeding India’s Exports
A combination of External and
Domestic Factors
High Cost of Delivery between the Farm
gate and Retail (in the Foreign market)
Tariffs Abroad Quality and Standards
High Transport Costs
(Inefficiencies in specific modes
of transport)
Inefficiencies in Domestic
Logistic and Intermediation
India Exports mostly to Proximate Markets
INDIA
South Asia
Share in India’s Exports
34%
Middle east
29%
East Asia
17%
Western Europe
10%
Rest of the world
7%
Africa
US & Canada
1%
2000
4000
1%
6000
8000
10000
12000
Distance in Kms.
Source: UN COMTRADE,2005;CEPII
14000
AIR TRANSPORT
 Costs are high
- Excessively high taxes on fuel and airport
charges
- Inadequate and under-utilized infrastructure
 Imbalances between exports and imports (to
Europe and North America)
Maritime Trade
 Inefficiency of ports
- Delays in project implementation
- Inflexible functioning of major ports
- Lack of multi-modal transport
- Cost-plus tariff policy
Surface Transport
 Road Transport
- Cost is high in effective terms (including
wastages, storage, and handling)
- Travel speeds are low (only about 200-400 km
per day)
- Movement of containers on the Indian
roadways is limited
- Refrigerated trucks are few and expensive
External Factors : Standards

Mandatory official standards are becoming less
important than quality standards imposed by
buyers
 Standards are also an opportunity
 Eliminate protection in foreign markets through
international negotiations
 SPS standards are part of a wider set of
competitiveness
horticulture.
challenges
facing
Indian
Grapes: Successful Fire-Fighting ?


•
•

•
•
•

•
•
Success: zero official rejections in the EU during 2004 + 2005
Crisis management very costly – both for government and private sector
Cost of compliance is 13% of FOB value
Cost of residue testing is 7.9% of FOB value
Addressed the symptoms not the cause
Local rejections (20% in 04; 12% in 05) – underlying problems with pesticide
usage, labeling, and/or recommendations
Declining export share to UK (quality shortfall)
Mandatory controls/testing – lack confidence in farm/firm practices
Thus, a ‘success’ yet neither a model to be replicated nor sustainable
Government over-extended
Private sector needs to bear cost and quality assurance
Source: : World Bank Study 2006
Taking a More Proactive Stance Towards
SPS Management
Pilot SPS management in Ag. Export Zones
Weigh
costs and
compliance carefully
benefits
Determine
private
responsibilities
and
of
SPS
public
Taking a More Proactive Stance Towards
SPS Management
Role of the Public Sector
Role of the Private Sector
Diplomacy
Collective Action & Selfregulation
Awareness Building and Good Management Practices
Promoting Good Practices
Risk
Assessment
Management
& Traceability
Develop Training, Advisory &
Conformity
Assessment
Services
Source: : World Bank Study 2006
INTER MINISTRIAL COMMITTEE
 Inter-ministerial committee was constituted by
PMO for rationalizing and streamlining the fresh
produce export chain
 Committee – Organizations/Departments:
• Agricultural & Processed Food Products Export
Development Authority
• Department of Civil Aviation
• Department of Agriculture & Cooperation
• Airports Authority of India
• Department of Revenue
• Board of Excise & Customs
• Punjab Agro Industries Corporation
• Field Fresh Foods (P) Ltd.
• Cargo Service Centre
Source : YES BANK
Schemes of Govt. of India
•
•
•
•
•
•
•
•
•
DMI,
MoA
MoFP
NHB & NHMI
Spices Board of India
APEDA
MPEDA
Khadi & Village Industries
SFAC
(ii) Post Harvest infrastructure:  For setting up of Food parks with common facilities like
Warehouse, Cold storage, Quality control Labs, effluent
treatment plants, packaging facilities etc.
 For setting up of Post Harvest Infrastructure (Such as
grading, sorting and packaging facilities).
 Integrated cold chain (mobile/stationary coolers,
refrigerated transport, freeze cabinets at the retail ends etc.
 For Setting up of cold storages:
(1) For Non horticulture products.
(2) As an Integral part of the food processing units or Food
parks.
(3) Special type of cold storage with modified controlled
atmospheres facilities.
SPICES BOARD’s Scheme
• Activities eligible for assistance
a)Adoption of Hi-Tech Processes such as (but not limited to) Cryo-grinding,
Steam Sterilization, Super Critical Fluid Extraction and advanced
packaging.
b)Up gradation of existing processing/manufacturing facilities to high tech
processes described at ‘a’ above by manufacturer exporters who have
invested to the tune of Rs,50 lakhs in the existing unit.
c)Setting up/up gradation of quality control equipments for testing among
other things, pesticide residues, aflatoxin, physical, chemical and microbial
contaminants and chemical composition of spices.
d) Adoption of Quality certifications procedures leading to accreditation under
ISO, HACCP, SQF 2000, organic certification and such other, including
consultancy services for the same.
e) Value addition processes by farmers groups, engaged in organic farming
and having a minimum membership of 50 certified organic producers.
Scale of Assistance
Back ended grant-in-aid at the rate of 33% of the
expenditure
incurred
towards
eligible
activity/activities limited to Rs. 75 lakhs per
exporter during the Xth Plan period subject to
the condition that in the case of units located in
the North East or hill areas and or owned /
operated by organic farming groups elsewhere
with a minimum membership of 50 certified
organic farmers, the scale of assistance shall be
50%
of
the
investment
on
eligible
activity/activities subject to a ceiling of Rs.150
lakhs during the plan period.