Transcript Presentation-by-Professor-VPS-Arora

HISTORICAL PERSPECTIVE OF
REGULATORY FRAMEWORK FOR
FRUITS AND VEGETABLES
MARKETING IN INDIA:
RECENT CONTRADICTIONS
V P S Arora
Vice Chancellor, Supertech University
Former Vice Chancellor, Kumaun University
India: An Overview
2
Total Geographical Area
No. of States
No. of Union Territories
Literacy Rate
Population Density
Rural Population
Life Expectancy
Per Capita Income
:
:
:
:
:
:
:
: Rs 68,757 at
Rs 39,168 at
329 m.ha.
29
7
74%
382 per sq.km.
69 %
70 years
current prices
2004-05 prices
7/20/2015
OUR COUNTRY HAS
3
 18 % of the world human population
 15 % of the world livestock heads
BUT ONLY
 2.4 % of the world geographic area
 11.3% of the world arable land
1% of the rain water
 1% of the forest cover
 0.5% of pasture land
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India is the Front Ranking Producer of many Commodities
Goat & Sheep
212.10 million
Cattle / buffaloes
Largest in the world
304.42 million
Food Grains
#2 in the world
(255.36 Mn T)
Milk
Largest Producer
~132.40 Mn T
F&V
#2 in the world
243.47 Mn T
Sugarcane
# 2 in the world
(338.96 Mn T)
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Fisheries
Marine: 3.275 Mn T
Inland : 5.744 Mn T
Tea
Largest Producer
(0.96 Mn T)
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Indian Agriculture
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 Backbone of the economy
 Leading producer of agriculture , horticulture, and
animal products
 Wide variability of crops due to variability in agro-
climatic conditions
 To achieve double digit GDP growth rate, an
agriculture growth rate of around 4% is required
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The Agenda for Agriculture has been written over
several times by many agencies
Who will make it happen?
Multiple stakeholders, Multiple decision makers
 Complexities and Mistrust
 No single “agency” responsible
 No single “stakeholder group” can make it happen
 Need for neutral body to catalyze collective action

How can an integrated virtuous cycle that compliments and accentuates
different positive forces Towards making it happen?
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The Agriculture & Food Value Chain in India
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Farmers
Final Users
• Inputs (seeds,
Pesticides/Fertilizers)
• Implements & equipment
• Extension Services
• Technology including IT
• Post Harvest Handling, Supply
Chain, Logistics &
Intermediation
• Markets & Market Infrastructure
• Processing
• Packaging
• Retailing
• Exports
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Potential
Businesses in
Agri Value
Chains
Indian Agriculture – A health Check
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Pre-Harvest
Post-Harvest
• Declining average
holding size
• Regulated markets
• 60% of area remain
under rain fed
agriculture
• Inefficient last mile
delivery of inputs
• Eroding water tables
and declining soil health
The
Key
Issues
• Inefficient market
systems and linkages
• Knowledge and
information gaps in
grading, sorting,
packing, pre-cooling
etc.
• No value addition at
farm gate
Needs massive infusion of Technology, Infrastructure and Market
linkages
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Agriculture Transition – Forces at work
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Retail revolution
• Shift in consumption
pattern from
traditional crops to
high value crops
• High penetration of
processed foods in
the consumption
basket
• Retailing in India is
currently a US$ 800 billion
industry with 70% share
of Food & Grocery
The
Transition
• Expected to grow @15-20
% per annum for the next
3 years
• 90% growth in food and
groceries
• Modern format going for
nationwide presence
including Rural
Compulsion on Government
to move away from subsidies
to higher remuneration to
farmers
Conscious policy shift for
value added agriculture
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Challenges of Demand Driven Agriculture
Land fragmentation / lack of land markets
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Inadequate knowledge of
potential risk and returns
Poor credit and risk
cover mechanism
Scalability
and
sustainability
Uncertain Crop
diversification Policies and
Programmes
Linking small farmers to
new marketing systems
Lack of collaborations
across value chains
Lack of efficient Agri markets
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What Does Indian Agriculture Need Today
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High Value Agriculture
Food grain Sector
Policy and programs for transition
to high value/demand led
Agriculture
Massive infusion of technology
and knowledge transfer for
productivity enhancement
Crop diversification to suit
commercial needs
Irrigation
Modern Technologies across Value
Chains
Credit and Insurance
Rural Infrastructure
Agri focused infrastructure
including Cold Chain for linking
farms to markets
Investments in rural infrastructure
Collaborations across value chains
Appropriate credit and risk
management policy
Demand pull
Long term
Competitiveness
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Critical Missions
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
Link Agriculture to Markets (state level reforms, marketing
infrastructure, cold chains)

Greater private participation in extension and farm services

Develop mutually rewarding models for Agri risk management

Promote private sector investments in Agribusinesses and Agri
infrastructure

State Governments to speed up reforms

Enable a globally aligned industry friendly food regulatory regime

Capacity building in the food processing sector

Promote promising Agri Value Chains
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Agricultural Marketing– Backdrop
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Increased marketed surplus
Changed commodity mix with growing share of
high value commodities
Increased urbanization and income levels
Increased linkages with distant and overseas
markets
Changes in the form and degree of Government
interventions
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Dimensions of Agricultural Marketing: S C P Issues
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Agriculture engages about 52% of work
force and contributes about 14 percent of
GDP.
Small and marginal farms account for over
40% of total food grains viz.
-
49% of
40% of
29% of
27% of
Rice;
Wheat;
coarse cereals;
pulses; and
over half of the total fruits and
vegetables
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Marketing Channels
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Agricultural commodities move through different marketing
chains.
Market functionaries involved distinguish the Marketing
channels
Length of the marketing channel depends on the size of
market, nature of the commodity and the pattern of
demand at the consumer level.
Agricultural marketing channels are in general divided into
four broad groups:
- Direct to consumer :
up to 2%
- Through wholesalers and retailers : about 80%
- Through public agencies or co-operatives : about10%
- Through processors :
from 3 to 5%
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Evolution of Supply Chains
For centuries, traditional market was the only supply chain to handle goods
Farmer
Consumers
Markets
Price & Regulation
From simple to complex supply chains have evolved
Hand Cart Vendor
Farm Owner
Farmer
Commission
Agent 1
Commission
Agent 2
Wholes
aler
Small Roadside
Vendor
Consumers
Consolidator
Medium / Large
Retailer
Trader /
Transporter
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Supermarket /
Hyper market
Source: Presentation by the World Bank in MACP Workshop
7/20/2015
Marketing Agencies
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Main functionaries in the marketing channel for agricultural
commodities include village traders, primary and secondary
wholesalers, commission agents, processors and retailers including
vendors (Approx. 2 Million wholesalers and 5 Million retailers)
Public agencies, farmers’ co-operatives and consumers’ organizations
also perform many marketing functions
Private sector handles around 80 per cent of the marketed surplus
of agricultural products
Quantity of agricultural products handled by government agencies
has been about 10 per cent of the total value of marketed surplus
Around 10 per cent marketed surplus was handled by producers or
consumers co-operatives.
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Government/ Co-operatives in Marketing
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Government intervention in purchase of agricultural commodities under- Minimum Support Price programme (MSP),
- Procurement of food grains,
- Market Intervention Scheme (MIS),
- Monopoly purchase,
- Open market purchases of commodities by NAFED, CCI, JCI and
state oilseed federations

Basic objective of entry of these agencies is to safeguard the interest of producerfarmers along side providing food security to consumers through operating PDS

Food Corporation of India has entered as an important market functionary in the trade
of cereals

Fair price shops also came as retail outlets for distribution of cereals to targeted
sections of population

Co-operatives have also assumed importance in the marketing channel with the
encouragement to producers or consumers cooperatives

In case of sugarcane, co-operative sugar factories play a dominant role.
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Historical Developments in Regulating Agricultural Markets
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First Agricultural Market was regulated in 1896 at Karanja (Former
Hyderabad State)
Cotton and Grain Market Law was enacted in 1897 in the Berar
region (Hyderabad Assigned District)
Based on the recommendations of Indian Central Cotton Committee
(1917) and Royal Commission on Agriculture (1928), various Provinces
and States enacted Acts for establishing Markets
Before Independence, market regulation was in force in Bombay
(1927), Central Province (1932, 1935), Mysore (1939), Punjab (1941),
and Patiala (1947)
After Independence most of the States enacted Agricultural Produce
Market Regulations Acts
The process of amendment in APMC Act by States restarted after
Model APMC Act was framed at the national level in 2003
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Agricultural Markets in India as on 31.03.2014
 5964 Wholesale Markets in India
 22759 Rural Primary Markets (about 15% are regulated markets)
 2483 Principal Regulated Markets
 4631 Regulated Market Sub-yards
Total – 7114
(Only 250 and 286 regulated markets in August 1947 and1950 respectively)
• Need for Regulated Markets within 5 sq. km radius whereas average all India
availability is 462.19 sq. km only.
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Salient Features of Regulated Markets
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Democratically governed by APMC, consisting of 15 to17
representatives of farmers, traders, cooperatives,
warehouses, and officials of marketing and other
departments (Elected members not less than 11).
Bylaws, rules and regulations are framed by APMC
Secretary of APMC is appointed by the Government
National Commission on Agriculture (1976) recommended
one regulated market at a radius of 5 sq km
Commodities notified varies from state to state
There is a provision of establishing Special Commodity(ies)
Markets
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Contribution of Regulated Markets
• Basic objectives have been- to ensure reasonable gain to the farmers by creating environment in
markets for fair play of supply and demand forces,
- to regulate market practices and attain transparency in transactions
• Aimed at providing proper method of sale, correct weighment, prompt
payment and various marketing related services
• Democratic set up to control and manage markets
• Advent of regulated markets has helped in mitigating the market handicaps of
producers/ sellers at the wholesale assembling level
• Achieved only limited success and Rural Periodic Markets in general, and the
Tribal Markets in particular, remained out of its developmental ambit.
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7/20/2015
Various Reforms Initiated
• Suitable amendments in the State APMC Acts to facilitate efficient and
alternative marketing channels for farm produce
• Progressive dismantling of controls and regulations under EC Act to
evolve a national integrated market for agri-produce
• Law for implementing Negotiable Warehouse Receipts System passed by
the Parliament
• Enactment of an Integrated Food Law to promote quality and single
window regulatory system
• Allowing futures trading/ electronic spot trading in agricultural
commodities for better price risk management and price discovery
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7/20/2015
Major Reforms through Model APMC Act
 Central Government circulated Model APMR Act to State Governments
for adoption in September 2003 and Model Rules in November 2007
 Establishment of Private/ Co-operative markets/ Farmer-consumer
markets/ Direct marketing
 Safeguarding interest of the farmers through provisions for Contract
Farming
 Single point levy and payment of market fee/ Single point registration of
functionaries
 PPP in management & extension activities/ Promotion of e-trading/
Electronic Spot Exchanges
 Encouraging professional management in APMCs
 Promotion of Grading and Standardization.
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Myths and Realities
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WHERE IS REGULATION OF AGRI
MARKETS?
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India: 35% of wholesale markets and 25% of all agri markets
Karnataka: 30% and 40%; Tamilnadu: 90% and 30%; AP
(old): 100%
Jharkhand:14% and 25%; MP: 100% and 33%; UP: 50% and
15%
UK:70% and 90%; Haryana: 35% and 60%; Punjab: 35%
and 90%
Gujarat: 98% and 85%; Maharashtra:33% and 22%
WB: 14% and 20% and Orissa: 10% and 20%
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ABOUT AMENDED APMC ACTS
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Is the farmer not free to sell anywhere s/he wishes?
If not, how are food supermarkets procuring? and how is
contract farming going on across India? And how are farmers’
markets being held?
Direct purchase from farmers allowed in: Maharashtra (130),
MP (8), Chattisgarh, Karnataka (258) Andhra Pradesh(171),
Gujarat (21), Haryana (37), Himachal Pradesh (12), Odisha
(46), Punjab (26), Rajasthan (77), Delhi, and Tamilnadu (179)
States with no APMC Act: Bihar (repealed w.e.f.
01.09.2006),Kerala, and Manipur
MoFPI says 16 states have amended the APMC Act fully or
partially, and have agreed to delist F&V from the APMC Act!
Some have already done it (??)
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MAJOR F & V STATES IN INDIA
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Andhra Pradesh, Karnataka, Kerala, Tamil Nadu,
Bihar, Orissa, West Bengal, Jharkhand,
Chhattisgarh, Madhya Pradesh, Gujarat,
Maharashtra, Himachal Pradesh, Uttarakhand, Uttar
Pradesh, Manipur, Arunachal Pradesh, Meghalaya,
Sikkim, Tripura
Where are F&V growing fast: AP, Bihar, Jharkhand,
Gujarat, Haryana, HP, J&K, MP, Chhattisgarh,
Maharashtra, Orissa, UP, UK, WB, and the NE states
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ABOUT AMENDED APMC ACTS
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Is contract farming not permitted
anywhere in India?
 States that permit Contract Farming:
Punjab, Haryana, Himachal Pradesh,
Uttarakhand, Rajasthan, Maharashtra,
Gujarat, Chhattisgarh, Madhya Pradesh,
Jharkhand, Andhra Pradesh, Orissa, West
Bengal, Karnataka, Kerala

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MAKING AGRI MARKETS WORK
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Scrutiny of contracts, public contract terms, and competition in
procurement (monopsony)
Incentivise smallholder inclusion
Link credit to CF, though not mandatory or exclusive (lower
interest rates for CF?)
Exempt F&V crops from APMC rules only for CF and Direct
purchase
Promote Producer Companies to organise/encourage market
oriented and business like co-operatives (New Generation Cooperatives) which can deal with CF agencies
7/20/2015
MAKING AGRI MARKETS WORK
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Role of the state- How Much regulation? Bihar v/s Gujarat in
APMC Act! Role of the state:
Promotion of producers’ organizations for marketing of farm
produce as PPP
Provide more of marketing extension to growers
Market orientation in terms of improved marketing practices at
the farmer level.
Incentivise/promote Group contracts to reduce information
asymmetry between firm and growers, transaction cost of
dealing with small growers and for better bargaining power to
growers
Legal protection to growers like in Japan/USA
7/20/2015
MAKING AGRI MARKETS WORK
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
Reform APMC markets- free licensing for better
competition, e-payment of market fee, ensure open
auction system, better facilities, PC representation in
APMC managment, denotification of CAs/Arthiyas
like in MP, (APMC markets serve as competitors to
contract and direct purchase and can help improve
the terms offered by CF/DP to growers as
contract/contact prices are benchmarked to APMC
prices, Make warehouse receipts applicable to less
perishable produce like potato/onions
7/20/2015
Farmers’ Need to Get Organized
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Group/ Co-operative Society/ Producer Company formation can
help in lowering transaction costs in marketing & purchase of inputs
and increasing bargaining strength
Helps in aggregation of marketable surpluses & value addition
and development of forward linkages with suppliers/ processors/
exporters/ futures market,
Facilitates access to technical services & credit,
Can help in owning & managing marketing/ processing facilities –
Farmers’ Markets coming up in many States – V & F Promotion
Council of Kerala, Ryathu Bazars in AP, Apni Mandis in Punjab are
examples,
ATMA Scheme & other Government Programmes promoting group
formation, capacity building, revolving funds, access to market
information, etc.
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Future Challenges
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Some States still not willing to allow direct marketing or
private markets – political opposition to direct marketing/
contract farming/ organized retail chain etc.
Authorities are overprotecting existing marketing channels –
not facilitating change/ competition/ new channels – also not
modernizing APMC Yards or improving management through
PPP
Trade/ movement restrictions still existing for certain
commodities
Single point levy of tax/ single point payment yet to be
facilitated in most States
APMC Rules not notified in many States for amended
provisions (Notified only in AP, HP, Karnataka, Maharashtra,
Rajasthan , M.P (only single license for more than one market),
Haryana (Only CF) & Orissa so far.
7/20/2015
Way forward
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Execution and not intent of APMC can be
questioned
India needs professionally managed APMCs to
safeguard the interests of millions of Small and
Marginal Farmers
Massive use of ICT will eliminate loose ends in the
process
APMC should act as marketing entity rather then
policing entity
7/20/2015
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Thank You
7/20/2015