Agriculture marketing
Agricultural Marketing, rather than production, is the key driver of the agriculture sector today, thanks to the new market realities posed by the increasing accent on globalization, liberalization and privatization of the economy. Market-driven production is an idea whose time has come. With the gradual shifting of agricultural system from subsistence to commercial one, there is increasing focus on Agripreneurship and Agri-marketing. It is the need of the time to tune up the Agricultural Marketing System of the country to enable the farmers to face the new challenges and reap the opportunities as well. This summons us to revisit our traditional statistic policies and laws and bring about the requisite reforms in the sector.
Agricultural Produce Market Committee act 2003
Agricultural Produce Market Committee (APMC) is a statutory market committee constituted by a State Government in respect of trade in certain notified agricultural or horticultural or livestock products, under the Agricultural Produce Market Committee Act issued by that state government.
Under Constitution of India, agricultural marketing is a state (provincial) subject. While intra-state trades fall under the jurisdiction of state governments, inter-state trading comes under Central or Federal Government (including intra-state trading in a few commodities like raw jute, cotton, etc.). Thus, agricultural markets are established and regulated mostly under the various State APMC Acts. Most of the state governments and Union Territories have since enacted legislations (Agriculture Produce Marketing Committee Act) to provide for development of agricultural produce markets and to achieve an efficient system of buying and selling of agricultural commodities. Except the States of Jammu and Kashmir, Kerala, Manipur and small Union Territories such as Dadra and Nagar Haveli, Andaman and Nicobar Islands, Lakshadweep, etc. all other States and UTs in the country have enacted such State Marketing Legislations. The purpose of these Acts is basically the same i.e. regulation of trading practices, increased market efficiency through reduction in market charges, elimination of superfluous intermediaries and protecting the interest of producer-seller.
Problems with APMC’s and Model APMC act
The APMC system was introduced to prevent distress sale by farmers to their creditors, to protect farmers from the exploitation of intermediaries and traders and to ensure better prices and timely payment for their produce through the auctions in the APMC area. However, APMC Acts restrict the farmer from entering into direct contract with any processor/ manufacturer/ bulk processor as the produce is required to be routed through these regulated markets. Over a period of time, these markets have acquired the status of restrictive and Monopolistic markets, harming the farmers rather than helping them to realise remunerative prices.
The APMC Act treats APMC as an arm of the state and the market fee as the tax levied by the state, rather than as a fee charged for providing services, which acts as a major impediment in creating a national common market.
Various taxes, fees/charges and cess levied on the trades conducted in the markets or Mandis are also notified under the APMC Act. APMCs charge a market fee from buyers, and a licensing fee from the commissioning agents who mediate between buyers and farmers. They also charge small licensing fees from a whole range of functionaries (warehousing agents, loading agents etc.). In addition, commissioning agents charge commission fees on transactions between buyers and farmers. The levies and other market charges imposed by states vary widely. Statutory levies/mandi tax, VAT etc. all add up to hefty amounts, create market distortions with cascading effects and strong entry barriers. Further, multiple licences are necessary to trade in different market areas in the same State. All this has led to a highly fragmented and high-cost agricultural economy, which prevents economies of scale and seamless movement of agri goods across district and State borders.
APMC operations are hidden from scrutiny as the fee collected, which are at times exorbitant, is not under State legislature’s approval. Agents in an APMC may get together to form a cartel. This creates a monoposony (a market situation where there is only one buyer who then exercises control over the price at which he buys) situation. Produce is procured at manipulatively discovered price and sold at higher price, defeating the very purpose of APMCs.
In order to deal with the challenges of APMC’s Central government introduced Model APMC act in 2003. Salient features of the act are as follows:
- Legal persons, growers and local authorities are permitted to apply for the establishment of new markets for agricultural produce in any area. Under the existing law, markets are setup at the initiative of State Governments alone. Consequently, in a market area, more than one market can be established by private persons, farmers and consumers.
- There will be no compulsion on the growers to sell their produce through existing markets administered by the Agricultural Produce Market Committee (APMC). However, agriculturist who does not bring his produce to the market area for sale will not be eligible for election to the APMC
- Separate provision is made for notification of ‘Special Markets’ or ‘Special Commodities Markets’ in any market area for specified agricultural commodities to be operated in addition to existing markets.
- A new Chapter on ‘Contract Farming’ added to provide for compulsory registration of all contract farming sponsors, recording of contract farming agreements, resolution of disputes, if any, arising out of such agreement, exemption from levy of market fee on produce covered by contract farming agreements and to provide for indemnity to producers’ title/ possession over his land from any claim arising out of the agreement
- .Provision made for direct sale of farm produce to contract farming sponsor from farmers’ field without the necessity of routing it through notified markets.
- Provision made for imposition of single point levy of market fee on the sale of notified agricultural commodities in any market area and discretion provided to the State Government to fix graded levy of market fee on different types of sales.
- Licensing of market functionaries is dispensed with and a time bound procedure for registration is laid down. Registration for market functionaries provided to operate in one or more than one market areas.
- Commission agency in any transaction relating to notified agricultural produce involving an agriculturist is prohibited and there will be no deduction towards commission from the sale proceeds payable to agriculturist seller.
- Provision made for the purchase of agricultural produce through private yards or directly from agriculturists in one or more than one market area.
Agriculture marketing and e-NAM
Union Budget 2014-15 and Union Budget 2015-16 had suggested the creation of a National Agricultural Market (NAM) as a priority issue. In July 2015, Union Cabinet unveiled its plan to go ahead with the project amidst the constitutional constrains as mentioned above.
The National Agriculture Market is envisaged as a pan-India electronic trading portal which seeks to network the existing APMCs and other market yards to create a unified national market for agricultural commodities. NAM is a “virtual” market but it has a physical market (mandi) at the back end. NAM is proposed to be achieved through the setting up of a common e-platform to which initially 585 APMCs selected by the states will be linked. The Central Government will provide the software free of cost to the states and in addition a grant of up to Rs. 30 lakhs per mandi will be given as a onetime measure for related equipment and infrastructure requirements. In order to promote genuine price discovery, it is proposed to provide the private mandis also with access to the software but they would not have any monetary support from Government.
Post harvest technology and value addition in Food Processing
v While increased productivity is an essential component of a vibrant agricultural sector, improved post-harvest handling and processing is essential to ensure high-quality products reach the markets.
v Too often, even when the yields are high, producers lose income due to poor post-harvest practices.
v Effective post-harvest management allows not only the minimization of losses but also increases the value of the marketed agricultural products by transforming the agricultural raw materials (fruit juice, jam, cheese; salting, drying, smoking).
v Good processing enables preservation of product quality at every stage of the marketing process.
v Attractive packaging makes the product more appealing to consumers who are therefore willing to pay more if the product offered is of good quality and easy to use. Growth in the State of Indian Agriculture food processing sector.
Food Processing Sector
v Food processing aims to make food more digestible, nutritious and extend the shelf life. Due to the seasonal variations high levels of wastage or shortages can arise if adequate measures are not taken to preserve and store the foods.
v Food processing covers all the processes that food items go through from the farm to the time it arrives on the consumer’s plate. It includes basic cleaning, grading and packaging as in case of fruits and vegetables and also alteration of the raw material to a stage just before the final preparation.
v Value addition processes to make ready-to eat food like bakery products, instant foods, flavored and health drinks, etc. is also included in this definition.
v Processed food can be customized to suit the nutritional requirements of groups such as the elderly, pregnant women, infants, young children and athletes.
v Such foods are characterized by a balanced composition of energy suppliers in the form of fats, carbohydrates and proteins, and by a combination of vitamins and minerals composed according to the current state of scientific knowledge.
v Food processing offers an opportunity for the creation of sustainable livelihoods and economic development for rural communities. Food processing has come a long way in the last few decades.
v The ever changing lifestyles, food habits and tastes of customers’ globally have altered the dynamics of the industry. The world food production and consumption patterns are evolving with a change in the needs of the customer.
v Increasing demand for ethnic and different foods from customers across the world has redefined the market canvas for food processors across the world.
v With these changes, producers, processors, retailers and suppliers of food, world over, are reorienting their business plans to meet the new demands of the customers.
v Food processing benefits all the sections of the society. It helps the:
ü Farmers – get higher yield, better revenues and lower the risks drastically,
ü Consumers – have access to a greater variety, better prices and new products,
ü Economy – gets benefitted with new business opportunities for the entrepreneurs and the work force gets employment.
STATUS OF POSTHARVEST HANDLING
v Poor infrastructure for storage, processing and marketing in many countries of the region contributes to a high proportion of waste, which average between 10 and 40%.
v Major infrastructural limitations also continue to impose severe constraints to domestic distribution as well as to the export of horticultural produce.
v Considerable waste occurs owing to the fact that small farmers lack resources and are unable to market their produce and implement suitable postharvest handling practices. Spoilage of fresh produce is also accelerated by the hot and humid climate of the region.
v Postharvest management and processing of horticultural produce has assumed considerable significance in light of increasing demand for fruits and vegetables in the region
v Although India is a major producer of horticultural crops, many Indians are unable to obtain their daily requirement of fruits and vegetables and the Human Development Index (HDI) is very low.
v Considerable quantities of fruits and vegetables produced in India go to waste owing to improper postharvest operations and the lack of processing. This results in a considerable gap between gross food production and net availability
CAUSES OF POSTHARVEST LOSSES
Postharvest losses are caused by both external and internal factors.
External Factors Which Lead to Postharvest Losses
Mechanical Injury
ü Fresh fruits and vegetables are highly susceptible to mechanical injury owing to their tender texture and high moisture content.
ü Poor handling, unsuitable packaging and improper packing during transportation are the cause of bruising, cutting, breaking, impact wounding, and other forms of injury in fresh fruits and vegetables.
Parasitic Diseases
ü The invasion of fruits and vegetables by fungi, bacteria, insects and other organisms, is a major cause of postharvest losses in fruits and vegetables.
ü Microorganisms readily attack fresh produce and spread rapidly, owing to the lack of natural defense mechanisms in the tissues of fresh produce, and the abundance of nutrients and moisture which supports their growth.
ü Control of postharvest decay is increasingly becoming a difficult task, since the number of pesticides available is rapidly declining as consumer concern for food safety is increasing.
Internal Factors
Physiological Deterioration
ü Fruit and vegetable tissues are still alive after harvest, and continue their physiological activity.
ü Physiological disorders occur as a result of mineral deficiency, low or high temperature injury, or undesirable environmental conditions, such as high humidity.
ü Physiological deterioration can also occur spontaneously owing to enzymatic activity, leading to overripeness and senescence, a simple aging phenomenon.
SCOPE AND STRATEGIES
Proper postharvest management practices for minimizing losses and for improving marketing are generally not followed in India
Raw Material
ü No matter how perfect postharvest operations are, good returns cannot be obtained from poor quality raw materials.
ü The selection of suitable varieties is, therefore, essential. Linking production to postharvest operations is essential to optimizing results. Pre-harvest parameters such as selection of proper planting material, crop management, and disease and pest control must be geared toward producing high quality produce.
ü Once the crop is ready for harvest, attention must be paid to the harvesting technique/procedure. Poor harvesting practices can lead to irreparable damage to horticultural produce.
ü It is therefore necessary to standardize maturity indices and harvesting techniques for each and every fruit and vegetable in order to minimize damage at the time of harvest.
Packing Stations
ü There is an absolute lack of the concept of packing house establishments in India. Fruits and vegetables are generally packed in the field without any pretreatment. Some are even transported without any packaging.
ü In developed countries on the other hand, fruits and vegetables are generally selected, cut, placed in bulk containers and transported to packing stations where they are trimmed, sorted, graded, packed in cartons or crates and cooled.
ü They are temporarily placed in cool storage for subsequent loading or are loaded directly onto refrigerated vehicles, and transported to market. A number of important operations are also carried out at packing stations. These include SO2 fumigation, fungicidal dipping, surface coating with wax, degreening of citrus, ripening and conditioning, vapor heat treatment etc.
ü Due to the lack of proper packaging systems in India, large volumes of the inedible portions of vegetables such as cauliflower, peas etc. are transported to wholesale markets from the field.
ü They are discarded to various degrees and large quantities of biomass which could be used as value added products are wasted. Removal of these inedible vegetable portions prior to marketing would reduce both transportation costs and environmental pollution.
ü These inedible vegetable parts ultimately undergo decomposition, cause sanitation problems and produce gases which are detrimental to the environment. Farmer’s cooperatives and other agencies should, therefore, be encouraged to establish packing stations at nodal points to augment the marketing of fresh horticultural produce
Primary Processing
ü Unlike durable crops such as cereals, pulses and oilseeds, fresh fruits and vegetables are highly perishable, and must be marketed immediately after harvesting without primary processing. Fruit and vegetables generate large quantities of valuable waste that ends up as garbage.
ü However, if they are gainfully utilized at the proper time they can become value added products. Vegetables such as cauliflower, peas, leafy vegetables, etc. can be minimally processed at packing stations immediately after harvesting, through the removal of inedible parts, following which they can be marketed in metro city markets in unit packs.
ü Between 10 and 60% of the fresh fruits and vegetables marketed and purchased by consumers in India are rejected as inedible. In villages or small towns the inedible portions of fruits and vegetables are either fed to animals or are discarded as garbage by consumers in metro cities
ü Primary processing of food crops other than horticultural crops has its origin from the dawn of civilization. It was a necessary step to the consumption of foods such as rice, wheat oilseeds, etc.
ü Processing not only renders these commodities edible, but also adds value to them. Value-addition to horticultural crops was never considered essential, owing to the fact that many of these fruits and vegetables, e.g., tomato, melon, cucumber, carrot, etc. could be directly consumed after harvesting.
ü Today, there is considerable interest in processing to add value, as well as to reduce losses in fruits and vegetables.
Packaging
ü Packaging is an integral element in the marketing of fresh horticultural produce. It provides an essential link between the producer and the consumer. Owing to its favorable properties, wood has remained the main packaging material for fruits and vegetables.
ü Timber conservation is, however, critical in order to maintain an ecological balance, and there is an urgency to identify substitutes for the use of timber in an effort to protect forest resources in many developing countries. Packaging has been identified as one of the most important areas where substitution of wood is not only possible but also obviously desirable.
ü Considerable work has been done by different agencies in introducing alternative types of packaging. Corrugated fibre board (CFB) containers consume one third of the wood required for producing timber boxes of the same size. CFB boxes can also be fabricated from kraft paper produced from bamboo, long grasses and many other types of agricultural residues like bagasse, paddy, cotton stalk, jute stick, wheat straw and recycled paper and cardboard.
ü Packaging produced from timber is often used as a source of firewood, owing to the severe shortage of fuel wood in India. CFB cartons on the other hand are recycled as pulp or paper.
ü Thus switching over from wood to CFB boxes for the packaging of horticultural produce is a very practicable and environmentally friendly option. Increased use of corrugated cartons for local distribution of produce could be accomplished with improvement in the quality of boxes produced in India.
ü The ventilated CFB box which contains ventilated partitions, and which was developed at the IARI was found to be ideal for the packaging and transportation of fruits, owing to the comparably minimal level of bruising observed in these boxes. Cushioning materials used in the packaging of fruits and vegetables in wooden boxes include dry grass, paddy straw, leaves, sawdust, paper shreds etc., all of which end up as garbage and add to environmental pollution in cities. Moulded trays or cardboard partitions used in CFB boxes are, however, easily recycled.
Palletization
ü Loading and unloading are very important steps in the postharvest handling of fruits and vegetables but are often neglected.
ü The individual handling of packaged produce in India leads to mishandling and to high postharvest losses in India.
ü With the introduction of CFB boxes, serious consideration should be given to the introduction of palletization and mechanical loading and unloading of produce particularly with the use of fork-lift trucks, in order to minimize produce mishandling.
Storage
ü The lowest temperature that does not cause chilling injury is the ideal storage temperature for fresh fruits and vegetables. Mechanical refrigeration is generally used for the storage of fruits and vegetables.
ü Mechanical refrigeration is, however, energy intensive and expensive, involves considerable initial capital investment, and requires uninterrupted supplies of electricity which are not always readily available, and cannot be quickly and easily installed.
ü Available cold storage in India is used primarily for the storage of potatoes. Appropriate cool storage technologies are therefore required in India.
Containerization
ü The use of containers for the transportation of goods was recently introduced into India. Relatively little attention has, however, been given to the use of containers for the transport of fresh horticultural produce.
ü Containerization provides an excellent system for the shipment of goods from one place to another. Refrigerated containers are used in the transportation of fruits, vegetables and flowers in many developing countries.
ü The design and fabrication of ventilated containers which incorporate evaporative cooling systems should be considered for the Indian context.
ü One of the greatest advantages of the container is that it can be placed on truck or rail, without interfering with the movement of the vehicle. Palletization and containerization will go a long way in developing local and international trade.
Rapid Transportation Systems
ü Railways and roads are two important transportation systems for the movement of goods in India.
ü The use of railways for the transportation of fruits and vegetables in India could be greatly enhanced by: making provisions for cooling and ventilation, providing improved handling facilities at platforms and providing storage space to accommodate the goods upon arrival at their destinations.
ü Similarly road services could be considerably improved by widening roads, upgrading surfaces and through the introduction of one way traffic. Long waits at level crossings should be avoided by introducing flyovers at intersections in order to increase the speed and movement of goods by road. Facilities such as sheds, for temporary cool storage should be available on highways and major roads.
Processing of Unmarketable Fruits and Vegetables and Factory Waste
ü Considerable volumes of unmarketable and physically damaged fruits and vegetables that are without infection can be converted into value added products by processing. Byeproducts of fruit and vegetable processing could also be gainfully utilized.
The Way Forward
The measures to strengthen the food processing include the following:
v Agriculture must diversify in favor of high-value enterprises. The emphasis should be on production of high value commodities for example, fruits, vegetables and fish with enhanced quality and specific nutritional and processing characteristics, rather than increasing production per se as in the past. Pricing policies also need to be changed, as linking these with the quality of the produce or a product is the basis for fixing per unit price, just as fat content in milk; higher protein quality/ quantity in wheat; better aroma or cooking quality in rice and shelf life of fruits and vegetables.
v Since marketing of products is more remunerative than sale of raw commodities, farmer – processor linkages are needed to add value as per demands of the consumers.
v There is great scope of developing some of our traditional food items from cereals, fruits, milk, poultry and fish. Appropriate and cost-effective packaging technology for these items is needed to ensure safety and prolonged shelf life.
v Agriculture is fast becoming demand driven from the earlier supply driven situation. Farmers will have to grow specific varieties needed for processing or add value to their produce. Policy and legislation should be reformed to allow processors to purchase their produce requirement directly from the farmers.
v Intermediaries in the food chain lock value and add to the cost of the raw materials sometimes by even 80 to 100 per cent.
v Self-help or common interest groups, producer companies on the model of cooperatives should be encouraged to enhance the bargaining power of the farmers and negotiate effectively with the industry, just as is being done in Kerala and Punjab.
v The Town and Village Enterprises (TVEs) model of China is an excellent example for involving surplus rural labor in industrial activity by providing them alternative work at their doorstep. This can be considered for adoption with suitable modifications, for primary processing of the agricultural produce and effectively linked to urban units for secondary processing, product development and marketing.
v Location of food-processing units should be strategically placed depending upon the raw material availability, labor, product utilization and domestic and/or export marketing. It should be nurtured to evolve on a natural course after the initial nucleation, as has been done for the IT industry.
v Often indigenous technologies are better suited for application than the imported ones. A scientific database of these technologies should be created to form a basis for the ones that are offered to us by other countries. There are nearly 200 major indigenous technologies for food processing which have been listed by CFTRI. NABARD or other financial institutions need to finance this activity.
v The creation of commodity-based management systems would be beneficial. These could advise the government and R&D institutions to take steps proactively, based on continuous tracking of the demand, supply, consumer needs and prices both in the domestic and international markets. The intelligent information collecting system should be networked with all user agencies and farmers in the country, using the latest IT technologies and infrastructure.
v The processing of agricultural raw material generates a sizable amount of utilizable byproducts, commonly termed as ‘waste’. Experimental protocols for converting these into usable secondary or co-products are available. These need to be developed into commercially viable technologies.
Plan Schemes by Government of India in Food Processing Sector
Scheme for Infrastructure Development
v The creation of integrated and holistic infrastructure is extremely important for the food processing sector.
v Towards achieving this end the Ministry of Food Processing Industries (MOFPI) had launched new schemes in eleventh FYP for the creation of modern enabling infrastructure that can facilitate the growth of food processing and an integrated cold chain mechanism for handling perishable produce.
v The MOFPI initiatives include a launch of the following schemes for strengthening infrastructure in agro and food processing sector, it had launched the Mega Food Parks Scheme; the Scheme for Cold Chain; Value Addition and Preservation Infrastructure and the Scheme for Construction and Modernization of Abattoirs.
Mega Food Parks Scheme (MFPS)
v The Mega Food Parks Scheme is the flagship programme of the Ministry of Food Processing Industries (MFPI) during the eleventh Five Year Plan.
v The Scheme aims to accelerate the growth of the food processing industry in the country by facilitating establishment of strong food processing infrastructure backed by an efficient supply chain.
v The Mega Food Parks Scheme provides for a capital grant of 50 percent of the project cost in difficult and ITDP notified areas (with a ceiling of Rs 50 crore).
v The grant shall be utilized towards creation of common infrastructure in Central Processing Centre (CPC) and Primary processing Centres (PPCs) in the park. Such facilities are expected to complement the processing activities of the units proposed to be set up at the CPC in the Park. Each Mega Food Park may take about 30-36 months to be completed.
v Out of 30 Mega Food Parks proposed during the eleventh five year plan, the Ministry has taken up 15 projects under the Scheme so far.
v Among these, final approval has been accorded to 15 Mega Food Parks in the states of Andhra Pradesh, Punjab, Jharkhand, Assam, West Bengal, Uttarakhand, Tamil Nadu, Maharashtra, Gujarat, Uttar Pradesh, Madhya Pradesh, Tripura, Orissa, Bihar and Karnataka.
v The total assistance from the government to these projects is estimated at Rs.750 crore. In addition to these, 15 new Mega Food Parks have been recently approved by the government.
Scheme for Cold Chain, Value Addition and Preservation Infrastructure
v The Task Force on Cold Chain set up by the Ministry of Agriculture has identified a huge gap of 9 to 10 million tonnes of cold storage capacity in the country.
v The Ministry of Food Processing Industries through its Scheme for Cold Chain, Value Addition, and Preservation Infrastructure has been successfully addressing the above issue.
v The Scheme was approved in 2008 with an objective to provide integrated and complete cold chain, value addition and preservation infrastructure facilities without any break, for perishables from the farm gate to the consumer.
v The assistance under the Scheme includes financial assistance (grant-in-aid) of 50 percent of the total cost of plant and machinery and technical civil works in General areas and 75 percent for the NE region and difficult areas subject to a maximum of Rs 10 crore
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