India Needs a Paradigm Shift in Agriculture Marketing Policy

8/12/2019 India Needs a Paradigm Shift in Agriculture Marketing Policy

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Does India need a paradigm shift in agri-marketing system todevelop free and competitive agriculture markets?

Does India need a paradigm shift in agri-marketing system to developfree and competitive agriculture markets?

Does the country need to completely revamp its agriculture market management policies,ensure scientific pricing for agriculture products and introduce true competition in the marketto make them efficient?

India is a net surplus country when it comes to trade in agriculture produce and has see

significant growth in its food production over the last few decades but a large part ofpopulation still remains deprived of the basic access to nutrition and the middle class highlyvulnerable to food inflation.


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1. Bottlenecks due to inefficient marketsOne of the major bottlenecks in the availability and price of food for consumers is existence ofgrossly inefficient agricultural marketing and distribution system that was originally created tohelp the farmers realize justified and non-discriminatory price for crops and the consumersavailability of food at affordable prices. The existing policies have failed on both fronts.

2. Poor are most vulnerable to InflationIn India poor spend disproportionate part of their daily income to purchase food and thereforeinflation hurts them the most. The majority of the rural poor depend on agriculture for theirlivelihood; its the poor farmers themselves who suffer the most for lack of food.

3. Agri-marketing and distribution ecosystemWhile low yields, low productivity, soil degradation, climate change and lack of marketlinkages as the main factors affecting farmer income, one the big areas of concern is theprevailing Agri-marketing and distribution ecosystem in India. In India most of the agri-

marketing ecosystem is controlled by public sector. The Government is controlling theAgriculture-marketing distribution ecosystem through three key interventions.

1. Instituting a Minimum Support Prices regime for farmers2. Controlling the agriculture trade through 7500 APMC Markets (Mandis)3. Controlling procurement and distribution through various public sector entities like

Food Corporation of India (FCI)

4. Decontrolling the existing Agri-marketing ecosystem?The subject agriculture basically is a state subject under the Indian constitution; hence,respective state governments have also been vested with the power to enact laws on this

subject. States regulate the sale of agricultural produce by farmers under a collection of laws.These rules, collectively known as the Agricultural Produce Marketing Committees Acts,require farmers to sell their produce to licensed agents in APMC yards.

5. Existing Agri-marketing institutions have failed to keep with ti mes

The regulation of markets has achieved which were relevant when introduced have failed tokeep up with times and have become restrictive and have failed to provide an efficientagricultural marketing system to the country.

These development oriented institutions (e.g. the State Agriculture Marketing Boards, APMCs)have become revenue generating institutions rather than facilitating efficient marketingpractices to benefit the farmers and market participants.


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The non-transparencies in transactions, high markups, collusion and mushrooming of largeintermediary players have added to further inefficiencies and woes.

The inefficient distribution channel has lead to both high retail prices as well as price variationsof up to 250% across regions.

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Major challenges with APMC controlled marketingThe major problems faced in the process of marketing agricultural Produce through APMCmarkets include:

1. Restriction to provide or allow alternative marketing channels,2. Compulsory requirement of owning shops within APMC premises3. Requirement of minimum distance of private/cooperative markets from existing APMC

market4. Compulsory payment of market fee even if sale transaction takes place outside the market

yard5. Restriction on trading in another Mandi,6. Regulator and licence issuing authority one and the same,7. Levy of Market fee at each stage.

The farmers have to travel on an average 70-100 sq km for the purpose of marketing theirharvested agricultural produce. Due to non-availability Market/Mandi or an alternativemarketing channel nearby, farmers sell the agricultural produce at a price dictated by localtrader which many times even does not cover cost of cultivation.


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5. Plethora of Laws and Multiple Frameworks

Besides the plethora of orders that are promulgated by Centre and States from time to time,multiplicity in policies and framework and physical barriers between states have prevented

development of free and competitive agriculture markets in the country. Besides the existinglaws do not encourage much private sector investment in agriculture and participation inlogistics and storage. This is critical to issue of food wastage, combating hunger and improvingfood security.

6. Need for a paradigm shift in Agriculture marketing systemThough certain measures like introducing schemes for agri-warehousing, subsidy schemes forwarehousing and cold storages, tax incentives, introduction of warehousing act, model APMCact and other schemes shall help attract private players but these efforts do not cover the entirevalue chain.

What is the need to time is have paradigm shift in our agricultural marketing system whichhelps promotes an efficient markets, scientific storage, efficient logistics, predictable price

variation across regions and above all help institute free and competitive agriculture markets inthe country which ensures level playing field for both public & private sectors.

India Needs a Paradigm Shift in Agriculture Marketing Policy

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