Mains Marathon 2024

Approach Briefly introduce the agricultural marketing system in India. Highlight the primary challenges encountered in the upstream and downstream processes of marketing agricultural products in India. Propose reforms to address these challenges.. Conclude Suitably.

Introduction

The agricultural marketing system in India is a complex network that facilitates the distribution of agricultural products from farmers to consumers. It encompasses various activities, including the sale, transportation, processing, and storage of agricultural goods.Effective marketing of agricultural products is essential for maximizing farmers' income and ensuring a stable supply of food to consumers. However, both upstream and downstream processes in the marketing of agricultural products face numerous challenges that hinder their efficiency and profitability.

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Upstream Challenges

• Input Accessibility:
  • Farmers often face difficulties in accessing quality agricultural inputs, such as seeds, fertilizers, and pesticides.
  • Many smallholder farmers struggle to afford these inputs, leading to reduced production and competitiveness in the market.
• Supply Chain Inefficiencies:
  • Inefficiencies in the supply chain, including poor transportation and inadequate storage facilities, lead to delays in the delivery of inputs to farmers. This affects their ability to plant and harvest crops on time, ultimately impacting production.
• Financial Constraints:
  • Limited access to credit and financial services is a significant barrier for farmers. Many rely on informal lending sources, which often charge high interest rates, restricting their ability to invest in necessary inputs and technology.
  • According to a 2019 National Bank for Agriculture and Rural Development (NABARD) report, the average debt burden on a farmer’s family is over Rs 1 lakh.
• Knowledge and Skill Gap:
  • There is a lack of awareness and knowledge among farmers regarding modern agricultural practices, technologies, and market trends. This gap prevents them from adopting efficient farming methods and understanding market demands.
  • According to data from the National Sample Survey Office (NSSO), there is a significant disparity in internet access, with only 24% of rural households having access compared to 66% of households in urban areas.

Downstream Challenges

• Market Access:
  • Farmers often struggle to access markets where they can sell their produce. Geographical barriers, lack of transportation, and inadequate market infrastructure hinder their ability to reach consumers effectively.
  • The majority of Indian farmers sell their produce in local markets, the 77th round of the National Sample Survey by the National Statistical Office titled Land and livestock holdings of households and situation assessment of agricultural households has found.
• Price Fluctuations:
  • Agricultural products are subject to volatile price fluctuations due to factors like seasonality, demand-supply mismatches, and market speculation. This volatility makes it challenging for farmers to predict income and plan their production accordingly.
  • By declaring a commodity as essential under ECA 1955, the government controls the production, supply, and distribution of that commodity, and imposes a stock limit.
    • However, the Economic Survey 2019-20 highlighted that government intervention under the ECA 1955 often distorted agricultural trade while being totally ineffective in curbing inflation.
• Lack of Infrastructure:
  • The inadequacy of infrastructure, such as cold storage, transportation facilities, and processing units, hampers the efficient marketing of agricultural products. Poor infrastructure leads to increased post-harvest losses and reduced quality of products.
  • Around 33.1 % of total production is wasted each year due to the ineffective and inefficient post-harvest stages of the supply chain in India.
• Intermediaries and Commission Agents:
  • The presence of intermediaries and commission agents in the supply chain often reduces profits for farmers. These middlemen can take significant commissions, leading to farmers receiving only a fraction of the final market price.
  • Agricultural Produce Market Committee (APMC) markets have become monopsonistic with high intermediation costs.
• Quality Assurance and Standardization:
  • Maintaining product quality and standardization is a challenge for farmers. Without consistent quality, their products may face rejection in the market, leading to financial losses and reduced consumer trust.

Proposed Reforms in Agricultural Marketing:

• Standardization of Agricultural Markets:
  • It is proposed that a uniform mandi fee of 0.25% or 0.50% be levied nationwide for foodgrains, oilseeds and fruits & vegetables.
  • All trade in APMCs should be through open auctioning, involving multiple bidders for each lot. Such trades should be directly between buyers and sellers, with no middlemen charging commission.
• Storage and Banking Facilities near APMCs:
  • Distress sales can be avoided if facilities for bagging and storage, along with loans against warehouse receipts, are available to meet immediate cash requirements. These should exist in the vicinity of APMCs.
• Promote FPOs in Marketing:
  • Farmer producer organisations/companies should be encouraged to take up direct marketing of their members’ produce to large buyers and processors.
  • It will result in more competition and better prices at APMCs.
• Relax/abolish Essential Commodities Act(ECA):
  • ECA places restrictions on the movement of produce, stockholding, pricing and adoption of new technologies
  • The dismantling of such controls under ECA and other regulations would expand trade and lead to better realisations for cultivators.
  • The narrative of “ease of doing business” is necessary as much for agriculture as other businesses.
• Increase the number of markets:
  • According to the Ashok Dalwai Committee, India needs at least 30,000 farms to produce markets, as against the approximately 6,500 now.
  • There is a need for a “mini-market” concept to bridge this wide gap.
• Agri Tech Markets:
  • The government has created an electronic national agriculture market (eNAM) to connect all regulated wholesale produce markets through a pan-India trading portal.
  • Agri Tech startups should be roped in for a price discovery mechanism, so that price volatility can be controlled.

Conclusion

Addressing the upstream and downstream challenges in agricultural markets in India requires a multi-faceted approach involving government initiatives, private sector participation, infrastructure investment, and capacity building for farmers. By implementing these strategies, India can enhance the efficiency and profitability of its agricultural markets, ultimately benefiting farmers and ensuring food security for the nation.