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RURAL MARKETING
Unit Structure :
1.0 Objective
1.1 Introduction
1.2 Concept
1.3 Characteristics of Rural Marketing
1.4 Scope of Rural Marketing in India
1.5 Significance/Importance of Rural Marketing
1.6 Exercises
1.0 OBJECTIVES
The marketing concept is the philosophy that firms should analyze the
needs of their customers and then make decisions to satisfy those needs,
better than the competition. As per our syllabus objectives of this
chapter are:
a) To know the meaning and concept of Rural marketing.
b) To understand the characteristics of Rural marketing
c) To learn the scope of Rural Marketing
d) To know the significance of Rural Marketing
1.1 INTRODUCTION
As per ancient text the term “Rural” is known in classical literature as
“GRAM” Historically this term is kn own as village. Village means
location situated on the bank of river, a small group of people having large
homogeneity of cultural and living traits.
The “Market” is a place where buyers and Sellers Exchange Things. In lay
man terms "It is a place where b uyers and sellers exchange goods/Service
for some value in return such as Money". So the Market is same
everywhere. But the difference is in the consumer behavior.
Even today more than 65% population is staying in villages. As a result
of the “Green Revol ution” there is a socio - economic revolution taking
place in Indian villages since last three decades. The knowledge of
fertilizers, water resources, pesticides, and better quality seed has been
increased. Methods of farming have changes the villages far better. Per
capita income is also increased which change the manner to spend the munotes.in
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2 money by rural people. The villages have accepted modern technology in
agricultural. At the same time rural people accepted modern living. People
in villages are demanded from fast foods to cars. In short life style of
rural people has change in passage of time. These changes in villages have
led villagers to think of material well -being. The expanding rural market is
important to the growth of economic development of India. With the
change of attitude of the Indian farmers the marketing focus is also
changing towards villages. The slogan of Mahatma Gandhi “Go to
villages” came in truth in modern marketing concept.
An attempt is made in this chapter, to understand the basic conce pt of rural
marketing, its characteristics, scope, significance, factors, and problems of
rural marketing.
1.2 CONCEPT
Marketing:
The marketing concept is the philosophy that firms should analyze the
needs of their customers and then make decisions to satisfy those needs,
better than the competition. Marketing generally involves a series of
planned activities involved in moving goods from point of production to
the point of consumption. It includes all the activities involved in the
creation of demand, time frame, place, form of possession and utility,
marketing is undisputedly the most important function of all business
organizations worldwide. Marketing starts with human needs, wants and
demands. Substantially, met with the availability of products and
solutions in the form of goods, services and ideas.
https://www.objectivequiz.com
Marketing is the promotion of business products or services to a target
audience. It is, in short, an action taken to bring attention to business
offerings they can be physic al goods for sale or services offered.
In 1776 in The Wealth of Nations, Adam Smith wrote that the needs of
producers should be considered only with regard to meeting the needs of
consumers. While this philosophy is consistent with the marketing
concept, it would not be adopted widely until nearly 200 years later. munotes.in
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3 Definition of Marketing :
The word market is derived from Latin word ‘Marcatus’ means trade or a
place where business is conducted. The term marketing is defined as a
“Business activity planned at satisfying to a reasonable extent, consumer
or customer needs and wants, generally through an exchange process”
Philip Kotler defines marketing as “a social and managerial process by
which individuals and groups obtain what they need and want through
creating, offering and exchanging products of value with others”
As per the definition by the American Marketing Association “Marketing
is the process of planning and executing the conception, pricing promotion
and distribution of ideas, goods and services to create exchanges that
satisfy individual and organizational goals.
Rural Marketing:
Rural marketing is now a two -way marketing process. There is inflow of
products into rural markets for production or consumption and there is
also outflow of products to ur ban areas. The urban to rural flow consists of
agricultural inputs, fast -moving consumer goods (FMCG) such as soaps,
detergents, cosmetics, textiles, and so on. The rural to urban flow consists
of agricultural produce such as rice, wheat, sugar, and cotton . There is also
a movement of rural products within rural areas for consumption.
National commission on Agricultural of India defines “Rural marketing as
a process which starts with a decision to produce a saleable farm
commodity and it involves all the as pects of market structure or system
both functional and institutional based on technological and economic
considerations and includes pre and post-harvest operations assembling
grading storage transportation and distribution”.
www.downtoearth.org.in
A large variety of transactions are considered as a part of rural
marketing.
These are marketing of:
a) Agricultural inputs like fertilizers, pesticides, farm equipments.
b) Products made in urban centers and sold to rural areas like soaps,
toothpastes, TVs etc. munotes.in
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4 c) Products made in rural areas sold to urban centers like khadi cloth
handcrafted products, etc.
d) Products made and sold in rural areas like milk and milk products
locally manufactured toothpowder, cloth etc.
1.3 CHARACTERISTICS OF RURAL MARKETING
Rural marketin g is the process of developing, pricing, promoting
distributing rural specific goods and a service leading exchanges between
urban and rural markets which satisfies consumers demand and also
achieves organizational objectives. Indian Rural Marketing in twenty first
century offers great challenge
and promise to all people in the rural marketing chain. Rural marketing in
India is a complex mix of factors such as, social, historical, cultural
technical, economical and business. Good Rural marketing gives a
multiplier effect and act as a booster to the economy. Some of the
important characteristics of rural marketing are specified as under.
1. Large and scattered population :
According to the 2011 census, 741.7 million India’s population lives in
rural areas. The rate of increase in rural population is also greater than
that of urban population. The rural population is scattered in over 6,
38,365 villages. The rural population is highly scattered, but holds a big
promise for the marketers.
2. Rising disposable income of Rural Customers :
New tax structures, good monsoon, the green revolution and the
administered pricing mechanism have raised disposable incomes in rural
areas. Today the rural consumer shops for value. This income attracts
companies for marketing t heir products in rural areas.
3. Higher purchasing capacity :
Purchasing power of the rural people is on the rise. Marketers have
realized the potential of rural markets, and thus are expanding their
operations in rural India. In recent years, rural market s have acquired
significance in countries like China and India, as the overall growth of
the economy has resulted into substantial increase in purchasing power of
rural communities.
4. Market growth:
The rural market is growing steadily over the years. Dem and for
traditional products such as bicycles, mopeds and agricultural inputs,
branded products such as toothpaste, tea, soaps and other FMCGs and
consumer durables such as refrigerators, TV and washing machines have
also grown over the years.
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5 5. Developm ent of infrastructure :
There is development of infrastructure facilities such as construction of
roads and transportation, communication network, rural electrification and
public service projects in rural India, which has increased the scope of
rural mark eting. Even today most villages in the country are inaccessible
during the monsoons. Moreover 3 lakh villages in the country have no
access to telephones. Other communication infrastructure is also highly
under developed. Many rural areas are not connected by rail transport.
50% of roads have been poorly surfaced and majority is severely damaged
by monsoons.
6. Low standard of living :
The standard of living of rural areas is low and rural consumers have
diverse socio -economic backwardness. This is diverse in different parts of
the country. A consumer in a village area has a low standard of living
because of low literacy, low per capita income, social backwardness and
low savings.
7. Traditional outlook :
The rural consumer values old customs and traditions. They do not prefer
changes. Gradually, the rural population is changing its demand pattern,
and there is demand for branded products in villages.
8. Marketing mix :
The urban products cannot be dumped on rural population separate sets of
products are desi gned for rural consumers to suit the rural demands. The
marketing mix elements are to be adjusted according to the requirements
of the rural consumers.
9. Diverse socio -economic background :
This is different in different parts of the country and brings diversity in
rural markets.
10. Changing demand pattern :
Demand pattern of rural customer is fast changing due to increasing in
income and credit facilities offered by banks like ‘Kisan credit card’.
11. Major income from agriculture :
About 60% of the rura l income is from agriculture and hence the demand
for consumer goods is high during harvesting season.
12. Saving habits:
Rural consumer is now having saving habits due to the efforts of co-
operative and commercial banks. In place of purchasing high price
products they preferred low price product and unspent amount is save for
future needs. munotes.in
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6 13. Media reach :
The reach of print media is 10% followed by TV 31%, radio 31% and
cinema 33%. The growth of satellite TV channels has had a major impact
on villagers. It has led to a change in lifestyle. Consumption of non-food
items has increased. Since to accessibility of television is high compared
to other media, its capacity to arouse interest is also high. Rural
consumers now aspire to by brands rather than just purchase
commodities.
14. Communication :
There is substantial improvement in all communication fields since one
decade. Even though as per Indian Express report about 6 lakhs villages
are without telephone facilities. Today, some of the mobile companies
reach to villages which increase communication facilities for rural
consumers. This help for increase in purchasing power of villagers.
15. Electrification :
When India became independent in 1947, electricity was available in a
few villages and merely touche d a few town and cities. At the time of
five year plans in 1951about 3000 villages were provided electricity and
nearly 21000 irrigation pump sets were energized. In 1965 -67, a rural
electrification programme was devised for increasing the infrastructural
inputs for agricultural production programs. To implement the
programme effectively the Rural Electric Corporation was set up. At
present 88% of villages have been electrified and rest will soon get
electricity by “Rural Electricity Corporation”. Due to improve of this
technical service the standard of living of rural peoples has been
increased.
1.4 SCOPE OF RURAL MARKETING IN INDIA
The new generation is no longer shying away from agriculture as a career.
Many government initiatives like MNREGS and minimum support prices
for various agriculture products have also given rural people a healthy
income. There is no scarcity of job opportunities for the urban youth as
well. In sectors like FMCG, automobile, retail, research and advertising,
there are numerous prospects which are available at various levels in
major companies having their operations in the rural sector.
The incursion of national and local brands into rural areas provides
employment opportunities to the masses there. To exist in these markets,
comp anies are coming up with money -spinning business models and are
also appealing to the local population, as people in rural areas buy things
based on the recommendation of others or those they are comfortable
with.
The unappreciated rural story is now fast catching up and has opened the
floodgates of prospects for those interested in making careers in this field. munotes.in
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7 Below are the few points why organizations are looking at rural
marketing with a positive attitude.
1. Population
The rural population is large and its growth rate is also high. Despite the
rural urban migration, the rural areas continue to be the
place of living for a vast majority of Indians. According to 2011 Census
rural population is 72% of total population and it is scattered over a
wide range of geographic area. That is 12% of the world population which
is not yet fully utilized.
2. Rising rural prosperity
Average income level has unproved due to modern farming practices,
contract farming industrialization, migration to urban areas etc. There
has been an overall increase in economic activities because during the
planned rural development heavy outlay of resources on irrigation,
fertilizers, agricultural equipment’s and agro processing industry has been
made. Saving habits in rural people also has increased. This too
contributes in higher purchasing power
3. Growth in consumption
There is a growth in purchasing power of rural consumers. But, the
average per capita house hold expenditure is still low compared to urban
spending. The average per cap ita household expenditure is Rs. 382. The
average rural house hold spend on consumables excluding food grains,
milk and vegetable is Rs. 215 with the most affluent households, the rich
spending around Rs. 333 and the least affluent ones spending about Rs.
166.
4. Change in life style and Demands
Life style of rural consumer changed considerably. There has been
increase in demand for durables and non -durables like table fans, radios,
mopeds, soaps, etc. by rural consumers. This provides a ready market for
the producers. Rural market is expanding day after day.
5. Life cycle advantage
The products which have attained the maturity stage in urban market is
still in growth stage in rural market, e.g. popular soaps, skin cream, talcum
powder, etc.
6. Decision -maki ng Units
Women in rural areas are beginning to make fast decisions for purchases.
Studies reveal that 72.3% decisions are taken jointly in a family. With
education and mass media, role of children in decision making is also
changing
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8 7. Market Growth Rate Higher than Urban
As per the survey made by NCAER the growth rate of FMCG market and
durables market is higher in rural areas. The rural market share is more
than 50% for products like body talcum powder, toilet soaps cooking oil,
hair oil etc. The durable market offers an excellent proposition. Following
table compares the durable owned and estimates of future sales along
growth rates in
rural and urban areas. The growth rates for all the three groups of
durable for rural areas are much higher than those in urban area.
Consumer Durables Rural Vs. Urban
For analysis purpose the durable are classified in the following three
groups.
Group I- Less than Rs. 1000 in value. Items like transistors, pressure
cooker, wrist watches and bicycles.
Group II- Rs.1001 -Rs.6000 in value. Items like sewing machines,
Mixers and Cassette recorders, etc.
Group III- above Rs. 6000 Items like Color TVs, Refrigerators, Two
wheelers , Mashing machines. Etc.
8. Rural Marketing is not expensive
Conventional wisdom dictates that since rural consumers are mostly
dictates that selling in rural India is not expensive. According to the
research by Anurag -Madison it costs roughly Rs. 1 crore to promote a
consumer durable inside a state. This includes the expenses of advertising
in vernacular newspapers, television spots, in-cinema advertising radio,
van operation and merchandising and point of purchase promotion.
Campaign like this which can be reaching millions cost twice as much in
urban area.
Groups
Areas
Million units Growth % change
over previous
period
1994 -95 2001 -02 2010 -11 2001 -02 2010 -11 I Urban 140.10 195.15 245.09 39.29 25.59
Rural 224.17 330.63 430.93 47.49 30.34
II Urban 61.44 95.54 122.70 55.50 28.42
Rural 43.54 100.13 144.83 129.97 44.64
III Urban 35.99 83.05 138.31 130.76 66.54
Rural 11.24 29.90 57.10 166.01 90.97
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9 9. Skill Development
The Indian government in the past few years has begun concentrating on
providing vocational education to rural men and women. These skill
development curricula help them to get empl oyment and many of them,
with the help and financial support of the government, start their own
small businesses. Many private companies are also training these masses
in various fields and later give them jobs in their own organizations.
This is helping people in getting employment in their own localities and
companies are also gaining as they get this workforce at a very reasonable
price. Even the farming community has been endued by many
technological inventions, and many private companies have started using
mobiles as their means of business.
10. Education and Training
The growing requirement of skilled professionals in these markets has led
to the outgrowth of rural marketing as a subject and now it is taught in
almost all major management colleges in t he country. Degree and diploma
courses in rural management are offered by numerous management
institutes in the country.
The most accepted among them are MBA in Rural Management, Master
of Rural Management (MRM), Post Graduate Diploma Programme in
Rural De velopment Management, and Post Graduate Diploma in Rural
Marketing. Admission into these courses is through the All -India
entrance tests followed by group discussions and a personal interview. The
least qualification to appear in these tests is a graduatio n or an equivalent
degree from any recognized institute.
1.5 SIGNIFICANCE / IMPORTANCE OF RURAL
MARKETING
In recent years rural markets have gained prominence in countries such as
China and India, the overall growth of the economy has resulted in a
substant ial increase in purchasing power of rural communities, Due to
green revolution in India rural areas consume a large amount of industrial
and urban. Rural markets coincides with the marketing of agricultural
products, shows the first commercialization of rural areas for urban
consumers or businesses, while the rural markets is to provide products or
processed inputs or services, rural producers and consumers.
1) Huge Rural Market
In the 21st century, the rural markets have acquired significance. The
green revolution and the white revolution combined with the overall
growth of Indian economy have resulted into substantial increase in the
purchasing power of the rural communities. Rural marketing denotes blow
of goods and services from rural producers to urban consumers at possible
time with reasonable prices, and agricultural inputs and consumer goods
from urban to rural. munotes.in
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10 National sample survey data shows that out of the total expenditure on
manufactured consumer goods, 75 percent is spent in Rural India. This
percentage is remaining constant since 1960 -61. Though per capita
consumption and expenditure on manufactured consumer items is low in
rural areas, the market is times larger than urban areas.
2. Rural target population
Distribution of wealth in Rural Ind ia is uneven and the top 13 percent of
the farmers land holding account for 37% of the cultivated area. The top
10 % of the rural population accounts for above 37% of the expenditure on
consumer goods. However with the increasing spread of the total income ,
consumer goods are expected to make substantial penetration into the
lower income strata by the normal percolation effect. There is an
increasing cross flow of population between urban and project town
centers which act as conducts for cross flow of products and ideas thus
supplementing the demand for such products.
3. Increase market for Agricultural Inputs
The demand for agricultural inputs is rapidly expanding in rural market.
This refers to marketing of products required for agricultural production.
Unlike urban market, rural areas are production centers. To produce food
grains, vegetables, fruits, etc. a large number of inputs are needed. These
include seeds, fertilizers, pesticides, agricultural implements (tractors,
pump sets, etc.), cattle feed, poultry feed. Input marketing also includes
marketing services such as diesel engine repair and health care.
4. Diverse markets.
It is of paramount importance in the Indian marketing environment as
rural and urban markets in India are so diverse in nature that urban
marketing programs just cannot be successfully extended to the rural
market differs from that of the urban Indian. Further the values aspiration
and needs of the rural people hasty differ from that of the urban
population.
5. Influenced buying decisions
Buying decisions are highly influenced by social customer’s tradition and
beliefs in the rural communities. As regards the purchasing power, the
urban markets are segmented according to income levels, but in rural
areas, the family incomes are gross ly underestimated.
6. To understand the rural consumer
Farmers and rural artisans are paid in cash as well in kind, and their
misrepresent their purchasing power. For their reason, a marketer must
therefore, make an attempt to understand the rural consumer better before
meaning any marketing plans.
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11 7. Untapped potential
Rural markets in India have untapped potential. There are several
difficulties confronting the effort to fully explore the rural markets. The
concept of rural markets in India is still in e volving shape, and the sector
pages a variety of challenges. Distribution costs and non-availability of
retail output are major problems faced by marketers.
8. Product Plan as per requirement of Rural People
Many successful brands have shown high note of failure in the rural
markets because the marketers try to extend marketing plans that they use
in urban areas. The unique consumption pattern, tastes, and need of the
rural consumers should be analyzed at the product planning stage so that
they match the needs of the rural people
9. Sources of Rural Marketing Capacity
There are certain factors which contribute to purchasing capacity in rural
areas. Some factors are as under.
a) Surplus of marketable agricultural and Rural/Urban terms of
Trade
Consumption of con sumer goods rise 0.7 percent for every one percent
increase in marketable surplus of food grains. As the surplus is increasing
every year there will be increasing purchasing capacity with farmers.
b) Remittances.
The traditional remittances from within the country are now being
supplemented in several states by remittances from overseas. This creates
new consumption and purchasing patterns.
c) Dispersal of Industry.
The investment in the development of backward areas will greatly speed
up the income generation process in rural areas.
d) Increase in government support
Indian Government increase support for investment in flood control,
irrigation facilities and central outlay for rural development. These will
generate income and increased purchasing power of rural areas can be
expected to support consumption of manufactured items. These
investments are expected to augment the income generation process
from land in future years, which in turn will accelerate the growth of rural
markets. This will encourage the income generation process.
2. Helpful in the Food processing Industry
India’s land is suitable for agriculture, horticulture, sericulture which
produces a number of varieties of food grains, fruits, vegetables,
commercial crops and flowers. For development of food processing munotes.in
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12 industry government has taken many efforts by giving a number of benefits
including tax benefits, incentives, subsidies, and transportation and
marketing facilities. Primarily food industries engaged in adding farm
utility to raw farm products. . Wheat is milled into flour, livestock is
converted into meat products, fruits and vegetables are canned. These
industries play important role in transforming bulky, raw, perishable farm
products into storable concentrated and more appealing good products.
Today food processors become involved in several supportive marketing
functions, such as transportation, storage and financing. By purchasing
farm commodities their activities are closely linked to farmers.
Government is developing food processing industries in the state of
Punjab, Himachal Pradesh, Jammu& Kashmir, Gujarat, Kerala, Karnataka,
Maharashtra, etc., which is being responded as per expectations.
3. Helpful in Economic Development
Rural marketing plays an important role in accelerating the pace of
econ omic development. The functions of rural marketing are important
in promoting economic development. The development of an efficient
marketing system is important in ensuring that scarce and essential
commodities reach different classes of consumers. The objectives of price
stability, rapid economic growth and equitable distribution of goods and
services cannot be achieved without the support of an efficient rural
marketing.
4. Increase in Farm Income
Rural marketing ensures higher levels of income for the farm ers by
reducing the number of middlemen or restricting the commission policies
on marketing services and malpractices adopted by mediators in the
marketing of farm products. An efficient rural marketing system
guarantees the farmers better prices for farm products. Investment in
purchase of modern inputs increases production and productivity of farm
products.
5. Proper utilization of resources and better output Management
An efficient marketing system helps for optimization of resource use and
output manageme nt. Rural marketing system contributes to an increase in
the marketable surplus by scaling down the losses arising out of
inefficient processing, storage and transportation. A well designed system
of marketing can effectively distribute the available stock of modern
inputs and thereby sustain a faster rate of growth in the rural sector.
6. Growth of Agro - Based Industries
Efficient rural marketing system helps for growth of agro based industries
and stimulates the overall development process of the economy. Ma ny
producers have installed their industrial units near the village side and are
also interested to install the units in the rural areas so as to minimize the
transportation cost, easily availability of raw material and some benefits
which are specially meant for rural producers. munotes.in
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13 7. Extension of Markets
A well rural marketing system widens the market for the products by
taking them to remote corners of the country.
The widening of the market helps in increasing the demand on a
continuous basis, and thereby gua rantees a higher income to the producer.
8. Good price Indicator
Efficient rural marketing system helps the farmers in planning their
production in accordance with the need of the economy. This is possible
through price indicators. For protection to farmers e very year government
announces minimum support prices for agriculture products. To obtained
good prices the farmers directed to produce as per the requirements of the
economy.
9. Use of New technology
The marketing system help to farmers for use of new and advance
technology for produce of agricultural products. Our past experience
shows that our rural areas were underdevelopment because of the lack of
mechanization of agricultural. With the advancement of technology,
mechanization, introduction of high yieldi ng varieties, development of
fertilizer and pesticides and proper government policy has increased the
agricultural production to a greater extent which is the back bone of rural
industries.
10. Increased employment in rural sectors
The marketing system provide s employment to number of people engaged
in various activities such as packaging, transportation and processing.
Many persons are engage in providing services related to agricultural
products like commission agents, brokers, traders, retailers, Wightman,
hamals and regulating staff in rural marketing system. Cooperative
marketing system provides employments to a number of employees.
Storage of agricultural products, warehousing, transportation, middlemen,
provides employments to a number of prospects.
11. Incre ase standard of living
The marketing system is essential for the success of the development
programmes, which are designed to uplift the rural population in India.
Government of India takes special efforts to diminishing the poverty of
the agricultural population, reducing consumer food prices. More
foreign exchange can be earned by efficient export system of
agricultural products. With rising agricultural income, standard of living
of rural people has been increased.
12. Creation of Various Utilities
Marketing is essential for every type of production. It is necessary to reach
the production at needy place from production place. Marketing system munotes.in
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14 increase the cost of the product at certain level, but at the same time, it
adds various utilities to the products. Marketing creates following utilities.
a) Form Utility
The processing function of marketing adds from utility to the products by
changing raw material into finished products. Due to this change,
products become more useful, for e.g. oil seeds are converted into oil,
sugarcane into sugar, cotton into cloth, wheat into flour and bread etc.
b) Place Utility
The transportation function creates place utility of the products by shifting
them to a place of need from the place of plenty. Products got higher
prices at the place of need than at the place of production because of the
increased utility of the product.
c) Time Utility
The storage function adds time utility to the products by making them
available at the time when they are needed. There are certain products
which m anufactured for regularly but its demand is only for a particular
period for e.g. manufacturing of seeds, fertilizers etc. similarly certain
products are manufactured in particular season but it is used for the entire
period as like sugar, pulps of various fruits etc. due to better storage
system products can be preserved for a long period in better conditions.
d) Possession Utility
The marketing function of buying and selling helps in the transferred of
ownership from one person to another, Products are trans fer through
marketing to persons having a higher utility from persons having a low
utility.
1.6 EXERCISES
1) Define rural marketing. State the characteristics of Rural
Marketing
2) Explain the scope of rural marketing.
3) State the significance or importance of Rural Marketing.
❖❖❖❖
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15 2
RURAL MARKETING: FACTORS AND
PROBLEMS OF RURAL INDUSTRIES &
RURAL SERVICES
Unit Structure
2.0 Objectives
2.1 Factors of Rural Markets
2.2 Marketing Problems of Rural Industries
2.3 Marketing for Rural Services
2.4 Exercises
2.0 OBJECTIVES
The rural markets have acquired signif icance, as the overall growth of the
economy has resulted into substantial increase in the purchasing power of
the rural communities. There are some factors which are responsible for
the growth of rural market in India. Today rural industries faced various
marketing problems. Marketing of rural services is one of the challenges
in today’s LPG scenario.
The main objectives of this chapter are,
a) To understand the factors of rural market.
b) To know the marketing problems of rural industries.
c) To learn marketing strategies of rural services.
2.1 FACTORS OF RURAL MARKETS
India is a land of agricultural and basically she resides in the villages.
According to the 2011 census, 741.7 million India’s population lives in
rural areas. This population makes its both ends by cultivating, selling the
agricultural products, working on agricultural which is called agricultural
labours, some are involved in the processing of agricultural products and
allied activities, some are rendering the services to the villagers by
providing them seeds, fertilizers, pesticides and some are doing the job
work on the agriculture. In short rural marketing has taken place only
in agricultural field.
The rural markets have acquired significance, as the overall growth of the
economy has resulted into su bstantial increase in the purchasing power of
the rural communities. The price sensitivity of a consumer in a village is munotes.in
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16 something the marketers should be aware of. The rural audience has
matured enough to understand the communication developed for the
urban markets, especially with reference to FMCG products. Television
has been a major effective communication system for rural mass as a
result, companies should identify themselves with their advertisements.
There are some factors which are responsible fo r the growth of rural
market in India which are as under.
1) Occupation in Rural India
Different types of occupation in Indian village reflect the base of their
socio -economic culture. Since the ancient period the Indian villagers have
been involved in variou s occupations out of which agricultural is one of
the main occupation. In the contemporary period the evolution and
advancement in different industrial and technological sectors in India
have opened new job opportunities for the Indian villagers, Agricultu re
however, remain the principal occupation in Indian villages from the
ancient period. In the changing time agriculture has been replaced by
other occupations in different parts of India in the contemporary period.
Other occupations in Indian villages includes the priests, carpenters,
blacksmiths, barbers, weavers, potters, oil pressers, leatherworkers,
sweepers, water bearers, toddy -tappers, etc. However rural Indian scenario
has been changed by taking up the non-traditional occupations. This
includes aca demics as teachers, truckers, clerks or getting engaged with
various cottage industries, regardless of which caste or class they belong
to. Different types of occupations are found in the modern Indian villagers
apart from agricultural or farming or the tr aditional occupations. The
climate and location influence occupations in Indian villages to a large
extent. Many villagers are involved in various kinds of art and crafts
works. The villagers produce different types of handicrafts products and
many of them are earning their livelihoods by marketing them. The
occupations like artisan in pottery, wood, cloth, metal and leather have
been in existence in Indian villages, since the ancient period and are found
even in the modern times. The women in the rural areas too are actively
getting involved in different industries like matchbox and firework
industries, Bidi making, agate and slate industries, coffee and tea industry,
etc. Tourism sector has emerged as one of the major occupations in
Indian villages, in the contemporary period. The rich cultural diversity in
the villages attracts many tourists from all over the world every year.
This has encouraged many villagers to get involved in various tourism
related occupations.
The villagers work as tourist guides or run different kinds of business in
the famous tourist spots or even provide accommodation facilities to the
tourists to earn their livelihoods. The occupations scenario in Indian
villages has changed mainly due to the changing economic scenario of
the Indian villages.
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17 2) Farming
From ancient period agriculture has been the main occupation of rural
India. In ancient India farming in Indian villages was mainly dependent on
the monsoon condition and hence most of the crops cultivated during the
monsoon. In the modern age the dependency on weather has lessened with
the advancement of irrigation technology and different types of crops that
are being cultivated in India. There are some people who do not have and
own land but they help others to cultivate crops in their lands. Another
form of farming in Indian villages that provides occupation to the
villages is organic farming. The organic farmers mostly rely on crop
rotation, crop residues, animal organics and mechanical cultivation to
maintain soil productivity and farmland. The main objective behind this is
to supply plant nutrients and to control weeds, insects and other pests.
The dependency of Indian villagers on agriculture and the suitable
climatic condition has made India the largest producer of milk, cashew
nuts, coconut, tea, ginger, turmeric and black pepper of milk in the world.
India is the second highest producer of farm products in the world. The
farming in Indian villages is the backbone of the entire economic
structure of India.
3) Teaching
Teaching is one of the important professions in India. Many people of
villages and cities are engaged in this profession. The rural population of
India receives education from the government and non -government
schools. The teachers usually hold a position of respect a nd honor in the
villages of India. In the recent period there are numerous schools
established in the Indian villages to provide primary and secondary
education to the children’s in villages. Teaching in Indian village schools
is being given more and more importance by the government of India.
The government sends young and devoted peoples to the rural areas for
giving better education to under privileged villagers. All this efforts being
improve the educational status of rural India.
4) Fishing
India is a lan d of water lands that include several rivers and seas. The
rivers and seas flowing through and along with the border of India are
home to a huge variety of fishes. In rural areas fishing has been a major
source of income for the people living in rural areas. This is one of the
occupations of Indian villagers. Peoples in south India are mostly
depending on this occupation due to most of the villages are located
along the coastal line. A majority of the fish is marketed abroad by which
huge foreign exchange amount received to India.
In the recent period the government of India is encouraging the Indian
villagers to take up ocean fishing as their occupation. The occasional
fishermen are mostly those who are usually involved in the agricultural.
Number of people s involved in this occupation is increased day to day by
which rural markets have been developed. munotes.in
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18 5) Handicrafts
As far as arts and culture India is one of the riches countries in the world.
High quality handicrafts products are made by Indian people. Handicr aft is
one of the important occupations in Indian villages. Villages in different
parts of India are famous for producing different types of handicrafts.
https://www.indiamart.com
Handicrafts in Indian villages are practiced since the ancient period. The
governments authorities in India are encouraging people to take up
handicrafts are their occupation in the recent years as the Indian
handicrafts products bring a huge amount of foreign currency to the
country.
6) Literacy in Rural India
Literacy in India is key for socio -economic progress and the Indian
literacy rate grew to 68% in 2007 from 12% at the end of British rule in
1947. Literacy rate of India in 2011 is 74.04%. The Male literacy rate is
82.14% and Female l iteracy rate is 65.46% according to Census 2011.
Among the Indian states, Kerala has the highest literacy rate 93.91% and
then Mizoram 91.58%.
Among the Union Territories, Lakshadweep has the highest literacy rate of
92.28%. Bihar has the lowest literacy r ate in India with 63.82%. The
Male literacy is highest in Lakshadweep 96.11% and Kerala 96.02%. The
Female literacy is highest in Kerala 91.98% and Mizoram 89.40%.
Lowest male literacy is in Bihar 73.39%. Lowest female literacy is in
Rajasthan 52.66%. Wome n in rural villages in India today tend to be
treated as second class citizen. Their primary responsibilities are to look
after the family and household and work in the fields.
7. Infrastructure
India’s economic growth and development is predicated to large e xtent
upon the development of its strong rural population. Majority of the
population lives in small villages and are engaged primarily in
agriculture. A substantial portion of India’s current agricultural labour
force has move to non-agriculture sectors for incomes in all sectors to go
up. The challenge is to manage the transition of 80% of the rural munotes.in
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19 population from a village -centric agricultural based economy to an
industry based economy. The government has launched ‘Bharat Nirman’
for the development of rural infrastructure. The government prepared plan
for the development of India Rural Infrastructure in the sector of
Irrigation, Roads, Housing, Water supply, Electrification and
Telecommunication. After independence the government took upon itself
the ma jor responsibility of development. Hence, the central and state
government carried out development projects as like Radio for rural
development. Satellite Instructional Television Experiment is considered to
be one of the biggest techno -social communicat ion experiments in
education and rural development. Rural adults viewed television programs
on improved agricultural practices, health and family planning.
Television was considered as window to the world. But it is sad that in
spite of best efforts satell ite television has been used for entertainment
more than rural development.
8. Rural communication
Internet and Mobile have played the most important role for the growth of
Rural Markets. The companies like BSNL, Airtel, and Reliance etc. have
given maximum attention on villages for expansion of network. Broad -
band and 3G mobile and internet services are easily available in rural area.
These facilities have opened the doors for companies to use latest
technologies for brand promotion. Gone are the days when pa mphlets
distributions, exhibition, door to door selling techniques were used to
bring awareness among rural consumers. Now it’s the time of online
marketing where customer can place order on net. Social networking
sites have also provided a right platform for sales promotion.
Around 50 percent of the villages are today connected by all -weather
roads and can be accessed throughout the year. But there are states, which
are almost 100 percent connected with the metal roads. Road networking
besides enhancing the mobility of rural consumers has increased their
exposure to products and services. By watching such a scenario in these
areas Korean consumer durable companies have decided to look beyond
their noses. They are now placing their bets on rural markets. Two giants
namely LG and Samsung have already made their strategies for entering
into rural India. As per survey conducted by Indian Market Research
Bureau (IMRB) 77 percent of the villages are covered by TV network.
Now even villages are going for DTH like D ish TV, TATA Sky and they
have already been enjoying exposure to various products through
advertisements.
9. Emerging Role of Bio-Tech. in Indian Agriculture Sector
It is evident from the facts that Indian agriculture is trailing in terms of
yield when compar ed with leading countries of the world. Countries like
USA, Canada, Israel and Germany have achieved high yield in
agriculture production but countries like India, Brazil and Nigeria are
having agriculture yield much lower than international average. The
major difference created in this respect is the use of the applications of munotes.in
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20 bio-technology. Bio -technology has vital role to play in so far as
enhancement of agriculture yield is concerned. For instance the yield of
wheat in USA per hectare is almost three times more than that of India
and the yield of sugar cane is two and half times more if compared with
the Indian yield of sugar cane per hectare. These advance countries have
been making an extensive use of bio -technology whereas in developing
countries the concept is not yet very popular. When we are living in the
era of globalization everything is becoming globally competitive and
therefore, we cannot live in isolation in terms of agriculture yield also.
We have to make use of the applications of the bio - technology in an
agriculture sector both in terms of generating quality seeds and cropping
the same in compliance with the theories of biotechnology. Our farmers,
who are normally not aware of this fact, have to be educated and the
responsibility lies on t he shoulders of researchers, scientists,
administrators and the policy makers of the country. It will provide more
discretionary income in the hands of the rural farmers.
10. Green Revolution
The substantial attention accorded to agriculture during the success ive
five-year plans has helped in improving agricultural productivity.
Adoption of new agronomic practices, selective mechanization, multiple
cropping, inclusion of cash crops and development of allied activities like
dairy, fisheries and other commercial activities have helped in increasing
disposable income of rural consumers. Over 75 percent villages in India
have been electrified. There is also a shift from rain dependence to
irrigation. Farmers are getting high return for their cash and food crops. In
the whole process, the dependence on seasonality has reduced, and in
return there has been increasing disposable income. By observing this
scenario, India is one of the biggest giant Hindustan Lever Ltd. has
entered into rural market for more penetration through the operation
“Bharat”. Since December 1999, HLL has reached out to 35,000
villages, 22 million households and spent Rs. 20 crore. This has been one
of the largest sampling exercises in recent times conducted by a big
business house.
11. Development programs
The five -year plans have witnessed massive investments in rural areas in
terms of number of development programs implemented by the central
and state Government. These programs have generated incomes to rural
peoples and helped them to change their life-styles. Some of these
programs are:
• Intensive Agricultural District Programme (IADP - Package
Programme)
• Intensive Agricultural Area Programme (IAAP)
• High Yielding Varieties Programme (HYVP - Green Revolution)
• Drought Prone Areas Programme (DPAP) munotes.in
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21 • Small Farmers Development Agency (SFDA)
• Hill Area Development Programme
• Operation Flood I, II and III (White Revolution)
• Fisheries Development (Blue Revolution)
• Integrated Rural Development Programme (IRDP)
• Jawahar Rojgar Yojna (JRY).
These programs are related with agriculture and allied activities but there
are certain other policies which are specifically meant to raise the standard
of the rural people in the field of health, education, sanitation etc. After
the beginning of economic reforms in 1991, the Govern ment has been
giving special attention to the rural India by providing certain
developmental schemes for these areas. Some announcements were made
by the finance minister in the Union Budget 2000 to enrich the existing
programs and to initiate some new schemes for the rural areas like Kisan
Credit Cards, Micro Finance and hence, we can see that today changes are
taking place rapidly in all walks of life and rural areas are no exception to
this. Improved infrastructure facilities, economic liberalization, renewed
emphasis on agribusiness and small industries, fast changing agricultural
technology, scope for commercialization of agriculture, greater budgetary
provision for rural people are few reasons to mention. Moreover, various
socio - cultural, psychologica l and political aspects of rural life are also
changing. Rural people today are less fatalistic, less attached to religious
beliefs, getting more individualistic, achievement -oriented and aspiring
than before. All this has opened up new vistas for the mark eters of
millennium at least in the states, which are leading in per capita income
with a sustained growth, like Punjab, Haryana, Maharashtra, Tamilnadu,
Karnataka, Gujarat, Delhi and Western UP etc.
12. Professionalization of the marketing
Marketing has been recognized as profession in the early 1950. People are
now preferring the jobs in the marketing department and accepting the
challenges of the marketing management. People are now more interested
to acquire knowledge of the marketing and apply it in the field of
marketing. The government is also motivating the people who are the
graduates in marketing and also the institutions which are providing
marketing education by allowing fellowship to the graduates and a huge
amount of grants to the institutions.
13. Urbanization
Today the rural population is moving to the urban areas for the purpose of
acquiring education seeking employment, Business purposes and selling
the agricultural and rural products in the urban areas. As the demand of
rural products in urban area s is more and by selling these products in the
areas they can earn their livelihood. Urban people are the main buyers of
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22 14. Cooperative Marketing system.
Marketing committee system and cooperative marketing are the two
parallel institutions framed for the purpose of rural marketing. The
marketing system is working under the direct control for the respective
state governments having its three tire system, the apex institution is state
marketing board, at district level central marketin g committee and at block
level primary marketing committees are functioning. On the other hand
cooperative marketing system is developed in rural India. Cooperative
markets are working very successfully and as a result it has increased the
share of sales of rural products in the regulated markets. This system
increasing the spirit of the producers as their interests is protected through
the marketing system in India. So this is the main reason that rural
marketing is gaining more and more attention in the Indian market scene.
2.2 MARKETING PROBLEMS OF RURAL INDUSTRIES
Rural Industries are playing very important role in the development of
economy. Today the growth of rural industries is not very healthy due to
some serious problems. These problems faced by rural industries in day to
day work. As the thorns are part of roses, similarly every flourishing
business has its own kind of problems. Some of the major problems faced
by rural Industries are as under.
1) Shortage of funds
Most of the rural entrepreneurs fail to get external funds due to absence
of tangible security and credit in the market. The procedure to avail the
loan facility is too time -consuming that its delay often disappoints the
rural entrepreneurs.
Lack of finance available to rural entrepreneurs is one of the biggest
problems which rural entrepreneur is bearing now days especially due to
global recession. Major difficulties faced by rural entrepreneurs include
low level of purchasing power of rural consumer so sales volume is
insufficient, lack of finance to start business, reduced profits due to
competition, pricing of goods and services, Financial statements are
difficult to be maintained by rural entrepreneur, stringent tax laws, lack of
guarantees for raising up of loans, difficulty in raising capital through
equity, dependence on small money lenders for loans for which they
charge discriminating interest rates and huge rent and property cost.
These all problems create a difficulty in raising money through loans.
landlords in Punjab proved to be m ajor source of finance for rural
entrepreneurs but the rates of land are reduced due to global recession so
they also lack hard cash now a days. Some banks have not ventured out to
serve rural customers because banks are expensive to be reached by rural
customers and, once reached, are often too poor to afford bank products.
Poor people often have insufficient established forms of collateral (such
as physical assets) to offer, so they are often excluded from traditional
financial market. Government is provi ding subsidies to rural areas but due
to high cost of finance, these subsidies are not giving fruitful results. munotes.in
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23 Major sources of finance in rural areas are loans from regional rural
banks or from zamindars but their rate of interest are usually very high.
Government has various institutions for this purpose but the results are not
up to the level expected. Industrial Finance Corporation of India (IFCI),
Industrial development bank of India, Industrial Credit and Investment
Corporation of India (ICICI), Smal l Scale Industry development bank of
India (SIDBI) are some of the national level (SFC) institutions that are
helping out rural entrepreneurs. Some state level institutions are also
working like State Financial Corporation and State Industrial
Development Corporation (SIDC). These institutions are providing
assistance for setting up of new ventures and side by side for
modernization and expansion of existing ones but their terms and
conditions are very strict to be handled.
Various schemes like composite loan scheme, tiny unit scheme, scheme
for technical entrepreneurs etc. had started but they are unable to meet the
expectation of rural entrepreneur. Raising funds through equity is little bit
difficult for rural entrepreneurs because of lack of financial kn owledge
and also their financial corpus is also low, so loans are primary source of
finance for them which proved to be a greatest obstacle in developing rural
entrepreneurship. Various policies of RBI regarding priority sector lending
failed to achieve it s objectives. Micro financing movements started in
India worked well. Self-help groups form the basic constituent unit of
micro finance movement in India. Self-help groups are a group of a few
individuals who pool their savings into a fund from which they can
borrow as and when necessary. Such a group is linked with banks but
joining an existing SHG is often costly affair for an aspiring villager as
in order to maintain parity among the members, a new member has to join
by depositing the total accumulated individual savings and interest of
groups. So starting new SHG is an easy as compared to join existing one.
NGO’s also played important role for rural development. These NGO’s
are usually registered as societies and trust. They have less capital
resources as they cannot raise equity capital.
2) Lack of Infrastructural Facilities
The growth of rural entrepreneurs is not very healthy in spite of efforts
made by government due to lack of proper and adequate infrastructural
facilities. Rural areas are characterized by poor infrastructural farcicalities
in the field of roads, electricity, street lighting, road transport etc. which
hampers the smooth movement of various industrial activities. This is a
major problem faced by rural entrepreneurs.
3) Risk Element
Rural ent repreneurs have less risk bearing capacity due to lack of financial
resources and external support.
4) Problem of Marketing
Marketing of rural products has not been well developed. Promotion,
distribution and implementation of customer feed-back is lacking. Rural munotes.in
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24 industries cannot compete with their urban counterparts. Dealers exploit
the rural industries in the traditional sector. Lack of proper communication
facilities and marketing information adds to the problem to large extent.
Following are the two major marketing problems of Rural Industries.
Most of the Rural Industries, except a few urban -based units which act as
ancillaries to the large industry, are forced to restrict their sales to the local
market, tailoring their supplies to the local needs. Not i nfrequently, a lack
of demand and accumulating stocks leave with them no working capital
to procure more raw materials and other physical resources to keep the
production units moving. Ancillary industries have their own problems,
like (i) delayed payments by parent units, (ii) inadequacy of technological
support extended and / or supply of critical raw materials by parent
units, (iii) Non-adherence to quality and delivery schedules, thus
disturbing the programme of the parent units, (iv) frequent changes in
fiscal levies, and (v) absence of a well -defined pricing system and
regulatory agency.
5) Problem of Competition
Rural entrepreneurs face severe completion from large sized organizations
and urban entrepreneurs. They incur high cost of production due to high
input cost. Major problems faced by marketers are the problem of
standardization and competition from large scale units. They face the
problem in fixing the standards and sticking to them. Competition from
large scale units also creates difficulty for the survival of new ventures.
New ventures have limited financial resources and hence cannot afford
to spend more on sales promotion. These units are not having any standard
brand name under which they can sell their products. New ventures have
to come up with new advertisement strategies which the rural people can
easily understand. The literacy rate among rural consumer is very low.
Printed media have limited scope in the rural context. The traditionally
bounded nature, cultural backwardness and cultural barriers add to the
difficulty of communication. People in rural areas mostly communicate in
their local dialects and English and Hindi are not understood by many
people. It has been seen in recent past that in spite of enough food stocks
with government warehouses, people are dying of starvation. This
indicates problem with the public distribution system. The producers are
not collective in their approach for marketing their products because they
are to widely scattered and uneducated.
6) Problem of Middlemen
Middlemen exploit rural entrepreneurs. The rural entrepreneurs are
heavily dependent on middlemen for marketing of their products who
pocket large amount of profit. Storage facilities and poor means of
transport are other marketing problems in rural areas. In most of the
villages, farmers store the produce in open space, in bags or earthenware
etc. So these indigenous methods of storage are not capable of protecting
the produce from dampness, weevils etc. The agricultural goods are not
standardized and grade d. munotes.in
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25 7) Problem of dealing with Government Agencies
What is true of raw materials is true probably of assistance granted by the
State to the industries. It is an admitted fact that no type of State assistance
is available in relation to needs. Therefore, there is a general practice to
ration it out. In the process of rationing there is ample scope for
discrimination, made possible by Government rules, regulations and red-
tapes.
The Rural Industries sector still faces problems in exports which make it
difficult f or it to undertake exports in an organized and appreciable
manner.
8) Lack of IT Knowledge
Information technology is not very common in rural areas. Entrepreneurs
rely on internal linkages that encourage the flow of goods, services,
information and ideas. The intensity of family and personal relationships
in rural communities can sometime be helpful but they may also present
obstacles to effective business relationships. Business deals may receive
less than rigorous objectivity and intercommunity rivalries may reduce the
scope for regional cooperation. Decision making process and lines of
authority are mostly blurred by local politics in rural areas.
9) Problems of Legal Formalities
Rural industries need compliance of various legal formalities in obtaining
the gov ernment's approval and license for carrying out industrial
activities. But rural entrepreneurs find it extremely difficult to comply
with various legal formalities due to sometimes complex legal provisions
or illiteracy and ignorance.
10) Procurement of Raw Materials
Rural industries face a tough task in procuring and storing raw materials.
Since rural industries are small they procure raw materials from
middlemen at higher prices. They may also supply poor quality raw
materials. Lack of warehousing facilities in the rural sector also costs
more towards storing of raw materials.
11) Lack of Technical Knowledge: -
Rural entrepreneurs suffer a severe problem of lack of technical
knowledge. Lack of training facilities and extension services create a
hurdle for the devel opment of rural entrepreneurship. As rural industries
are labour intensive, they cannot afford to introduce sophisticated
techniques and methods of production which is very expensive. Lack of
technical know -how, appropriate technology and training create i mmense
problem in the growth of rural industries. Without this, productivity and
increased profit is a distant dream.
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26 12) Poor Quality of Products
Another important problem is growth of rural entrepreneurship is the
inferior quality of products produced due t o lack of availability of standard
tools and equipment and poor quality of raw materials.
13) Shortage of Power
The problem of shortage of power has become so widespread that for the
last few years it has been among the most glaring and telling problems.
But its impact is decidedly fatal on rural producers. Large industries
manage to escape somehow. There are two aspects to the problem, one,
power supply is not always, everywhere, available to the rural industry on
the mere asking, and wherever it is available, and it is rationed out,
limited to a few hours in a day. It means that if a small rural unit can
manage to take advantage of the supply at fixed hours, well and good,
otherwise, it will have to let its capacity go unutilized, thus adding to cost.
14) Low Skill Level of Workers
Most of the entrepreneurs of rural areas are unable to find workers with
high skills. Turnover rates are also high in this case. They have to be
provided with on the job training and their training is generally a serious
problem for entr epreneur as they are mostly uneducated and they have
to be taught in local language which they understand easily. The
industries in rural areas are not only established just to take advantage of
cheap labour but also to bring about an integrated rural deve lopment. So
rural entrepreneurs should not look at rural area as their market, they
should also see the challenges existing in urban areas and be prepared for
them. Rural entrepreneurs are generally less innovative in their thinking.
Youths in rural areas have little options “this is what they are given to
believe”. This is the reason that many of them either work at farm or
migrate to urban land.
15) Negative Attitude of Peoples
The environment in the family, society and support system is not
conducive to enco urage rural people to take up entrepreneurship as a
career. It may be due to lack of awareness and knowledge of
entrepreneurial opportunities. The young and well educated mostly tend
to leave. As per circumstances, rural people by force may be more self-
sufficient than their urban counterparts, but the culture of entrepreneurship
tends to be weak. Continuous motivation is needed in case of rural
employee which is sometime difficult for an entrepreneur to impart with.
16) Lack of adequate knowledge and informati on:
Though information technology has substantially developed in the
modern world and has penetrated into the rural areas through internet,
rural people hardly availed its benefits. Rural people do not have
adequate information avenues. They are not know ledgeable, trained and
motivated to achieve more and more in their own sphere. munotes.in
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27 2.3 MARKETING FOR RURAL SERVICES
Marketing of rural services is one of the big challenge before services
provider, because the rural market in India is a huge unorganized market
as well as much of it is still untapped in various domains. There is a large
scope for services in rural areas hence major companies have directed
their focus in rural market. Since major of Indian population exists in rural
segment, prospects of huge demand exists for the products offered by
various companies or service providers. But the demand and supply
pattern in the rural segment is majorly different than those in the urban
segment.
This difference is due to following factors Income level.
• Expenditure capacity
• Taste and preferences
• Educational level
• Social, Cultural and environmental
These differences results in Gaps between Service provider and the
consumers/customers in both the market segments. Hence a service
provider clearly needs to understand thes e gaps and the strategies to fill
these gaps effectively. Therefore the mantra for successful strategy
implementation in rural markets for service delivery is “Think Global Act
Local” Analysis of Services Requirements in Rural Markets.
Following Service areas have great potential in rural markets.
1. Agricultural consultancy :
Agriculture is main business in rural India. But due to change in climate,
changing prices of agriculture products and uncertainty are increasing day
by day in this field. Hence Rural cus tomers who are farmers require
proper consultancy services about the best methods, timings and seasons,
technology, tools, prices and best markets for selling their farming
products. Traditional media would serve as a great driver to generate
awareness amo ng rural consumers. Skits magic shows and educational
drives are better sources for marketing of agriculture consultancy service.
2. Banking, microfinance and loan facilities :
The rural market has huge potential for banking services for providing
following facilities at affordable prices:
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28
https://www.fincash.com
Agricultural loans
Farmers have required loan for meeting of various agricultural needs in
various seasons for cultivation, purchase of seeds, development of
irrigation system, construction of well, purchase of fertilizers, purchase of
agricultural instruments, etc. These loans are provided by rural banks in
the form of crop loan, short term loan, midterm loan and long term
loan. Various strategies are used by banks for providing of these services
as like advertisement through local media, organizing Mela of farmers,
display of banking services banners at important places like Tahasil office,
ST stand, Panchayat samiti office etc.
Educational loans
Educational loan is need of today’s rural consumers. This facility is
provided by bank for child of farmer’s for their higher education with low
interest rate.
Housing loans
In last some decades housing loan is given by banks only to consumers in
city areas but due to privatization in banking sector competit ion is raised
then the banks are turn in rural areas for providing housing loans . RBI is
also take lead to providing funds at large scale for providing of housing
loan in rural areas. Hence there is a large scope for these services in rural
areas.
Savings accounts and safe deposits
Bank encourages to rural consumers for opening of saving accounts in
banks as well as convey for safe deposits. Due to increase in saving
accounts and safe deposits bank financial capacity is increased and
available funds are used for better performance of banking services.
Automobile loans
Due to 5th and 6th pay rural employee’s income level is also increased.
Even though, these employees cannot purchase cars, motor cycle, and
other automobiles in cash. Banks are encouraged to such consumers for
automobile loans at a low rate of interest.
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29 Personal loans
Rural banks provide personal loan facilities to rural consumers for meeting
of their personal needs for temporary period.
Following strategies are used for marketing of services by rural banking
sector
The focus of the service quality should be customer driven and hence
need to be customized as per the rural requirements of customers
having low income group as major target group. Hence more of
benefits driven by the customer from savings schemes should be
included in the Services provided through accounts maintenance with
the banks.
The service providers should be clearly aware of the local languages,
culture and behavior of the rural customers. Thus the inclusion of
local employee s would be beneficial for the banks to deal effectively
with the customers.
The banks should be able to provide these banking services such as
loan and microfinance services at lowest and most profitable interest
rates with flexible and customized repaymen t options to the
customers. The Bank need to clearly understand the best possible
location for its setup and operations as the location and facility layout
of the service provider plays a very significant role in rural banking
because the rural areas do no t have sufficient transport facilities like
urban markets.
The customers should be made aware clearly about the services
provided by the bank through effective physical evidence and
promotions that should be made as simple as possible to the rural
customer s to understand properly. The assistance should be provided
regularly to the customers to educate them about the current as well as
prospective facilities and benefits derived from the banking services
provided.
Do not put much focus on providing any compl ex and unessential
services like corporate loans and credit card facilities as still the
market demand for such services are much lesser as compared to other
banking services.
Do not use any illegal or unethical means for repayment of loans
and other servi ces as this would result in more of customer
dissatisfaction and grievance which would harm the brand equity and
image of the banking company
Do not provide services to the customer before properly educating the
customer about the details product and proce ss of the service so as to
avoid confusion and discrepancy.
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30 Do not focus on the short term profitability but the bank needs to
focus on the building long term relationship with the customer by
putting more concentration on:
1. Service quality
2. Service recover y
3. Reach to the customer and building prospective future customers
4. Improving market share
5. Building Brand loyalty
6. Providing new facilities as per the customer needs and requirements
3. Healthcare:
There is a huge demand for medical and health facilities in rural markets
as there is large population in India that resides in rural areas and lack of
proper facilities for proper health care. The availability and location of
these services are of great concern as most of the areas either do not have
any or many rural and remote areas needs to be dependent on very few
and distantly located Hospitals.
4. Telecom services:
Due to increased awareness and improved telecom infrastructure across
India, the demand for telecomm (Fixed and wireless) and internet services
have incr eased drastically. Even the government’s policies for reduced
tariffs, call rates, lesser mobile handset prices and private participation
involvement has helped in increasing the level of competition, continuous
improvement in technology and thus has resul ted in the growth of the rural
telecom market. Hence the rural market has now become attractive and
lucrative for many National and Global telecomm companies, who now
are focusing more on this huge untapped market.
5. Automobiles Services:
There has been a huge increase in the number of two wheeler, four
wheeler and agricultural tools and vehicles in past few decades because of
reduction in prices and government support to the rural population. This
has given rise to a new business for providing maintenance an d repair
services to these vehicles with more attractive service quality, location and
availability. This segment has huge potential in the upcoming trends of
services to the rural markets.
6. T.V. Channels Services :
Due to the increased awareness, arenas of interest, leisure requirements,
and number of entertainment options like televisions and computers due to
reduced & affordable prices, the demand for entertainment services like
T.V. entertainment channels have increased. This provides a huge
potential for cable and Direct to Home services providers to tap the rural munotes.in
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Problems of Rural Industries &
Rural Services
31 markets to meet their demands. Many companies have already gained
profits by targeting rural markets which include Airtel (DISH TV),
Reliance (BIG TV), and Tata (SKY).
7. Travel and reservation Services:
The travel and reservation booking and organizing services for booking
train, busses, taxies and tour consultancy has also been observed to
create a huge demand in last few decades as more and more rural
population need to mobilize for business and personal needs. Hence these
services hold a huge potential for service providers.
8. Low Cost Hotels:
Due to increased mobilization because of business and personal needs,
there is also increased demand for hotel and lodging services to the
travelers but majo rly driven by the pricing of such services and facilities.
Hence provide a great platform for the service providers to focus on these
demands to capture a big untapped market.
9. Event Managements :
The rural population are majorly involved in celebrating and organizing
festivals, which require lightning arrangements, venue decoration, food,
lodging, transportation, catering and event planning etc. for
i. Family gatherings, Marriages, engagements, birthday parties, etc.
ii. Festivals like Diwali, Onam,Christmas, lorhi , Eid, Dushera, Kannada
Rajamahotsava, Navratri, Garba and Dandia mahotsava etc.
iii. Religious/Caste based events like poojas, various ceremonies, etc.
Hence these services also have great potential to meet the rural customer’s
demand for even management.
10. Beau ty Parlors:
As there has been major improvement in the quality of life style and
increased awareness among the rural customers (especially females), there
has been great demand observed for beauty products and services. A huge
increase in the demand for FMCG products like shampoos, beauty soaps,
beauty creams, cosmetics, etc. has also been observed lately in rural India.
This market is still dominated by unorganized and local players who lack
adequate tools, methods, skills, and process, technology and beau ty
products to meet the demand of rural population. Hence focusing on this
segment would be a profitable business for any company.
11. Affordable Movie theatres:
Till now the entertainment service providers for movie theatres at
affordable prices in rural mark ets are dominated by local and unorganized
players who lack proper facilities and infrastructure as well as quality
delivered. Focusing on this market is a good profitable business munotes.in
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32 12. Educational and Career consultancy:
The rural markets lack adequate and quality educational services which
are majorly catered by government agencies and bodies. But due to lack of
proper infrastructure, expertise, knowledge, talent, funds and
participation of the service provider, this sector is unable to meet the
desired level of service expectation of the rural customer for career
building. Hence there a great business opportunity for any company if it is
able to fill this gap effectively and would also is imparting its social
responsibility to the growth of the society and cou ntry.
With all the above mentioned areas for Services in rural markets, there is a
huge demand and growth opportunities that exists to be exploited by the
companies which can make best market expansion and profitability by
investing in Rural India.
2.4 EXERCI SES
1) What are the factors influences on Rural Market?
2) Which marketing problems are faced by Rural Industries?
3) State the strategies applied by marketers for rural services.
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33 3
RURAL MARKETING: PROBLEMS OF
RURAL MARKETING
Unit Structure
3.0 Objectives
3.1 Introduction
3.2 Problems of Rural Marketing
3.3 Exercises
3.0 OBJECTIVES
Rural marketing is a two - way marketing process. There is inflow of
products in to rural market for production and there is also out flow of
products to urban areas. Today rural marketing has facing many problems.
To Discuss and know various problems of Rural marketing are the
objectives this topic.
3.1 INTRODUCTION
Rural marketing is a time consuming affair and requires consid erable
investments in terms of evolving appropriate strategies. There are many
problems to be tackled in rural marketing, despite rapid strides in the
development of the rural sector.
The main objective of this topic is
To discuss and know various problems of rural marketing.
3.2 PROBLEMS OF RURAL MARKETING
The rise of rural markets has been the most important marketing
phenomenon in today’s environment. Many corporations are interested to
enter in the rural markets. Although the rural market does offer vast
potential, it should also be recognized that it is not easy to operate there.
Rural marketing is a time consuming affair and requires considerable
investments in terms of evolving appropriate strategies. There are many
problems to be tackled in rural marketi ng, despite rapid strides in the
development of the rural sector. Some of the common problems are
discussed below.
1) Transportation
Transportation is an important aspect in the process of movement of
products from urban production centers to remote villag es. The
transportation infrastructure is extremely poor in rural India. Due to this
reason, most of the villages are not accessible to the marketing man. In our munotes.in
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Rural Marketing & Finance
34 country, there are six lakhs villages. Nearly 50 per cent of them are not
connected by road at all. Many parts in rural India have only kachcha
roads. During the monsoons, even these roads become unserviceable.
Regarding rail transport, though India has the second largest railway
system in the world, many parts of rural India however, remain outside
the rail network.
2) Communication
The development of appropriate communication systems to rural market
may cost up to six times as much as reaching an urban market through
established media, need rural communication facilities.
Marketing communication in rural markets suffers from a variety of
constraints. The literacy rate among the rural consumers is very low.
Print media, therefore, have limited scope in the rural context. Apart from
low levels of literacy, the tradition -bound nature of rural people, their
cultural barriers and their overall economic backwardness add to the
difficulties of the communication task. Post, telegraph, and telephones are
the main components of the communication infrastructure. These facilities
are extremely inadequate in the rural parts of our country. In rural areas,
the literacy percentage is still low, compared to urban areas. In India, there
are 18 recognized languages. All these languages and many dialects are
spoken in rural areas. English and Hindi are not understood by many
people. Due to these problems, rural consumers, unlike urban consumers
do not have exposure to new products. Television has made a great impact
and large audience has been exposed to this medium. Radio reaches
large population in rural areas at a relatively low cost. However, reach of
formal media is low in rural households; therefore, the market has to
undertake specific sales promotion activities in rural areas like
participating in Mela or fairs.
3) Availability of Appropriate Media
It has been estim ated that all organized media in the country put together
can reach only 30 per cent of the rural population of India. The print
media covers only 18 per cent of the rural population. The radio network,
in theory, covers 90 per cent. But, actual listenersh ip is much less. TV is
popular, and is an ideal medium for communicating with the rural masses.
But, it is not available in all interior parts of the country. It is estimated
that TV covers 20 per cent of the rural population. But, the actual
viewership is meager. The cinema, however, is a good medium for rural
communication. But, these opportunities are very low in rural areas.
4) Warehousing
A storage function is necessary because production and consumption
cycles rarely match. Many agricultural commodities are produced
seasonally, whereas demand for them is continuous. The storage function
overcomes discrepancies in desired quantities and timing. In warehousing
too, there are special problems in the rural context. The central
warehousing corporation and state warehousing, which constitute the top
tier in public warehousing in our country, have not extended their network
of warehouses to the rural parts. It is almost impossible to distribute munotes.in
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Rural Marketing: Problems of
Rural Marketing
35 effectively in the interior outlets in the absence of adequate storag e
facilities. Due to lack of adequate and scientific storage facilities in rural
areas, stocks are being maintained in towns only.
5) Village Structure in India
In our country, the village structure itself causes many problems. Most of
the villages are small and scattered. It is estimated that 60 per cent of the
villages are in the population group of below 1,000. The scattered nature
of the villages increases distribution costs, and their small size affects
economic viability of establishing distribution points.
6) Rural Markets and Sales Management
Rural marketing involves a greater amount of personal selling effort
compared to urban marketing. The rural salesman must also be able to
guide the rural customers in the choice of the products. It has been
observed t hat rural salesmen do not properly motivate rural consumers.
The rural salesman has to be a patient listener as his customers are
extremely traditional. He may have to spend a lot of time on consumer
visits to gain a favorable response from him. Channel management is also
a difficult task in rural marketing. The distribution channels in villages
are lengthy involving more intermediaries and consequently higher
consumer prices. In many cases, dealers with required qualities are not
available.
7) Inadequate Bank ing and Credit Facilities
In rural markets, distribution is also handicapped due to lack of adequate
banking and credit facilities. The rural outlets require banking support to
enable remittances, to get replenishment of stocks, to facilitate credit
transa ctions in general, and to obtain credit support from the bank.
Retailers are unable to carry optimum stocks in the absence of adequate
credit facilities. Because of this problem, they are not able to offer credit
to the consumers. All these problems lead t o low marketing activities in
rural areas. It is estimated that there is one bank for every 50 villages,
showing the poor banking facilities in rural areas.
8) Market Segmentation in Rural Markets
Market segmentation is the process of dividing the total marke t into a
number of sub -markets. The heterogeneous market is broken up into a
number of relatively homogeneous units. Market segmentation is as
important in rural marketing as it is in urban marketing. Most firms
assume that rural markets are homogeneous. It is unwise on the part
of these firms to assume that the rural market can be served with the
same product, price and promotion combination.
9) Branding
The brand is the surest means of conveying quality to rural consumers.
Day by day, though national brands are getting popular, local brands are
also playing a significant role in rural areas. This may be due to
illiteracy, ignorance and low purchasing power of rural consumers. It has munotes.in
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36 been observed that there is greater dissatisfaction among the rural
consumer s with regard to selling of low quality duplicate brands,
particularly soaps, creams, clothes, etc. whose prices are often half of
those of national brands, but sold at prices on par or slightly less than the
prices of national brands. Local brands are bec oming popular in rural
markets in spite of their lower quality.
10) Packaging
As far as packaging is concerned, as a general rule, smaller packages are
more popular in the rural areas. At present, all essential products are not
available in villages in smaller packaging. The lower income group
consumers are not able to purchase large and medium size packaged
goods. It is also found that the labeling on the package is not in the local
language. This is a major constraint to rural consumers understanding the
product characteristics.
11) Physical Distribution and Channel Management
The problems of physical distribution and channel management adversely
affect the service as well as the cost aspect. The existent market
structure consists of primary rural market and retai l sales outlet. The
structure involves stock points in feeder towns to service these retail
outlets at the village levels. But it becomes difficult maintaining the
required service level in the delivery of the product at retail level.
An effective distribu tion system requires village -level shopkeeper,
Mandal/ Taluka - level wholesaler or preferred dealer, distributor or
stockiest at district level and company -owned depot or consignment
distribution at state level. The presence of too many tiers in the
distri bution system increases the cost of distribution.
12) Rural Culture and Traditions
Culture is a system of shared values, beliefs and perceptions that influence
the behavior of consumers. There are different groups based on religion,
caste, occupation, income, age, education and politics and each group
exerts influence on the behavior of people in villages. Life in rural areas is
still governed by customs and traditions and people do not easily adapt
new practices. For example, even rich and educated class of fa rmers does
not wear jeans or branded shoes. Rural consumers are cautious in buying
and decisions are slow and delayed. They like to give a trial and only after
being personally satisfied, do they buy the product.
As a general rule, rural marketing involves more intensive personal selling
efforts compared to urban marketing. Marketers need to understand the
psyche of the rural consumers and then act accordingly. To effectively tap
the rural market a brand must associate it with the same things the rural
folks do. This can be done by utilizing the various rural folk media to
reach them in their own language and in large numbers so that the brand
can be associated with the myriad rituals, celebrations, festivals, melas
and other activities where they assemble. munotes.in
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Rural Marketing: Problems of
Rural Marketing
37 13) Seasonal Demand for Products
Demand for goods in rural markets depends upon agricultural situation,
as agriculture is the main source of income. Agriculture to a large extent
depends upon monsoon and, therefore, the demand or buying capacity is
not stable or regular.
14) Different Way of Thinking
There is a vast difference in the lifestyles of urban and rural people. An
urban customer has many more choices than his rural counterpart. The
rural customer usually has two or three brands to choose from, whereas
the urban one has many more choices. There is also a difference in the
way of thinking. The rural customer lives fairly simply compared to his
urban counterpart. Life in rural areas is still governed by customs and
traditions and people do not easily adopt ne w practices.
15) Low Level of Literacy
Literacy in India is key for socio -economic progress and the Indian
literacy rate grew to 68% in 2007 from 12% at the end of British rule
in 1947. Literacy rate of India in 2011 is 74.04%. The Male literacy rate is
82.14% and Female literacy rate is 65.46% according to Census 2011. But
Literacy rate are low in rural areas compared to urban areas. This leads to
the problems of communication. The print medium is ineffective in rural
areas since its reach is poor.
16) Low per Capita Income
Near about 26% of GDP is generated in rural areas. It is shared by 74
percent of the population. So, per capita incomes are low. Moreover,
demand for goods in rural markets depends upon the agricultural
situation, as agriculture is the main source of income and it depends
upon the monsoon to a large extent. Therefore demand is not stable or
regular.
17) Many Languages and Dialects
The number of languages and dialects vary widely from state to state,
region to region and probably from district to district. Messages have to be
delivered in local language and dialects. Even though the number of
recognized languages is only 18 but there are an estimated 1700 dialects.
It is very difficult to marketers to design promotional strategies in
different language s and local dialects. Facilities such as phone, telegram
and fax are less developed in the villages, adding to the communication
problems faced by marketers in the distribution of goods, etc.
3.3 EXERCISES
1) State the problems faced by rural marketing
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38 4
AGRICULTURE MARKETING
Unit Structure :
4.0 Objectives
4.1 Introduction
4.2 Concept of Agriculture Marketing
4.3 Nature of Agriculture Marketing
4.4 Classification of Agriculture Marketing
4.5 Marketing Channels
4.6 Summary
4.7 Questions for practices
4.0 OBJECTIVES
1) To understand the concept of Agriculture marketing.
2) To learnt about the nature of Agriculture Marketing.
3) To understand the various types of Agriculture Marketing.
4) To learnt about methods of sales of Agriculture product.
4.1 INTRODUCTION
Agricultural marketing is a method that incl udes gathering, storage,
preparation, shipping, and delivery of different farming materials across
the country. It is different from the marketing of manufactured goods,
because of the special characteristics of agricultural product. These
characteristics are affecting by the supply and demand of agricultural
product.
Agriculture marketing is a process which starts with a decision to produce
a saleable farm commodity and it involves all aspects of market structure,
supply of farm inputs to farmers and movem ent of agricultural product
from the farm to the consumers. It’s also include assembling, grading,
storage, transportation, distribution, packaging, warehousing / storage,
cleaning, standardization etc.
4.2 CONCEPT OF AGRICULTURAL MARKET
I) “Agricultural marketin g is the process which starts with a decision
to produce a suitable farm commodity or product and its involves all
aspects of market structure or systems, both functional and institutional, munotes.in
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Agriculture Marketing
39 based on technical and economic considerations and include pre and post-
harvest operations like assembling, grading, storage, transportation and
distribution.”
- National Commission on Agriculture.
https://thedailyguardian.com
II) As per Indian council of Agricultural Research ‘Agricultural
Marketing involves three important functions.’
a) Assembling of goods.
b) Preparation for consumption
c) Distribution of agricultural products.
III) According to American Association defines “Marketing includes
all activities having to do with affecting chan ges in a ownership and
possession of goods and services. It is that part of economics with deals
with creation of time, place and possession utilities and that phase of
business activity through which human wants are satisfied by exchange of
goods and services for some valuable considerations.”
IV) Narrow definition of Agricultural is “agricultural market is a
place, where agricultural produce is brought and sold.”
Simply agricultural marketing involved all activities i.e.
a) Supply of farm inputs to the farmers.
b) Movement of agricultural products from the farms to the consumers.
V) Following important activities involved in agricultural marketing -
a) Assembling or procurement of goods
b) Processing of product
c) Distribution of product.
d) Packaging of the product.
e) Grading and standardization
f) Storage and warehousing
g) Transportation etc. munotes.in
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40 Production Marketing Movement of agriculture
products from to consumer Agricultural Marketing = Agriculture + Marketing 4.3 NATURE OF AGRICULTURE MARKETING
The marketing of agriculture commodities is different from the
marketing of manufactured good. It includes the two word i.e.
I) Agriculture - It is called a primary s ector as it includes all the
primary activities of production. Generally it is used to mean growing
and raising livestock’s and crops.
II) Marketing - It is the performance of business activities that direct
the flow of goods and services from producers to consumers or final
users.
Two aspects of Agricultural Marketing:
I) In agricultural marketing, the point of production (the form or ranch)
is the basic source of supply. Marketing process begins at that point and
continues until a consumer buys the product at th e retail counter or until it
is purchased as a raw material for another production phase.
II) Marketing also includes the input supply market. This refers to
marketing of products required for agricultural production. Unlike Urban
markets, production centers in rural areas. To produce food grain,
vegetable, fruits etc. large number of inputs is needed.
I.e. seed, fertilizer, pesticides, agricultural equipment etc. Input marketing
also includes marketing services such as engine repair.
III) In short Agricultural Mark eting is
= +
= +
*Farm inputs - fertilizers, pesticides, other chemicals, and livestock feed,
farm machinery, credit, electricity, water, labour etc.
Input Marketing Procurement of
farm inputs * by
farmers Agricultural
Marketing
Agricultural
Marketing munotes.in
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Agriculture Marketing
41 IV) Components of Agricultural Marketing :
1) Marketing functions
2) Marketing Agencies
3) Marketing Channels
4) Marketing efficiency
5) Marketing cost and margins
6) Price spread and market integration
7) Producer’s surplus (e.g. marketable surplus and marketed surplus)
8) Government policy
9) Research, training and statistics
V) Agricultural commodities are produced in all over the country.
Usually agricultural product are produced in one region and sold in other
region. Some time produced in one region and sold in all over world.
The farmers are not capable for selling their product in other regions. To
Sale number of products in other regions, numbers of middleman are
involved in marketing. The middlemen are the bridging for farmers and
consumers. This increases the gap between prices paid by consumer and
received by the producer. In this process farmers are not getting the
remunerative prices for produce. There are major conflicts on producer,
consumers, middlemen / traders and Government .
Conflicts in agricultural marketing :
Expectation from the marketing system varies from group to group and
therefore generally their objectives are in conflict -
1) Producers - Except maximum price for their produce and want the
inputs at the lowest possible price.
2) Consumers - Expect the best quality product, that to at the lowest
price.
3) Market middlemen and traders - Expect increasing income and
maximum profit, hence interested in buying from the producer
(farmers) at the lowest price and selling to the cons umer at the highest
price.
4) Government - Interests of the above three groups are in conflict. Govt.
has to reconcile this conflicting interest and attain overall welfare.
4.4 CLASSIFICATION OF AGRICULTURE
MARKETING
Classification of markets is on the basis of nature of commodities each
market has plus & minus points. Market can be classified on the basis of
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42
i) Freedom of interaction
ii) Time Span
iii) Area
iv) Nature
v) Public intervention
vi) Accrued of marketing margins
Fundamentals of these markets have remained unchanged. On the basis of
the place of location we may classify agricultural markets into, tree nodes
as follows:
Classification on the basis of place of location
Village Wholesale Terminal Seaboard
Markets Markets Markets Markets
Primary secondary
I) Village Markets - This market is located in a small village where
major transactions take place among the sellers and buyers of village or a
group of villages in the vicinity. Mostly degradable commodities like milk
or vegetable etc. goods are being, purchased or sold in a village or nearly
village. In this market only small lots of goods are being sold.
Much local assembly is undertaken by country buyers who farmer in his
village to bid for fruit on the tree or for grain after harvest. This saves
farmer’s trouble; but he is at a disadvantage in bargaining unless he knows
what other possible buyers would offer.
II) Wholesale Markets - These markets are classified in two types.
a) Primary wholesale market : This market is located in big towns
near the center of production. Producer farmers bring their produce for
sale to the traders. Transactions are between farmers and traders. The
agric ultural produce is purchased by intermediaries, which later they sell
it into wholesale markets. Besides agricultural produce, other articles
required for rural people, consumables i.e. pulses, salt jiggery, oil, fruits
and vegetables, spices, cloth, ornam ents of cheap metal are also sold in
these markets.
The main function of these markets is to serve assembling centers for local
produce and distributive centers for local consumption.
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Agriculture Marketing
43 Formers (Producers) Consumers b) Secondary wholesale markets - Generally, this market is located in
district headquarters / important trade centers / railway junctions. In this
market major transaction takes place between village traders and
wholesalers. The bulk of the arrivals in these markets is from other
markets. Produce handled in large quantities. Therefore, specialized
marketing agencies perform different marketing functions i.e. commission
agents, brokers and weigh men.
III) Terminal Markets : In this market produce is either finally disposed
of to the consumers or processors or assembled for exports, merc hants are
well organized and use modern methods of marketing. Commodity
exchanges provide facilities for forward trading in specific commodities
located either in metropolitan cities or in sea ports (Mumbai, Madras,
Calcutta, Delhi)
These markets handle large scale business with large number of buyers
and sellers. All facilities are available in the markets. Such as grading,
transportation, information, packing, weighing, loading etc.
IV) Seaboard Markets : This market is located near sea -coast and
meant mainly for import and export of good i.e. Mumbai, Madras, and
Calcutta.
These markets either receive the agricultural good from central market or
directly from local or district assembling market. Corresponding facilities
for handling imports of agricultural good s are also available in such
market.
4.5 MARKETING CHANNELS
The marketing channels of agricultural markets are different from other
commodity market. Agricultural produce has to pass through a wide
variety of market and change hands several times before it rea ches the
final consumer. Main reason for that is farmer and producers are scattered
geographically all over the country.
Routes through which agricultural products move from producers to
consumers marketing channels vary from commodity to commodity.
I) Direc t route :
This is possible only in limited cases.
II) Indirect Route : Presence of a number of middlemen in between
the primary producer and ultimate consumers.
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44
Wholesalers Commission
Agents Govt.
Agency Processors Cooperative
Marketing
Society Village
Trader Producer Farmers
4.6 SUMMARY
Agricultural marketing plays an important role in d eveloping country
market, has greater significance for consumers, producers, traders as well
as government, management guru Peter Director noted scientific
marketing removes imbalance in the supply by moving surpluses to deficit
area. Increase in marketing efficiency help to increase national income a
reduction of cost in marketing is of benefit directly to the society.
Lack of proper marketing channels is the main reasons for high prices
consumers have to pay for the products.
Here in the chapter we have s tudied Concepts, Nature and Classification
of Agricultural Marketing.
4.7 QUESTIONS FOR PRACTICES
1) Explain the concept of agricultural marketing.
2) What is agricultural marketing? State the nature of agricultural
marketing.
3) Discuss the various types of Agricultur al Market in India.
4) Write explanatory note on -
a) Marketing channels
b) Types of Agriculture Marketing
c) Nature of agriculture Marketing
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Consumers
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45 5
FACTORS OF AGRICULTURAL
MARKETING
Unit Structure :
5.0 Objective
5.1 Introduction
5.2 Factors of Agricultural Marketing
5.3 Summary
5.4 Exercise
5.0 OBJECTIVES
1) To understand the various factors of Agricultural Marketing.
2) To understand the secondary factors of Agricultural Marke ting.
3) To study functions of Agricultural Marketing.
5.1 INTRODUCTION
Various elements are the components in Agricultural Marketing. Along
with these elements other components like middleman in marketing roam
around. The buyer, middleman, trader and Government alike institutes
play the role of marketing and provide services, at their own individual
and independent level in the marketing.
Agricultural marketing is a process which starts with a decision to
produce a saleable farm commodity and its involves all the aspects of
market structure. Agricultural marketing pass through three main stages
i.e.
Pre-harvest operation
Harvesting operation
Post-harvest operation
Agricultural marketing involved the supply of farm inputs to the farmers
and movements of agricultura l products from the farm the consumers. The
activities are
1) Assessment of the disposable surpluses
2) Search the market to dispose of these surpluses munotes.in
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46 3) Collection of farm goods from individual farmers
4) Arrangement for transport to the nearest assembling centre
5) Pooling the produce of all the farmers
6) Grading and standardization
7) Processing whenever required
8) Packaging
9) Storage and warehousing 10)Transporting to the consumption center
11) Other activities i.e. pricing, promotion efforts, arrangements of
distribution.
Agricultural marketing start from input marketing and ends on output
marketing.
Agricultural Marketing Include:
I) Producers: Producers expect maximum price for their produce and
want the inputs at the lowest possible price.
II) Consumers: Consumers expect the bes t quality products, that too at the
lowest prices.
III) Market middlemen and traders: Middlemen & traders expect
increasing income and maximum profit so they interested in buying
from the producer (farmer) at the lowest price and selling to the
consumer at the highest price.
IV) Government: Government interests of the above three groups are in
conflict. Govt. has to reconcile these conflicting interests and attain
overall welfare.
Marketing : A process of value addition
Agricultural marketing involve transfer of good s from farmer to the
consumer, it creates following utilities.
I) Time utility : It’s added to commodities through storage.
II) Place utility : It’s added through transportation facilities.
III) Farm utility : It’s added through processing functions.
By the creation of mass utilities marketers are productive and add value
to raw agricultural commodities that consumers want.
The value adding process takes place through the following three sectors.
I) Input sector
II) Farm sector
III) Product market sector munotes.in
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47 5.2 FACTORS OF AGRICULTURAL MARKE TING
Marketing is influenced by nature of agricultural marketing differently
from marketing of manufactured good.
1) Lack of Infrastructure : The infrastructure includes, roads,
transport facilities, electricity, telecommunications, etc. These basic
facilities are not available in the rural areas. Condition of road is poor &
not in condition. Many areas are simply inaccessible. So the rural
marketing concept appears unpromising.
2) Product Design : A product which is selling well in urban markets
may not necessaril y be a success in rural markets, the reason being the
difference in the utility value of the product.
3) Existence of Middlemen : The government does not impose any
restrictions on the entry of market middlemen. Therefore, there are many
middlemen between the producer and the consumer. As a result, the
length of the marketing channel increases and the cost of marketing and
market margins go up. Hence, producers receive a low price, while
consumers pay a high price.
4) Multiplicity of Market Charges: For the same v alue of goods, the
cost of marketing agricultural produce is much higher than the products of
other sectors. A large number of market charges are paid - commission,
brokerage, weighment, hamali, karda, dhalta, muddat, darmada etc. These
charges also vary from market to market.
5) Awareness of market planning: Rural markets are different from
urban markets. Unlike urban they are unplanned in nature. Rural markets
were simply not cared about companies which have been household names
for decades in urban areas, w ere not even heard of in the rural markets.
Lack of awareness and understanding of consumer behavior in rural
markets, creates problems in formulating strategies and plans for these.
6) Existence of Malpractices: Unauthorized market charges, spurious
deductio ns, unfair weighing, taking away a part of product as sample by
bidders, bungling of accounts, etc. result in an increase in the real cost of
marketing produce.
7) Product Price : Price is a tool with which companies can compete
with one another. It is a sensi tive index, while considering the product.
Price plays an important role in urban as well as rural markets, but, it is
more crucial in rural areas because the income is low.
8) Lack of Communication: With the given level of literacy and
awareness of rural pop ulation, communication constitutes a major hurdle
in exploiting rural markets. Various factors, like language, religion,
superstitions, rigidity, etc. make communication in rural markets more
difficult.
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48 9) Lack of Market Information: There are no reliable ch annels of
communication to provide price information to producer -farmers, who are
isolated in remote villages. In the absence of reliable information, farmers
depend on hearsay reports that they receive from village merchants, and as
a result sell their pr oduce at lower rates.
10) Absence of Proper Standardization and Grading : Most farmers
have little knowledge of the practice of grading of produce prior to its
sale. They usually mix superior or inferior quality products to make a
single lot. As a result, they get a lower price for their produce. Sometimes
farmers are penalized by traders for the existence of a small percentage of
poor quality produce in the lot.
11) Lack of proper distribution system: Nobody ever thought of
developing the channels of distribution i n rural areas till the focus of the
executives shifted from urban to rural areas. Only those companies which
were directly related with agricultural activities,
e.g. insecticides, fertilizers, seeds etc., contacted the rural markets. The
consumer goods com panies had not focused their activities in the rural
areas. Thus, adequate channels of distribution do not exist, and this
restricts the exploitation of the rural markets to the full.
12) Cultural Factors: Culture affects the behavior of individuals. The
consu mers in the rural areas are much under the influence of traditional
cultural values. The culture at present is more or less the same as it was
some 50 years back. Consequently, their buying decisions are the result of
the culture.
13) Storage Facilities: Agric ultural production is not only confined to a
few areas but is also limited to a few seasons in a year. But its
consumption is spread throughout the year. Only adequate and efficient
storage facilities can ensure continuous supplies throughout the year. At
present, storage facilities are not only inadequate but the available storage
are not properly managed. This leads to wastage or reduced supplies,
resulting in high prices during the off-season.
14) Purchasing Design: One of the important factors affecting
consumers behavior in rural markets is the right to take the purchase
decisions. In most rural families, it is the heads of the family who
decides what do buy and when to buy. Consequently, his purchase
decisions are influenced by his own personality traits, rather than the
aptitude and perception of the actual consumers of these goods. Thus,
while venturing into rural markets, this fact needs probing.
15) Lack of literacy : In rural areas, the educational level is very low
in a majority of the rural areas. The income level also is very low. The
main occupation continues to be agriculture, and the level of
advancement in agriculture is also low. This results in lesser output and
consequently low income, resulting in low purchasing power.
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49 5.3 SUMMARY
Agricultural market ing involves all aspects of market structures. It’s
include producers, consumers, middlemen & government Marketing pass
through three stages which is pre- harvest operation, harvesting & post -
harvest operation. Mainly the marketing is the process of value additions.
Money factors are influenced to Agricultural Marketing which is
discusses earlier.
5.4 EXERCISE
1) Explain the concept of Agricultural marketing and state the Nature
of Agricultural Marketing.
2) Discuss the various factors of Agricultural Marketing.
❖❖❖❖
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50 6
IMPORTANCE AND PROBLEMS OF
AGRICULTURAL MARKETING
Unit Structure :
6.0 Objective
6.1 Introduction
6.2 Importance of Agricultural Marketing
6.3 Problems of Agricultural Marketing
6.4 Remedial measures for Agricultural Marketing
6.5 Summary
6.6 Exercise
6.0 OBJECTIVE
1) To understand the importance of Agricultural Marketing in Rural
Development.
2) To study various problems of Agricultural Marketing.
3) To study various remedies for the problems of Agricultural
Marketing.
6.1 INTRODUCTION
Efficient marketing is a prerequisite for the development of economy.
Efficient marketing ensures remunerative prices to producers, reduces
marketing cost and margins, provides commodities to consumers at
reasonable prices and promotes the movement of surpluses for economic
development.
In modern age, all nations have seen growing importance of marketing and
those adopted their economy, where marketing is developing at great
speed. In developing & developed countries, marketing in economy has
assumed top most priority. The whole world is a market in modern age.
Accordi ng to Peter, marketing is most ignored sector in economic lives of
developing country, instead such country doesn’t value marketing, isn’t
the case. America, the developed country is market oriented.
Marketing means : All comprehensive actions; to satisfy consumer and
achieve the objectives of organization & provide services to the
consumer are called as marketing. The marketing concept involves all
efforts to satisfy the consumer, society right from purchasing produce, as
assembling up to provision goods, produce to the consumer. In short
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51 6.2 IMPORTANCE OF AGRICULTURAL MARKETING
The success of produce is dependent on marketing of agricultural produce.
We realize the importance of agro-marketing, by this, which is given
below.
1) Drives behind Agricultural Produce: In a developing country like
India, agro -based produce is solely dependent on monsoon. If monsoon is
favorable, the yield is satisfactorily good. Otherwise yield gets reduced.
Monsoon & natu ral conditions are out of human reach that bring
uncertainly in agro-yield. To neutralize the uncertainty, marketing plays
the role at large scale. If marketing system is loopholes free, may bring
certainty about in farmer’s mind and may stimulate to incre ase agro -
yield.
2) Marketing is producer’s ultimate objectives :
Any producer produces the goods to sell and earn profit as ultimate
objectives. Until the produce is sold out, the production cycle never gets
completed. We come to know how much agri -yield marke ting is
important.
3) Capability a distinctive side: Agro -produce has variety. Farmers
from various regions produce various agro -products, across the country.
Nevertheless, a produce has variety of standard in a particular product of
the particular region. If agro-marketing system is influentially strong, the
farmers from the region get ample value for their produce that generates
capability in agro produce and marketing.
4) Increasing agro marketing: Farmers generally stores some part of
his yield for self-consumption and for seeds. Whatever produces
remained, he brings to market. Such selection is called increased
marketing yield. This should be to such an extent to fulfill the needs of
non-farmer community. The farmers are to be encouraged to bring this
produ ce in the market. This marketing of agro-based produce is one of
major function. If marketing of such yield is strong, there is rise, increased
marketing of yield.
6.3 PROBLEMS OF AGRICULTURAL MARKETING
Marketing agricultural products may appear to be simple, but it is very
complicated and consists of various complex operations. The agricultural
conditions in India had rapidly changed. Production has been achieved at
reasonable growth rate. But the growth rate not only has to be maintained
but accelerated and f luctuations in agricultural production have to be
minimized.
The Indian farmer is illiterate and ignorant; as a result, he will face a lot of
problems in marketing his agricultural produce. Following problems
faced by the Indian farmers.
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52 1) Lack of Crop plan ning : The major problem is in the crop planning
itself. In India a variety of crops are grown, but due to lack of knowledge
or information about the demand and supply conditions about the
commodities, a large number of farmers generally sow the seeds for t he
crop, which have good price in the market in current year. After
harvesting, the supply will become more than the demand. As a result, the
prices of those commodities will get affected immediately and the farmer
won’t get the prices what he has expected .
2) Problems of Organization : The first thing that strikes the observer is
the lack of any kind of collective organization among the producers. The
buyers of agricultural produce especially in the case of money crops,
usually operation a larger scale and are organized while the producers are
invariably small and scattered over, a wide there is no common
organization to guide them and to protect their interests, while purchasers
of commercial crops on the other hand, are large -scale operators on an
organized basis. Under the circumstances it is common to find that the
producers of agricultural products as a class are being exploited by the
purchasers.
3) Forced Sales: The village is the common place where most of the
farmers sell their produce just after the harve st and hence they get a very
low price. The basic reason for this is the indebtedness of the farmer for
his needs like to purchase seeds, manures, etc.
All of these force him to sell his produce to the money lenders, merchants,
landlords, and itinerant merchants and to borrow before and during
sowing period. For production or other purposes, he has to enter into
advanced sale contract on less price terms with these merchants before
the crop is harvested.
4) Multiplicity of Market Charges : The marketing charges payable by
the producers are numerous and varied in unregulated markets and they
tend to reduce considerably the return to the producer from the sale of his
produce. On a sale of produce worth Rs. 100, a much as 21.5 per cent
of the income of the producer goes to meet the various expenses.
5) Inadequate Storage Facilities : The cultivators store their produce in
carts, pits, kachcha store houses, etc. There are no adequate storage
facilities. Even the available store houses are costlier for the farmers.
Partic ularly in a situation, where there are small producers, producing
little output, they cannot think of storing their products in the store
houses. Due to insufficient method of storing, it is estimated that 10 to
20 per cent of the agricultural produce are destroyed because of
dampness, rats, ants, etc. There will be deterioration in the value of the
products also.
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53
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6) Superfluous Middlemen : Agricultural Marketing is characterized
by the existence of a long chain of middlemen or intermediaries in
between the producers and the consumers. This, in turn, reduces the
effective share of the producer -sellers to a considerable extent. The
intermediaries comprising the village Banias, itinerant merchant or
Beopari, Dalal, Kachcha and pucca arhatiyas. Whol esale merchants and
retailers. They function at various stages in the process of assembling to
distribution. The existence of a long chain of middlemen take away a huge
share of the price paid by the consumer and consequently, the producer
gets a small sha re of the price. In the case of plantation crops and the
perishable products, the presence of this group is much higher than the
other products.
7) Malpractices of Markets : In unregulated markets, malpractices
tend to be common. i.e. Scales and weights are manipulated against the
seller. This practice is rendered easier by the fat that till recently there had
not been 110 standardized weights and measures nor was there any
provision for regular inspection.
There are all kinds of arbitrary deductions for religi ous and charitable
purposes and for other objects. The burden falls entirely on the seller and
he has no effective means of protest against such practice.
8) Lack of Transport: Inadequate transport facility is one of the serious
problems for the agricultural producers. The transportation system in
India is a mixture of the ancient and modern means of transport. Some of
the villages are not even connected by the roads. Many parts of the
villages are untouched by either pucca roads or rail. So, the farmers find it
difficult to transport their produce to the storehouses and to the markets,
because of these a part of the produce is spoiled and lost in transportation.
And at many places, a sizeable part of the agricultural produce does not
reach the markets.
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54
https://agric ळltळristm ळsa.com
9) Grading and sorting:
Grading and sorting is an activity where farmer differentiate
commodities according to quality specifications . It implies the division of
products into classes made up of unit possessing similar
characteristics of size and quality. Agri produce may be difference in
quality or shape or size or features of the products.
10) Insufficient Grading and Standardization: Another problem in
marketing of agricultural produc e is that agricultural goods arenot
standardized and graded. A good system of marketing should ensure an
adequate premium for superior over inferior produce. A large number of
farmers have little knowledge of grading their produce and usually mix -up
good a nd poor quality product into a single lot, which secure them lower
price.
11) Lack of Market Information: Absence of market intelligence as to
prices is another defect. The villagers have practically no contact with the
outside world nor are they in touch with the trend of market prices and
they mostly depend on hearsay reports received from the village Baniya
who is not at all interested in supplying them the correct information as
to prices obtaining in the wholesale market.
12) Lack of Financial Facilities at Cheaper Rates : The cultivator is
financed by the village Savkar -cum-trader who is in his own turn financed
by arhatiya and the indigenous banker in the absence warehouse and the
lack of facilities for making advances against the warehouse receipts there
cann ot be any system of cheap finance against security of goods. There is
at present no proper link between indigenous bankers or commercial
bankers and the Reserve Bank of India. The various marketing agents
borrow funds at a high rate of interest.
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55 6.4 REME DIAL MEASURES FOR AGRICULTURAL
MARKETING
1) Regulated Markets :
Regulated markets are places where transactions are governed by various
rules and regulations. Markets may be regulated either by local bodies or
operate under state legislation. Market communiti es consisting of
representatives of growers, traders and the government look after the
functioning of these markets. They are responsible for ensuring fair
trading practices, licensing market functionaries, curbing the deduction of
unauthorized market char ges as also for the introduction of open auction
system of sales, enforcement of standard weights and impartial arbitration
in case of disputes. In short, a regulated market offers a package of
measures to remove the defects of traditional rural markets.
2) Provision of Storage and Warehousing Facilities:
Improved storage performs an important marketing function of regulating
supply in relation to demand, stabilization of prices and maintenance of
buffer stocks. A warehouse in a broad sense is storage where goods are
stored on the journey from places of production to places of
manufacture or consumption. Warehousing is done in such a manner as
to serve the needs of primary producers, middlemen, manufacturers and
consumers.
3) Provision of Finance:
Finance is a major problem for the farmers. Small and marginal farmers
are entirely dependent on credit to meet their needs and carry out farm
activities. Large numbers of farmers commit suicide every year due to
bankruptcy and inability to repay loans. Hence, it is v ery important that
the rural credit structure is improved so that more credit is made available
to farmers, thus improving their financial status.
4) Development of Agricultural Marketing :
Campaign under this programme. Government provides the required
information for the scientific methods of storage. Government
established an Indian Grain Storage Institute in 1958 so to promote the
scientific storage of the grains.
5) Improvement of Transport Facilities :
Here are some ways in which transport can be impro ved and transport
costs reduced:
There must be full utilization of the capacity of the vehicle in
terms of load to reduce per quintal cost of transportation.
The transportation cost per quintal can be reduced by fixing the
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56 Using the correct type of wagons to reduce spoilage, damage,
breakage or pilferage.
Reducing the barriers to interstate movement of produce.
6) Grading and Standardization :
Standardization is the process of fixing certain norms for the products.
These norms are established by customs or traditions or by certain
authority. It involves determination of basic characteristics of a product on
the basis of which the product can be divided into various groups. It also
means determining the standards of pro ducts to be produced with regard to
size, colour form, weight, shape and quality. Standards are model
products which form, the basis for comparison, standardization facilitates
marketing of the product, and increases demand for the products, leads
consumer satisfaction, eliminates the risk in buying non -standard products
and assures quality.
7) Market Information :
The availability of prompt and reliable information about what is
happening in the market, what quantities are arriving and what prices are
quoted for different commodities considerably improve the decision -
making capability of the farmers and strengthens their bargaining power.
8) Market Inspection, Research and Training :
Proper arrangements for market inspection, research and training will help
solve the problems of agricultural marketing in many ways. With the
help of this research, an efficient marketing system can be developed.
Inspection will help in identifying the nature of the problems and their
root cause. On the basis of this research can b e undertaken to find
solutions and implement them.
9) Use of Standard Weights and Measures:
Some of the traders resort to using unauthorized and faulty weights and
scales. They also resort to very unethical practice of freely taking away the
excess left in the lot after weighing. All such malpractices rampantly
coexist due to the absence of an impartial and independent agency for
weighing. There is also a complete absence of uniform weighing charges.
The lack of any fixed procedure of supervision over the actual weighing
processes also responsible for the situation.
10) Co-operative Marketing :
There were so many malpractices in the marketing of agricultural
produce. The private traders those were handling this trade were having
profit as their main objective. They were financing the farmer's activities
but they were charging very high rate of interest. They felt compulsion to
sell their produce immediately after the harvest even at low prices. The
charges of the middlemen were high. To remove all these defects the munotes.in
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57 Government encouraged the establishment of co-operative marketing
institutions. Co-operatives are the best form of organization to further
their business and economic interests.
6.5 SUMMARY
Agricultural marketing covers the services involved in moving an
agricultural product from the farm to the consumer . These services involve
the planning, organizing, directing and handling of agricultural produce in
such a way as to satisfy farmers, intermediaries and consumers.
Marketing of Agricultural products is simpl e but it’s very complicated.
Efficient marketing ensures remunerative prices to produces. For the
process of Rural Development, efficient marketing system necessary
operational efficiency and pricing efficiency can improve the marketing.
In this topic, we discuss the problem of Agricultural Marketing and
Remedial measures.
6.6 EXERCISE
1) Explain the importance of Agricultural Marketing in Rural
Development.
2) Discuss the various problems of Agricultural Marketing.
3) Explain the defects of Agricultural Marketing and state its
Remedies.
❖❖❖❖
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58 7
AGRICULTURAL MARKETING RISKS
AND UNCERTAINTIES PART -I
Unit Structure.
7.0 Objectives.
7.1 Introduction.
7.2 Features of Agriculture Produce.
7.3 Concept of Agriculture Marketable and Marketed Surplus.
7.4 Role of Marketable and Marketed Surplus.
7.5 Reasons of low Agriculture Marketable Surplus.
7.6 Measurements to improve Agriculture Marketable Surplus.
7.7 Summary.
7.8 Exercises.
7.0 OBJECTIVES
1. To know the Features of Agriculture Produce.
2. To understand the Concept of Agriculture Marketable and Marketed
Surplus.
3. To know Role of Marketable a nd Marketed Surplus in Agriculture
Marketing.
4. To understand the various reasons of low Agriculture Marketable
Surplus.
5. To suggest measurements to improve Agriculture Marketable Surplus.
7.1 INTRODUCTION
Farmers and cattleman deal with a significant amount of uncertainty
every day. From not knowing what the weather will be like this year to
wondering if market prices will increase or decrease tomorrow,
agricultural producers are forced to make decisions based on imperfect
information. Born out of this uncertai nty is the possibility of injury or loss.
Risk can be defined as the possibility of adverse outcomes due to
uncertainty and imperfect knowledge in decision making.
The term "agricultural product" means any agricultural commodity or
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59 derived from livestock that is marketed in India for human or livestock
consumption.
Agricultural biodiversity provides humans with food and raw materials
for goods - such as cotton for clothing, wood for s helter and fuel, plants
and roots for medicines, and materials for biofuels - and with incomes and
livelihoods, including those derived from subsistence farming.
Agricultural products are different than industrial products . So the features
of products can be divided into three major types based on production,
marketing, and consumption.
7.2 FEATURES OF AGRICULTURE PRODUCE
1. Seasonal production:
Unlike consumer goods and industrial goods which are produced
througho ut the year, agricultural goods can be produced only during a
specific period in a year. There are summer crops and winter crops.
Certain crops need a lot of water. Others require only minimum water.
Given all these differences, all the crops cannot be gro wn in all the months
in a year.
2. Difficult to control production:
In the case of consumer and industrial goods, the producer can exercise
direct control over production. But in the case of agricultural goods, nature
plays a vital role in production. If the cultivator has sown the seeds and is
awaiting rains, failure of rains will hamper production. Agricultural
production is much dependent on the availability of abundant water. The
availability of water depends on rainfall.
3. Difficult to control quali ty and quantity of output:
The producers of consumer and industrial goods can control both the
quality and quantity of output. It is not that easy in the case of agricultural
production. Even if the producer (the farmer) uses good quality seeds,
fertilizer s, and manures, the quality and quantity of output are determined
mainly by natural factors.
4. Long waiting period:
Production of consumer and industrial goods takes place almost
continuously daily. But in the case of agricultural goods, the gestation
period is too long. Thus, continuous production cannot be thought of.
5. Loss of crops due to pests and animals:
The crops need to be protected from pests and animals. Every year,
farmers suffer a heavy loss of revenue due to crop loss caused by the
activi ties of pests, insects, and animals. To protect their crops, farmers,
therefore, use pesticides, insecticides, and so on. They also use electrical
fences to safeguard their crops from cows, elephants, and other animals.
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60 6. Loss of production due to litig ation:
Another peculiar problem in agricultural production is that there is always
litigation between the farmers over the land territory and other such issues.
As a result, they may have to spend a lot of time, money, and effort to win
legal battles. This affects the time available for production and thereby
affects the output.
7. Small -scale production:
In India, the number of small and marginal farmers is larger than the
number of big landlords. The small and marginal farmers hardly own a
few acres of l and. The quantity of output they turn out is hardly sufficient
for their family needs. Most of these people produce for their families
rather than for the market.
8. Use of primitive techniques of production:
In developed countries, agriculture gets the s ame importance that the
industry gets. But in India, although industrial development has reached a
significant level, agriculture remains a neglected sector.
The farmers follow the conventional methods of production which affect
the yield. They do not hav e access to the latest machines and equipment
because they cannot afford to have these.
9. Ignorance of the producers:
Producers of consumer and industrial goods have greater awareness than
the producers of agricultural goods. As a result, the former can adapt to
any kind of situation and come out of the problem.
For example, the producers of consumer and industrial goods can modify
or update their products in tune with the demand and market trends. But
the farmers are conservatives. They cannot adapt the mselves to changes.
They prefer to grow the same crop they grow every year.
10. Lack of collective bargaining:
Industrialists have their associations through which they represent all their
grievances to the Government and can find a solution to any proble m. But
in the case of agriculture, the farmers do not have any such prominent
association. As a result, although they have grievances, they are not in a
position to represent the same property.
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61 7.3 CONCEPT OF AGRICULTURE MARKETABLE AND
MARKETED SUR PLUS
Concept of Marketable and Marketed Surpluses
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Marketable Surplus is a theoretical ex -ante concept that represents the
surplus that the farmer/producer has available with himself for disposal
once the genuine requirements of the farmer for family consumption,
payment of wages in kind, feed, seed, wastage, and purchases have been
met. Marketed Surplus as compared to marketable surplus is a practical -
post concept and refers to that part of the marketable surplus that’s
marketed by the prod ucer i.e. not only the part which is available for
disposal but that part that is made available to the market or the disposal of
the non -farm rural and urban population.
Computation of Marketable Surplus
It is computed by the formula: A – B = MS
Where MS is Marketable Surplus, A - stands for net availability of the
given crop in the year of reference, and B - stands for the following items
in the same year:
i. Consumption by the farm family,
ii. Consumption by permanent labour engaged on the farm,
iii. Consumption by the temporary labour occasionally employed on
the farm,
iv. Quantity retained for seed,
v. Quantity retained as feed for farm animals,
vi. Quantity retained for barter,
vii. Payments in kind:
a). To permanent labour, b) To tempora ry labour, c) For machinery and
equipment, d) For customary payments, e) To land owners as rent, f) To
land owners as a hare of produce, g) for re -payment of loan, h) Land
revenue, i) Irrigation charges.
viii. Physical losses: a) In threshing and winno wing, b) In transport from
threshing floor to storage, and c) In storage at producer’s level.
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62 Consumption by the Farm Family
The term “Consumption by the farm family” of the cultivator households
has two distinct connotations in so far as its impact on m arketed and
marketable surplus is concerned. For marketed surplus, it refers to the
quantity retained for consumption by the family irrespective of the actual
total requirements for the purpose. marketable Surplus, reefers to the
quantity that ought to be retained by the farm family for its consumption
or the quantity required for consumption. The use of the term “Surplus”
would thus be justified only if the quantity required for consumption,
rather than the quantity actually for consumption is taken into a ccount for
arriving at the quantity of marketable surplus actually for non -farm
consumption.
In case the quantity retained for consumption (and not the quantity
actually for consumption) is taken into account , the quantity calculated is
the marketed surp lus which is a gross concept not subtracting repurchases,
because the quantity sold will not include the buybacks by the buybacks
Meanwhile, instead of quantity retained for family consumption, the
quantity required for consumption is taken into considerat ion for the
calculation mark the marketable surplus and hence it is a net concept
subtracting repurchase see. The quantity required for family consumption
has been calculated by adding the “Quantity retained for family
consumption + Quantity purchased for family consumption + Total
receipts in kind for family consumption”.
The marketable surplus will thus be according to the formula:
A – B = MS
Where, A stands for production, and B includes all the items mentioned
earlier except that “Quantity required for consumption” has been treated to
include the quantity required for “family consumption” as explained above
and MS stands for “marketable surplus”. This quantity is available for
non-farm consumption and is, therefore, a true Marketable Surplus.
Compu tation of Marketed Surplus
In case the quantity retained for consumption (and not the quantity
actually for consumption) is taken into account, the quantity calculated is
the marketed surplus which is a gross concept; because the quantity sold
will not in clude the buyback The marketable surplus will thus be
according to the formula:
A – B = MS
Where A stands for production and B includes all the items mentioned
above apart from viii) (c) i.e. viii) Physical losses: c) In storage at
producer’s level.
The term “Consumption by the farm family” of the cultivator households
refers to the quantity retained for consumption by the family irrespective
of the actual total requirements for the purpose.
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63 For Accounting Purpose
Marketable Surplus= Net availabilit y of the Crop in the year –Retention
including all seed feed and wastage – Purchases.
MS = N – R – P => MS = (N – R) – P
The marketable surplus differs from region to region and within the same
region, from crop to crop. It also varies from farm to farm.
On a particular farm, the quantity of marketable surplus depends on
1). Size of operational holding,
2). Yield of Commodity,
3). Price of the Commodity,
4). Household Size,
5). Requirements of seeds and feed,
6). Payments to labour in kind,
7). D istance from mandi, and
8). Stock of previous year etc.
The larger the quantity marketed, the greater the cash income to a farmer.
Accordingly, crops also came to be known as cash crops, which earn more
cash in insofar the farmers. The marketable or mar keted surpluses depend
upon the type of crop ie. food grab another food crop, or, a non -food crop.
In the case of food grain and other food crops, the surpluses are generally
less on small and marginal farms and their proportions a widely according
to the size of holding and other related factors. But in the case of non -food
crops viz. Cotton, sugarcane, soybean, etc. which are used as a raw
material in an o -based industry, almost all the production is available for
sale except for small quantities kept for seed. In these crops, marketable
surpluses are nearly percent cent. Such crops are called cash crops or
commercial crops In the same analogy, even food crops with large
marketable surpluses (say above 50%) can be regarded as cash or
commercial crops.
Identification of certain crops as commercial or cash crops has many
policy implications from the point of view of the development of well -
good organized markets and other infrastructure facilities such as storage
(including cold storage or perishables), com munication, market
information, banking services, etc.
1. Marketable surplus for food grains, particularly in a deficit state is low
and such crops may not be considered commercial crops in that area.
2. All fruit crops are commercial crops because thei r marketable surpluses
are above 96%.
3. Similarly, vegetables are also commercial crops, which is evident from
their marketable surpluses being above 96% and marketed surpluses
above 85%.
4. Special mention needs to be made about milk.
Some oil seed c rops like groundnut, sunflower, safflower, soybean, castor,
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64 commercial crops as the marketable surpluses in them are almost 100%
and therefore they are cash crops for the farmers. In addition , there are
some crops, which are grown in small pockets, but they have large
marketable surpluses and hence they are cash crops for farmers in those
areas. Examples are – Red chili, turmeric, tobacco, minor fruits, etc.
The solution to the problem of dev elopment, it is argued, is to take steps to
increase agricultural productivity rather than get involved in the possibility
of the failure of marketed agricultural surplus to grow. Since the peasant
has a rather high propensity to save and since a large par t of his
incremental consumption consists of manufactured goods, the argument
runs, it is incorrect and misleading to over -emphasis the problem of
marketed surplus.
However, why marketed surplus may not fail to increase with rising in per
capita agricult ural production. In a predominantly agricultural country,
like India, aiming at a high rate of capital formation, it is not enough that
marketed surplus should rise with risings of production; the ratio of
marketed surplus to production must raise enough t o mobilize the savings
potential in the agricultural sector to the utmost. It would not do, therefore,
to ignore the problem of marketed surplus.
1. Marketable Surplus
The marketable surplus is the quantity of the product which can be made
available to t he non -farm population of the country. It is a theoretical
concept of surplus. The marketable surplus is the residual left with the
producer -farmer after meeting his requirements for family consumption,
farm needs for seeds and feed for cattle, payment to labour in kind,
payment to artisans – carpenter, blacksmith, potter, and mechanic –
payment to the landlord’s rent, and social and religious payments in kind.
This may be expressed as follows:
MS = P – C
Where
MS = Marketable surplus
P = Total producti on, and
C = Total requirements (family consumption, farm needs, payment to
labour, artisans, landlord, and payments for social and religious work).
2. Marketed Surplus
Marketed surplus is the quantity of the product that the producer -farmer
cells in th e market, irrespective of his requirements for family
consumption, farm needs, and other payments. The marketed surplus may
be more, less, or equal to the marketable surplus.
Whether the marketed surplus increases with the increase in production
has been under continual theoretical scrutiny. It has been argued that poor
and subsistence farmers sell that part of the product that is necessary to
enable them to meet their cash obligations. This results in distress sales on
some farms. In such a situation, an y increase in the production of marginal
and small farms should first result in increased on -farm consumption. munotes.in
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Agricultural Marketing Risks
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65 An increase in the real income of farmers also has a positive effect on on -
farm consumption because of positive income elasticity. Since the
contribution of this group to the total marketed quantity is not substantial,
the overall effect of an increase in production must lead to an increase in
the marketed surplus.
Bansil writes that there is only one term – marketable surplus. This may be
defin ed subjectively or objectively. Subjectively, the term marketable
surplus refers to the theoretical surplus available for sale with the
producer -farmer after he has met his genuine consumption requirements
and the requirements of his family, the payment of wages in kind, his feed
and seed requirements, and his social and religious payments. Objectively,
the marketable surplus is the total quantity of arrivals in the market out of
the new crop.
7.4 ROLE OF MARKETABLE AND MARKETED
SURPLUS IN AGRICULTURE MARKET ING
Rising marketable surpluses are the real surpluses, which determine the
real income, real savings, real capital formation and real investment and
have great importance in raising the welfare in inflation free economies.
Fall in the real marketable surp luses in less developed economies, raise the
prices of not only foodstuffs but also of other wage goods and invariably
the real levels of living of working class may go down. Marketable
surpluses plays role in following way:
i) Need of food grains for growi ng population:
Sufficient food grains should be provided to all the people of a State.
Production of food grains should be sufficient to meet their demand. If the
production is less than demand, the country will have to import food
grains which will creat e the problem of adverse balance of trade and
balance of payments.
ii) Development of industrialization:
Agriculture has huge positive impacts on the industrial development, It
regularly supplies raw materials like sugarcane , jute cotton, oilseeds, tea,
spices, wheat; paddy etc. to the consumer goods industries .
iii) Development of the second and tertiary sector:
The primary, secondary and tertiary sectors represent various business
types and the goods they procure and sell in an economic setup. Each
sector is interdependent on the other so that the economy as a whole
functions properly and efficiently.
iv) Availability of foreign currency:
Agricultural trade plays an important role in the sustainability of global
and regional food systems. Trade between countries allows food to shift munotes.in
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Rural Marketing & Finance
66 from surplus to deficit areas . It helps to increase the variety of products on
offer.
v) Improving the living standards of farmers:
Agricultural development and agro surpluses are one of the most powerful
tools to end extreme poverty, boost shared prosperity, and feed a projected
9.7 billion people by 2050 . Growth in the agriculture sector is two to four
times more effective in raising incomes among the poorest compared to
other sectors.
vi) Modernization of agribusiness: Agricultural Mode rnization is the
process of transforming the agricultural. To transform there is need of
surpluses of agricultural; goods, which will be able to raise more capital
for the sectore.
7.5. REASONS OF LOW AGRICULTURE
MARKETABLE SURPLUS.
On a particular farm, the quantity of marketable surplus depends on the following factors:
i) Regional Situation: The marketable surplus differs from region to
region and, within the same region, from crop to crop. It also varies from
farm to farm.
ii) Consumption habits: The quantity of output retained by the farm
family depends on the consumption habits. For example, in Punjab, rice
forms a relatively small proportion of total cereals consumed by farm
families compared to those in southern or eastern states. Therefore, out of
a given output of paddy/rice, Punjab farmers sell a greater proportion of
paddy/rice, in Punjab farmers sell a greater proportion than that sold by
rice-eating farmers of other states.
iii) Size of holding: There is a positive relatio nship between the size of
the holding and the marketable surplus. India is populated country and
every year many hector land divided and fragmented due to inheritance
act. Divided and fragmented piece of land is not viable as far as today’s
production cost is concern.
iv) Size of family: The larger the number of members in a family, the
smaller the surplus on the farm.
v) Price of crop output: The price of the commodity and the marketable
surplus have a positive as well as a negative relationship, depending upon
whether one considers the short and long run or the micro and macro
levels.
vi) Level of production: The higher the production on a farm, the larger
will be the marketable surplus and vice versa.
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67 vii) Seed and feed requirements: The higher the requirement for t hese
uses, the smaller the marketable surplus of the crop.
viii) Type of crop: marketable surplus also depend on the type of crops,
climate and area. In our country crops are taken on the base of type of land
( Soil) and climate, so in certain period surplus o f certain crops is
abundance and it is one kind of risk as far as prices are concern.
7.6. MEASUREMENTS TO IMPROVE AGRICULTURE
MARKETABLE SURPLUS.
i) Technological Measures:
Measures are taken to increase agricultural production substantially to
meet the growing needs of the population and also to provide a base for
industrial development including steps to increase both extensive
cultivation and intensive cultivation.
ii) Land reforms:
Land reform measures are taken to abolish intermediary interests in land
(viz. Za mindars, Jagirdars etc.) and transfer of land to actual tiller of the
soil were expected to be taken up on a priority basis.
iii) Institutional credit:
Another important measure was expansion of institutional credits to
farmers through cooperative and commercia l banks. After nationalization
of banks in 1969, nationalized banks have paid increasing attention to the
needs of agriculture. Regional Rural Banks were also set up to deal
specially, with the needs of agricultural credit.
iv) Procurement and support prices:
Announcement of procurement of support prices to ensure fair returns to
the farmers so that even in years of surplus the prices do not tumble down
and farmers do not suffer loss. In fact the policy of the commission for
agricultural cost and price in recen t years has been to announce fairly high
prices in a bid to provide incentive to farmers to expand production.
v) Input subsidies to agriculture:
The government has provided massive subsidies to farmers on agricultural
inputs like irrigation, fertilizers and power. The objectives of input sub -
sidisation are to increase agricultural! Production and productivity by
encouraging the use of modern inputs in agriculture. Under this policy
various inputs are given to the farmers at a sub -sided rate.
vi) Rural Employment Programmed:
To provide purchasing power to the poor, rural employment the
programmes are needed. Government introduced poverty alleviation
programmes from the Fourth Plan onwards like Small Farmers munotes.in
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68 Development Agency (SFDA), Marginal Farmers and Agricultur al Labour
Development Agency (MFAL), National Rural Employment Programme
(NREP), Rural Landless: Employment Guarantee Programme (RLECP)
Jawahar Rozgar Yojana (jRY), Jawahar Crami Samriddhi Yojana for 5
years (JCSY), Sampoorna Grameen Rozgar Yojana (SCRY) e tc.
vii) Cooperation and consolidation of holdings:
To prevent fragmentation of holdings, Indian agricultural policy
introduced the programmes of cooperation and consolidation of holdings.
Latter programmes aimed at consolidating plots owned by a particular
farmer in different places of village by sanctioning land at one place of
equal area or value to his plot of land.
This avoids wastage of time and energy employed in cultivation and he
can practise scientific technique of production. Cooperation aims at
uniting small and marginal farmers together to reap the harvest of large
scale farming. Under cooperative farming small and middle class farmers
use their land and resources and practise joint cultivation.
7.7. SUMMARY:
Generally the predominant agricultural countr ies like India depend much
on the marketable surplus of agricultural produces. As a matter of fact, it
is not the total production of agricultural sector but the surplus generated
by the agricultural sector for the market plays the crucial role in the
deve lopment of such countries. Thus, in cases of agricultural economics
like India it is not sufficient to boost only its agricultural production but it
must boost the marketable surplus of agricultural produces regularly.
Marketable surplus represents the theoretical surplus available for disposal
with the producer left after his genuine requirements of family
consumption, payment of wages in kind, feed, seed and wastages have
been met. Marketed surplus on the other hand represents only that portion
of the marketable surplus which is actually marketed and is placed at the
disposal of the non -farm rural and urban population
7.8. EXERCISE
1. Write various features of Agriculture Produce in India.
2. Explain the concept of Agriculture Marketable and Marketed Surplus
with suitable examples.
3. State the role of Marketable and Marketed Surplus.
4. Write various reasons of low Agriculture Marketable Surplus.
5. Explain the measurements to improve Agriculture Marketable Surplus.
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69 7.9. REFERENCES:
1: Rural Marketing for Module 1 P.No. 7 7 to 96, 243 to 250, 457 to 478,
361 to 368 Badi R.V. Badi N.V.
2: Development Issues of Indian Economy Himalaya Publishing House
for Module 1 Mumbai – 400 004 – 2013 Mishra and Puri
3: Indian Agriculture Since Independence Oxford and IBH Publishing Co.
Pvt. Ltd. New Delhi – 110 001 1990 Dantwala M.L
4: Rural Marketing P.No. 285 to 308, 411 to 456 Badi R.V. Badi N.V.
5: Rural Marketing P.No. 344, 422, 418 to 455 Books For Addition
Readings Badi R.V. Badi N.V.
6: Rural Marketing in India HPH - Mumbai 400 004 --- 2003 Habeeb
U.R., Rahman K.S.
7: Rural MarketingGopalaswamyVikas Publishing House New Delhi.
8. Small -scale industries and entrepreneurship Himalaya Publishing
House, Desai Vasant.
9. Indian economy S. Chandand company limited 7361, Datta Ruddar:
Sundaram K P.
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70 8
AGRICULTURAL MARKETING RISKS
AND UNCERTAINTIES PART -II
Unit Structure
8.0 Objectives.
8.1 Introduction.
8.2 Concept of Risk & Uncertainties.
8.3 Agricultural Marketing Risk & Uncertainties.
8.4 Types of Agricultural Marketing Risk & Uncertainties.
8.5 Remedial Measures on Agri cultural Marketing Risk & Uncertainties.
8.6 Summary.
8.7 Exercise.
8.0 OBJECTIVES
1. To know the concept of Risk & Uncertainties.
2. To understand Agricultural Marketing Risk & Uncertainties.
3. To study types of Agricultural Marketing Risk & Uncertainties.
4. To understand the remedial Measures on Agricultural Marketing Risk
& Uncertainties.
8.0 INTRODUCTION
The land varies from country to country and from country to country
geographically in terms of soil texture, fertility, rainfall, temperature, and
water availability. Sometimes a program designed for the development of
one region is not conducive to the development of another region and
fertile rocky and barren lands are found in different parts of the same
region which creates uncertainty in production resulting in risk related to
income, price, etc. Differences in climate and use of technology in the
agricultural sector create uncertainty in production and productivity and
price and income remain uncertain. This has a huge impact on the
agricultural sector and the mindset of th e farmers. In the field of
agriculture, insurance schemes are being implemented at the government
level for the risks. National Agricultural Insurance Scheme, Crop
Insurance, Agricultural Income Insurance, Livestock Insurance, etc. make
it possible for far mers to manage risk. It is necessary to reduce the
uncertainty and risks in the agricultural development of the country. munotes.in
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71 8.1 CONCEPT OF RISK & UNCERTAINTIES
The concepts of agricultural market risk and uncertainty are as follows:
Concept of Risk
"Risk is an important and far -reaching event that can be predicted
based on past experience or collected data ."
Concept of Uncertainties.
"Uncertainty is an event or situation in which no definite prediction
can be made from past experience or related statistics abou t a future
event that will have an adverse effect."
8.2 AGRICULTURAL MARKETING RISK &
UNCERTAINTIES.
Agricultural marketing experiences three types of risks namely
the Physical risk, Price risk and the Institutional risk . The physical risk is
the loss in the q uantity and quality of the product during storage and
transport like fire accident; rodents, pest and disease attack and due to
improper packing.
https://www.slideshare.net
8.3 TYPES OF AGRICULTURAL MARKETING RISK &
UNCERTAINTIES
i) Uncertainty about market commodity prices: In additional to yield or
technical uncertainty, uncertainty also exists with regard to the prices of
agricultural products. Price is more or less an uncontrolled or exogenous
variable so far as the individual farmer is concerned.
ii) Uncertainty in supply and demand: Agriculture sector has no control
on supply of produce as like industrial goods. It is depend upon climate
and the cultivation methods. Many times it is observed that because of the
excessive supply farmers have sold their goods at a very low rate.
iii) Dangers in freight: As far as India is concern we always have
experienced dangers and risk of bad roads, high cost of transportation, munotes.in
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72 irregularity of vehicles, insufficiency of vehicl es, insufficient means of
transportation and long distance from farm to their houses as well as
markets . All these factors of freight effect on farmers in our country.
iv) Uncertainties regarding storage arrangements: Every year, there is
a large amount of food loss due to lack of storage facilities in India. A
recent study by National Academy of Agricultural Sciences (NAAS)
highlights that the lack of access to a storage facility “is the most
important cause of post -harvest losses for all types of food in India”, due
to lack of storage facilities in India farmer sale their goods in distress
prices.
v) Intermediate numbers and their dominance: Basic types of
marketing intermediaries include agents, marketing agencies, wholesalers
and retailers in agricultu ral market. Middlemen are usually held
responsible for farmer's low share in the consumer rupee and are blamed
for exploiting the farmers.
vi) Market export arrangements: We get to see lack of various
marketing activities required for export purposes such as marketing
research, product design, branding, packaging, pricing, promotion, etc.
vii) Malpractices in Unregulated Markets: Even now the number of
unregulated markets in the country is substantially large. Arhatiyas and
brokers, taking advantage of the ignorance, and illiteracy of the farmers,
use unfair means to cheat them. The farmers are required to pay arhat
(pledging charge) to the arhatiyas, "tulaii" (weight charge) for weighing
the produce, "palledari" to unload the bullock -carts and for doing ot her
miscellaneous types of allied works, "garda" for impurities in the produce,
and a number of other undefined and unspecified charges. Another
malpractice in the mandies relates to the use of wrong weights and
measures in the regulated markets. Wrong wei ghts continue to be used in
some unregulated markets with the object of cheating the farmers.
i) Chainless animals in market Yard: Many times it observed that
chainless animals and cattle move freely in the market yard and they eat
valuable goods of farmers. These kinds of risk also have to face farmers
those approaches to the local as well as other market places.
ix) Policies of Central and State Governments: Impact of unclear and
distinguished state and government policies badly effect on the farmers
and the ir market activities.
8.4 REMEDIAL MEASURES ON AGRICULTURAL
MARKETING RISK & UNCERTAINTIES.
1) Diversification of crops
Production of different crops is the best option to avoid agricultural
uncertainty. This mainly involves taking several crops at the same ti me
and selling them at different times rather than at the same time. As a
result, it is possible to avoid the fact that the price of a particular product munotes.in
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Agricultural Marketing Risks
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73 increases or decreases as the income increases. Such efforts reduce
farmers' income uncertainty. Crop diversification minimizes uncertainty.
2) Crop insurance
Uncertainty in agriculture causes financial loss to farmers. It is advisable
to ensure crops and livestock to avoid these losses. Crop damage can be
compensated. Crop insurance schemes have been int roduced by the
government. Crop insurance scheme has been introduced in India in 1999 -
2000. Some of the uncertainties/threats in agriculture may be man -made.
These mainly include theft, burning of agricultural commodities, etc.
Consists of Crop insurance is also useful for transferring such uncertainty
or risk.
3) Avoid competition
Competitive production competition among farmers creates uncertainty
and risks. E.g. Farmers imitate and grow the same crop. As a result, the
supply of agricultural commodities increases, and there is an imbalance
between supply and demand. As a result, commodity prices fall and
farmers suffer. To avoid this loss, farmers should avoid competition and
try to diversify their production.
4) Government intervention
Reducing uncerta inty in the agricultural sector requires government
intervention in the right place and for the right reasons. The government is
required to announce the basic prices of agricultural commodities in due
course. Due to natural adaptations in the country when production was
large. It is then necessary to arrange storage of additional products. Timely
decision on the export of agricultural commodities. The government needs
to pay attention to taxes, agricultural loans, prices of agricultural inputs,
and taxes. This reduces the uncertainty in agriculture.
5) Promoting Supplementary Industries -
Emphasis on agro -based and agro -based processing industries will help
reduce the uncertainty in agriculture by getting better prices for
agricultural commodities. Agricul tural supplementary businesses need to
be promoted. E.g. the development of supplementary industries such as
poultry farming, dairy farming, goat and sheep farming, pig farming,
beekeeping, and silk industry will help reduce agricultural uncertainty.
6) Future Price Estimation -
Estimates of future prices are needed to reduce agricultural uncertainty.
This is because it is possible to make some changes in production
according to the future fluctuations in the prices of agricultural
commodities. For example , many times Kharif crops are produced and
prices fall due to an increase in market income. With the availability of
information on these matters, it is possible to take measures such as
preventing the product from entering the market at the same time and
storing it.
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74 7) Agreement system -
The agricultural contracting system is suitable for reducing agricultural
uncertainty. When planting crops in agriculture, pre -harvest agreements
with traders, intermediaries, and agents, estimating the expected yield,
help in achieving some degree of economic stability. Agreements are often
reached with pre -harvest or pre -planting traders and barriers for orchards,
bananas, mangoes, leafy vegetables, tobacco, and other agricultural
products in respect of prices and trans actions of agricultural commodities.
As a result, it helps reduce agricultural uncertainty.
8) Flexibility -
To complement crop diversification, farmers should use the flexibility of
technology to reduce their income uncertainty. Technical flexibility mea ns
that farmers should be able to move easily from one crop to another or
from one venture to another. Flexible technology allows farmers to easily
migrate from one resource to another. For example, it is easy to migrate
from meat production to milk produc tion. Also, after the fall in grape
prices, farmers will prefer to produce raisins. This means creating a multi -
product diagram. Production should be flexible, not rigid.
9) Liquidity
Uncertainty can be reduced by retaining farmers' assets. With more cash ,
the cost of agricultural resources can be reduced by purchasing them at
lower prices. Due to its proximity to cash, agricultural production can
continue even when market prices are low.
10) Adoption of Innovative Techniques
Persistence in traditional cr op production will reduce uncertainty over the
production of innovative crops. But with the use of new technology
carefully and properly, the uncertainty in agriculture is reduced.
8.5 SUMMARY
Most of the remedial measures that have been discussed below are
concerned with the price uncertainty or the yield uncertainty as these two
directly and immediately affect the earnings of the farmers and the farmers
can also take some commonly accepted steps to meet these types of
uncertainty.
For some types of uncertain ty, no suggestion can be made to the farmer
because nothing can be done at his own level e.g., Political uncertainty.
For others, like Personal uncertainty or people’s uncertainty, no
suggestion of a general nature can be offered simply because the problem
is too personal to be generalized.
8.6 EXERCISE
Define the Concept of Risk & Uncertainties.
Write various issues related to Agricultural Marketing Risk &
Uncertainties. munotes.in
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Agricultural Marketing Risks
and Uncertainties Part -II
75 Explain different types of Agricultural Marketing Risk & Uncertainties.
Suggest remedial Measures on Agricultural Marketing Risk &
Uncertainties.
8.7 REFERENCES:
1: Rural Marketing for Module 1 P.No. 77 to 96, 243 to 250, 457 to 478,
361 to 368 Badi R.V. Badi N.V.
2: Development Issues of Indian Economy Himalaya Publishing House for
Module 1 Mumbai – 400 004 – 2013 Mishra and Puri
3: Indian Agriculture Since Independence Oxford and IBH Publishing Co.
Pvt. Ltd. New Delhi – 110 001 1990 Dantwala M.L
4: Rural Marketing P.No. 285 to 308, 411 to 456 Badi R.V. Badi N.V.
5: Rural Marketing P.No . 344, 422, 418 to 455 Books For Addition
Readings Badi R.V. Badi N.V.
6: Rural Marketing in India HPH - Mumbai 400 004 --- 2003 Habeeb U.R.,
Rahman K.S.
7: Rural MarketingGopalaswamyVikas Publishing House New Delhi.
8. Small -scale industries and entre preneurship Himalaya Publishing
House, Desai Vasant.
9. Indian economy S. Chandand company limited 7361, Datta Ruddar:
Sundaram K P.
munotes.in
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76 9
AGENCIES IN AGRICULTURE
MARKETING: MARKETING AGENTS ,
CACP
Unit Structure
9.1. Objectives.
9.2. Introduction: Agricultural Marketing.
9.3. Marketing Agents.
9.4. Agencies Involved In Agricultural Marketing.
9.5. The Commission for Agricultural Costs & Prices.
9.6. Exercises.
9.1. OBJECTIVE S
The agricultural marketing system is a link between the farm and the
nonfarm sectors. Agriculture marketing therefore comprises all activities
involved in the supply of farm inputs to the farmers and movements of
agricultural products from the farms to the consumers. The objectives of
this topic are,
7.6.1.To know agencies in Agricultural marketing.
7.6.2.To know the types of agricultural agencies.
7.6.3.To understand the role of Agricultural agencies.
7.6.4.To learn the types of Agricultural Agents.
9.2. INTRODUCTION: AGRICULTURAL MARKETING
India needs to come up with an efficient marketing network for
agricultural produce. Marketing covers the entire sequence of activities
starting from purchase, packing, grading, transportation and storage,
wholesale and ultimately retail sale of produce.
Agricultural marketing is the study of all the activities, agencies and
policies involved in the procurement of farm inputs by the farmers and the
movement of agricultural products from the farms to the consumers. The
agricultural marketing system is a link between the farm and the nonfarm
sectors. Agricultural marketing involves the buying and selling of
agricultural produces. According to the Indian Council of Agricultural
research Agricultural marketing involves three important functions. munotes.in
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Agencies in Agriculture
Marketing: Marketing Agents,
CACP
77 1) Assembl ing of goods.
2) Preparation for consumption.
3) Distribution of agricultural products.
DEFINITION
According to National Commission on Agriculture “ Agricultural
marketing is the process which starts with a decision to produce a suitable
farm commodity or produc t & it involves all aspects of market structure or
systems, both functional and institutional based on technical and economic
consideration and include pre and post -harvest operations like assembling
grading, storage transportation and distribution.”
Agric ulture marketing therefore comprises all activities involved in the
supply of farm inputs to the farmers and movements of agricultural
products from the farms to the consumers. These are
1) Making as assessment of the disposable surpluses of Agricultural
production.
2) Finding the markets to dispose of these surpluses.
3) Collection of such items from individual farmers
4) Making necessary arrangement for transport to the nearest
assembling center.
5) Pooling the produce of all the farmers.
6) Cleaning grading and standardi zation.
7) Processing whenever needed.
8) Packaging
9) Warehousing/storage
10) Transporting to the consumption Centre.
11) Negotiating with consumers/buyers
12) Exchange of the goods with the ultimate consumer.
9.3. MARKETING AGENTS
The peculiar characteristics of agricultural prod uce such as small and
scattered production, seasonality and persihability of products,
transportation and communication etc. require a large number of
intermediaries between the producer and the ultimate consumer. All the
agencies more or less participate in assembling and distribution of
agricultural products.
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78
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Sometimes, agricultural commodities directly pass from producers to
consumers. But in indirect marketing agricultural commoditi es generally
move from producers to consumers through intermediaries or middlemen.
The number of intermediaries may vary from one to many. All such
intermediaries are called marketing agents.
9.4. AGENCIES INVOLVED IN AGRICULTURAL
MARKETING
Producers
The farmer s or producers perform various marketing functions before the
produce is moved on in order to reach the final consumer. They play a key
role as they form the base of the entire system. Most farmers or producers,
perform one or more marketing functions. The y sell the surplus either in
the village or in the market. Some farmers, especially the large ones,
assemble the produce of small farmers, transport it to the nearby
market, sell it here and make a profit. This activity helps these
producers to supplement their incomes. Frequently visits to markets and
constant touch with market functionaries, bring home to them a fair
knowledge of market practices, they have thus as access to market
information and are able to perform the functions of market middlemen.
Middlemen
Middlemen are those individuals or business concerns which specialize in
performing the various marketing functions and rendering such services as
are involved in the marketing of goods. They do this at different stages in
the marketing process. The y are classified on the basis of their functions
as under.
i) Merchant middlemen
Merchant middlemen are those individuals who take title to the goods
they handle. They buy and sell on their own and gain or lose, depending
on the difference in the sale and pur chase prices. Merchant middlemen are
of two types i) wholesalers and ii) retailers.
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79 ii) Agent middlemen: commission agents, arhatias, brokers.
iii) Facilitative middlemen. These are the middlemen, who do not
buy and sell directly agricultural goods but assist in t he marketing process
such as hamals/labourers weighmen/tolas, graders, transport agencies,
communication agencies etc.
Wholesalers
Whole selling is one of the activities in agricultural marketing. Whole
selling is the one that covers activities of all indi viduals or businessmen,
which sell to or negotiate sales with customers, who buy for resale or
industrial use. His position is that of an intermediary between
manufacturer and retailer.
Wholesalers are classified as
I. Local wholesalers are the traders who pu rchase goods from farmers at
local level and deliver their purchases to local retailer in the same area.
II. Provincial wholesalers some time called as distributor selling to the
retailers of a particular district or a state and
III. National wholesalers located at a strategic place and distribute goods
all over the country.
The wholesalers perform the following functions in marketing
a) They assemble the goods from various localities and areas to meet
the demands of buyers.
b) They sort out the goods in different lots ac cording to their quality
and prepare them for the market.
c) They equalize the flow of goods by storing them in the peak arrival
season and realizing them in the off-season.
d) They regulate the flow of goods by trading with buyers and sellers in
the various markets.
e) They finance the producers so that the latter may meet their
requirements of productions inputs.
f) They assess the demand of prospective buyers and processors from
time to time and plan the movement of the goods over space and
time.
Retailers
He is the last link in chain of middleman, who sells directly to consumer.
He takes title to goods, sells and sets up business usually amidst the
consumer's groups. He buys his requirement usually from the wholesalers.
Retailers in producing areas may have direct c ontact with producers and
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80 Co-operative Marketing Societies
Main function is that of commission agency i.e.
a) Selling the product of member's.
b) They also undertake outright purchases.
c) Provide storage facilities for storage and grading.
d) Save cultivators from exploitation by traders and help farmers in
getting fair price for their produce.
e) Performing functions of processing of raw produce.
Pucca Arhatias
He is the real purchase in the wholesale market on his own behalf of
acting for some businessmen, firms in consuming markets. Big mills
(rice, oils, cotton etc.) play as their agent and order him to purchase
certain quantity within a given range of price. When pucca arhatia trades
on his own, he dispose of his produce brought by him through dealers in
different parts of country.
Katcha Arhatia
He also advances money to the cultivators and village banias on the
condition that the produce will be disposed off through him alone and
hence charges a very nominal rate of interest on the money advanced.
Katcha arhatia charges commission for services rendered by him.
Important link between the village cultivator or traders on the one hand.
Village Merchants
He is an important agency in the collection of produce and more so when
the man does is situated at a considerable distance from the village. He
advances from his shop either on credit or for exchange of food grain or
so price given for cultivator's produce. The quantities of agriculture
Produce so collected are either disposed of in the m andi or retained for
resale in the village in the processed forms, such as rice, flour, oil etc.
Itinerant Traders
They are small merchants, who move from village to village and buy the
produce from cultivator's house. They give a lower price than selling in
the nearby market and in setting transportation take into consideration, the
factors such as cost of transportation, market charges and profit margin.
Transport Agency
This agency assists in the movement of the produce from one market to
another e.g. ra ilways, trucks, bullock carts, camel carts, tractor trolleys.
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81 Communication Agency
It gives information about the prices prevailing, and quantity available and
transactions e.g. post, telephone, telegraph, newspapers, radio.
Advertising Agency
It enables prospective buyers to know the quality of the product and
decide about the purchase of commodities e.g. newspapers, radio,
television, cinema slides.
Auctioneers
They put produce for auction and bidding by the buyers.
Government Agencies / Institutions
In addition to individuals, corporate, co-operative and government
institutions are operating in the field of agricultural marketing. Some
important institutions are :-
The State Trading Corporation (STC)
The Food Corporation of India (FCI)
The National Agric ultural Co -Operative Marketing Federation
(NAFED)
Cotton Corporation India (CCI)
All India cotton co-operative federation limited
Jute corporation of India (JCI)
National dairy development board (NDDB)
National oilseeds and vegetable oils development (NOVO D) board
Tobacco board
Agricultural processed products and export development agency
(APEDA)
Marine products export development agency (MPEDA)
The directorate of marketing and inspection,
Government of India
State level agricultural marketing departments and agricultural
marketing boards
State and lower level co-operative marketing societies
Fair price shops
Consumers co-operative stores, milk unions
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82 9.5. THE COMMISSION FOR AGRICULTURAL
COSTS & PRICES
9.5.1.INTRODUCTION
The Commission for Agricultural Costs & Prices (CACP since 1985,
earlier named as Agricultural Prices Commission) came into existence in
January 1965. Currently, the Commission comprises a Chairman, Member
Secretary, one Member (Official) and two Members (Non -Official). The
non-official members are representatives of the farming community and
usually have an active association with the farming community.
It is mandated to recommend minimum support prices (MSPs) to
incentivize the cultivators to adopt modern technology, and raise
productivity and overal l grain production in line with the emerging
demand patterns in the country. Assurance of a remunerative and stable
price environment is considered very important for increasing agricultural
production and productivity since the market place for agricultur al
produce tends to be inherently unstable, which often inflict undue losses
on the growers, even when they adopt the best available technology
package and produce efficiently. Towards this end, MSP for major
agricultural products are fixed by the governme nt, each year, after taking
into account the recommendations of the Commission.
As of now, CACP recommends MSPs of 23 commodities, which comprise
7 cereals (paddy, wheat, maize, sorghum, pearl millet, barley and ragi), 5
pulses (gram, tur, moong, urad, len til), 7 oilseeds (groundnut, rapeseed -
mustard, soybean, seasmum, sunflower, safflower, nigerseed), and 4
commercial crops (copra, sugarcane, cotton and raw jute).
CACP submits its recommendations to the government in the form of
Price Policy Reports every year, separately for five groups of commodities
namely Kharif crops, Rabi crops, Sugarcane, Raw Jute and Copra.
Before preparing aforesaid five pricing policy reports, the Commission
draws a comprehensive questionnaire, and sends it to all the state
govern ments and concerned National organizations and Ministries to
seek their views. Subsequently, separate meetings are also held with
farmers from different states, state governments, and National
organizations like FCI, NAFED, Cotton Corporation of India (CCI ), Jute
Corporation of India (JCI), trader's organizations, processing
organizations, and key central Ministries. The Commission also makes
visits to states for on -the-spot assessment of the various constraints that
farmers face in marketing their produce, or even raising the productivity
levels of their crops. Based on all these inputs, the Commission then
finalizes its recommendations/reports, which are then submitted to the
government. The government, in turn, circulates the CACP reports to state
governm ents and concerned central Ministries for their comments. After
receiving the feed-back from them, the Cabinet Committee on Economic
Affairs (CCEA) of the Union government takes a final decision on the
level of MSPs and other recommendations made by CACP. Once this
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83 stakeholders to see the rationale behind CACP's price and non-price
recommendations.
9.5.2. ROLE OF THE CACP IN AGRICULTURAL MARKETING
The role of CACP is very important in agricu ltural marketing. This role is
useful and benefited, to agricultural producers, Agricultural traders and
development of National economy.
9.5.2.1. The need to provide incentive to the producer for adopting
improved technology and for developing a production pattern broadly in
the light of national requirements.
9.5.2.2. The need to ensure rational utilization of land, water and other
production resources.
9.5.2.3. The likely effect of the price policy on rest of the economy,
particularly on the cost of living, level of wages, cost structure of agro -
based products and the competitiveness of agriculture and agro-based
commodities.
9.5.2.4. The Commission may also suggest such non-price measures
related to credit policy, crop and income insurance and other sectors as
would facilitate the achievem ents of the objectives set out in 1 above.
9.5.2.5. To recommend from time to time, in respect of different
agricultural commodities, measures necessary to make the price policy
effective.
9.5.2.6. To take into account the changes in terms of trade between
agricultural and non-agricultural sectors.
9.5.2.7. To examine, where necessary, the prevailing methods and cost
of marketing of agricultural commodities in different regions, suggest
measures to reduce costs of marketing and recommend fair price margins
for different stages of marketing.
9.5.2.8. To keep under review the developing price situation and to
make appropriate recommendations, as and when necessary, within the
framework of the overall price policy.
9.5.2.9. To undertake studies in respect of different crops as may be
prescribed by Governm ent from time to time.
9.5.2.10. To keep under review studies relating to the prices policy and
arrangements for collection of information regarding agricultural prices
and other related data and suggest improvements in the same, and to
organize research studies in the field of price policy.
9.5.2.11. To advise on any problems relating to agricultural prices and
other production that may be referred to it by Government from time to
time.
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84 To effectively integrate the recommended non-price measures with price
recommendations an d to ensure competitive agriculture
9.6. EXERCISES
1) Define ‘Agricultural marketing’ and state the types of Marketing
agents.
2) State the Importance of Agricultural Agencies.
3) Explain the types of Agricultural Agencies.
4) What is the role of CACP as an agency in agric ultural marketing?
❖❖❖❖
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85 10
AGENCIES IN AGRICULTURE
MARKETING: FOOD CORPORATION OF
INDIA
Unit Structure
10.1. Objectives
10.2. Introduction
10.3. List of Offices of Food Corporation of India
10.4. Golden Principles for Preservation of Food - Grains without
Deterioration / Loss
10.5. Role of Food Corporation of India
10.6. Operations
10.7. Procurement of Food -Grains
10.8. Quality Control and Scientific Preservation
10.9. Transport Management
10.10. Distribution of Food -Grains
10.11. Procurement Overview
10.12. Policy and System
10.13. Centralized and Decentralized Procurement Systems
10.14. Exercise
10.1 OBJECTIVES
FCI is one of the Government agency in agriculture marketing. The
objective of this topic is to know the role of FCI, its operation and various
functions.
10.2. INTRODUCTION
The Food Corporation of India was setup under the Food Corporations Act
1964, in order to fulfill following objectives of the Food policy :
Effective price support operations for safeguarding the interests of the
farmers.
Distribution of food-grains throughout the country for Public
Distribution System; and
Maintaining satisfactory level of operationa l and buffer stocks of
food-grains to ensure National Food Security. munotes.in
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86
https://www.facebook.com
In its 50 years of service to the nation, FCI has played a significant role in
India's success in transforming the crisis management oriented food
security into a stable security system.
10.3. LIST OF OFFICES OF FOOD CORPORATION
OF INDIA
1) Food Corporation of India, Regional Office, No.124, Greams
Road, Chennai -6.
2) Food Corporation of India, District Office,No.1, Bharathi Road,
Cuddalore – 607 001.
3) Food Corporation of India, District Office, Imanuvel
Complex,No.40, Thayumanavar Street, Thirunagar,Vellore – 632
006.
4) Food Corporation of India, District Office,No.2, Satyamurthi
Road, Chetpet, Chennai - 600 031
5) Food Corporation of India, District Office,No.379, 380, North
Ajram Street, Thanjavur - 613 006
6) Food Corporation of India, District Office,Post Box No.2911,
Tatabad, Coimbatore – 641 012.
7) Food Corporation of India, District Office,Xaverina Building,
23-B, Beach Road,Tuticorin – 628 006.
10.4. GOLDEN PRINCIPLES FOR PRESERVATION OF
FOOD - GRAINS WITHOUT DETERIORATION /
LOSS
Food grain bags should be received with proper tonnages as per
stack plan to facilitate cross ventilation/inspection/QC treatments and
ensuring stacks are formed to full capacity and avoid part stacks. munotes.in
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87 Maintaining excellent hygienic conditions all around the stacks/
godowns /operational points and avoiding loose spillages by ensuring
cleaned spillages are put into palla bags to respective stacks.
Effective personal supervi sion of prophylactic (spraying) treatments
with correct dosage and immediate curative treatments (fumigation) on
finding insects in a stack to avoid cross infestation on the lines of “A
stitch in times saves nine”.
Insistence / ensuring provision of adequa te Tarpaulins/ polythene bits
to the minimum size of 10’ x 10’ at the operational points of receipts/
issues to avoid mixing of spillages with mud and possible losses.
Insistence / ensuring spreading of tarpaulins / polythene bits/ gunny
wrappers on the de cks of trucks before loading of food - grains bags to
avoid oozing enroot and proper full covering of loaded bags with
tarpaulins to avoid pilferages, without complacency.
Ensuring adequate aeration of stacks by opening all doors on all clear
days.
Complete ly avoiding dumping of spillages on the stacks.
As per the quality policy to comply with ISO 9001: 2008, FCI is focused
on professional excellence in management of food- grains by adopting
the above principles to avoid deterioration/ losses.
It is one of t he largest corporations in India and probably the largest
supply chain management in Asia (Second in world). It operates through 5
Zonal offices and 24 Regional offices. Each year, the Food Corporation
of India purchases roughly 15 to 20 per cent of India' s wheat output and
12 to 15 per cent of its rice output. The purchases are made from the
farmers at the rates declared by the Govt. of India. This rate is called as
MSP (Minimum Support Price). There is no limit for procurement in
terms of volume; any quan tity can be procured by FCI (Food Corporation
of India) provided the stock satisfies FAQ (Fair Average Quality)
specifications with respect to FCI.
10.5. ROLE OF FOOD CORPORATION OF INDIA
I. To procure a sizable portion of marketable surplus of food - grains and
other agricultural commodities at incentive prices from the farmers on
behalf of the Central and State Governments.
II. To make timely releases of the stocks through the public distribution
system. (fair price shops and controlled items shops)
III. To minimize seasona l price fluctuations and inter-regional price
variations in agricultural commodities
IV. To build up a sizable buffer stock of food-grains.
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88 10.6. OPERATIONS
The Food Corporation of India procures Rice and Wheat from farmers
through many routes like Paddy purchase c enters/Mill Levy/Custom
Milling and stores them in depots. FCI maintains many types of depots
like Food Storage Depots and Buffer Storage Complexes and Private
Equity Godowns and also implemented latest storage methods of silo
storage facilities which are located at Hapur in Uttar Pradesh and Elavur in
Tamilnadu. The stocks are transported throughout India and issued to the
State Government nominees at the rates declared by the Government of
India for further distribution under the Public Distribution Syste m (PDS)
for the consumption of the ration card holders. (FCI itself does not directly
distribute any stock under PDS, and its operations end at the exit of the
stock from its depots). The difference between the purchase price and sale
price, along with internal costs, are reimbursed by the Union Government
in the form of food subsidy. At present the annual subsidy is around $10
billion. FCI by itself is not a decision -making authority; it does not decide
anything about the MSP, imports or exports. It just i mplements the
decisions made by the Ministry of Consumer Affairs, Food and Public
Distribution and Ministry of Agriculture.
10.7. PROCUREMENT OF FOOD -GRAINS
To nurture the Green Revolution, the Government of India introduced the
scheme of minimum assured price of food-grains which are announced
well before the commencement of the crop seasons, after taking into
account the cost of production \ inter-crop price parity, market prices and
other relevant factors.
The Food Corporation of India along with other Governm ent agencies
provides effective price assurance for wheat, paddy and coarse
grains.
FCI and the State Governments. Agencies in consultation with the
concerned State Governments establish large number of purchase
centers throughout the state to facilitate p urchase of food-grains.
Centers are selected in such a manner that the farmers are not required
to cover more than 10 kms. to bring their produce to the nearest
purchase centers of major procuring states.
Price support purchases are organized in more than 12,000 centers for
wheat and also more than 12,000 centers for paddy every year in the
immediate post-harvest season.
Such extensive and effective price support operations have resulted in
sustaining the income of farmers over a period and in providing the
required impetus for higher investment in agriculture for improved
productivity.
To name a few states about Rs.41,000 million for paddy and 43,000 munotes.in
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89 million for wheat in Punjab and Rs. 45,000 million for levy rice in
Andhra Pradesh is paid to the farmers/ m illers during wheat / rice
procurement season.
India today produces over 200 million tons of food-grains as against a
mere 50 million tons in 1950.
In the last two decades, food -grain procurement by Government
agencies has witnessed a quantum jump from 4 million tones to over
25 million tons per annum.
Food -grains are procured according to the Government - prescribed
quality standards.
Each year, the Food Corporation purchases roughly 15 -20% of India's
wheat production and 12-15% of its rice production.
This helps to meet the commitments of the Public Distribution System
and for building pipeline and buffer stock.
The Dept. of Food, GOI has recently formulated aforesaid policy for
involving Central Govt. Undertaking /State Govt. undertakings/for the
Central Pool and expanding the scope of MSP operations in the areas
where FCI/State agencies infrastructure for potential of procurement is
weak and existing Govt. Agencies (FCI and State Agencies) are not able
to carry out MSP operations in such areas where procu rement exists to
ensure that farmers are not denied the benefit of MSP.
The eligibility Criteria and priority for engaging such Agencies/Private
companies is mentioned in clause 2 to 2.3 of the policy guidelines. The
private companies can only be engaged as last option as per the policy
guideline. The engagement of agencies falling under clause2.2 and 2.3
must result in a cost saving of at least 10% of the incidentals (other than
taxes, statutory charges etc.) of FCI as provided at point 3.3 of policy of
guidelines of Ministry of Food. The other details are mentioned in the
Policy Guidelines. The Central Govt. Undertaking/ State Govt./
Undertaking/ Co-operatives/Private Companies fulfilling the eligibility
criteria and desirous to undertake paddy procurement operations on behalf
of FCI may contact concerned GMs(Region),/EDs(Zone) or Procurement
Division, FCI Headquarters.
10.8. QUALITY CONTROL AND SCIENTIFIC
PRESERVATION
The Food Corporation of India has an extensive and scientific stock
preservation system. An on -going programme sees that both prophylactic
and curative treatment is done timely and adequately. Grain in storage is
continuously scientifically graded, fumigated and aerated by qualified
trained and experienced personnel.
Food Corporation of India's test ing laboratories spread across the country
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90 assurance as per PFA leading improved satisfaction level in producers
(farmers) and customers (consumers). The preservation of food grain
starts , the minute it arrives in the godowns. The bags themselves are kept
on wooden crates/poly pallets to avoid moisture on contact with the floor.
Further till the bags are dispatched/issued, fumigation to prevent
infectation etc. of stocks is done on an aver age every 15 days with
malathion and once in three months with Deltamethrin etc. on traces of
infestation, curative treatment is done with Aluminium Phosphide.
FCI's testing laboratories spread across the country (188) ensure that the
stored food -grains re tain their essential nutritional qualities as per FAQ.
District Labs – 164
Regional Labs - 18
Zonal Labs - 5
Central Lab - 1
10.9. TRANSPORT MANAGEMENT
Ensuring accessibility to food in a country of India's size is a
Herculean task. The food-grains are transport ed from the surplus
States to the deficit States.
The food-grain surplus is mainly confined to the Northern States;
transportation involves long distance throughout the country. Stocks
procured in the markets and purchase centers is first collected in the
nearest depot and from there dispatched to the recipient States within
a limited time.
FCI moves about 270 Lakh tons of food-grains over an average
distance of 1500 Kms.
10.10. DISTRIBUTION OF FOOD -GRAINS
The national objective of growth with social justice and progressive
improvements in the living standards of the population make it imperative
to ensure that food -grain is made available at reasonable prices.
10.10.1. Public Distribution of food-grains has always been an
integral part of India’s overall food policy. It has been evolved to reach
the urban as well as the rural population in order to protect the consumers
from the fluctuating and escalating price syndrome.
10.10.2. Continuous availability of food-grain is ensured through about
4.5 lakhs fair price shops spread throug hout the country.
10.10.3. A steady availability of food -grains at fixed prices is assured
which is lower than actual costs due to Govt. policy of providing subsidy
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91 10.10.4. The Govt. of India introduced a scheme called Targeted Public
Distribution Scheme (TPDS) effective from June, 1997. The stocks are
issued under this scheme in the following two categories: -
a) Below Poverty Line (BPL): Determination of the families under this
category in various states is based on the recommendation of the Planning
Commission.
Antyodaya Anna Yojna - During the year 2000 -2001 Govt. of India
decided to release food -grains under Antyodaya Anna Yojna. Under this
scheme the poorest strata of population out of earlier identified BPL
population is covered. Food - grains are being provided to 1.5 crores
poorest of the poor families out of the BPL families at highly subsidized
rates of Rs.2/ - per kg. of wheat and Rs.3/ - per kg. of rice by FCI. This is
the biggest food security scheme in the world.
b) Above Poverty Line (APL) – Families which are not covered
under BPL are placed under this category. The stocks are issued at Central
Issue Price of Rs. 6.10 per Kg. of wheat and Rs. 8.30 per Kg. of rice.
10.11. PROCUREMENT OVERVIEW
The Government policy of procure ment of Food -grains has broad
objectives of ensuring MSP to the farmers and availability of food-grains
to the weaker sections at affordable prices. It also ensures effective market
intervention thereby keeping the prices under check and also adding to the
overall food security of the country.
FCI, the nodal central agency of Government of India, along with other
State Agencies undertakes procurement of wheat and paddy under price
support scheme. Coarse grains are procured by State Government
Agencies for C entral Pool as per the direction issued by Government of
India on time to time. The procurement under Price Support is taken up
mainly to ensure remunerative prices to the farmers for their produce,
which works as an incentive for achieving better producti on.
Before the harvest during each Rabi / Kharif Crop season, the
Government of India announces the minimum support prices (MSP) for
procurement on the basis of the recommendation of the Commission of
Agricultural Costs and Prices (CACP) which along with other factors,
takes into consideration the cost of various agricultural inputs and the
reasonable margin for the farmers for their produce.
To facilitate procurement of food-grains, FCI and various State Agencies
in consultation with the State Government establish a large number of
purchase centers at various mandis and key points. The number of centers
and their locations are decided by the State Governments, based on
various parameters, so as to maximize the MSP operations. For instance
for Wheat procurem ent more than 20,000 procurement centers were
operated during RMS 2015 -16 & for Rice procurement more than 44,000
procurement centers were operated. Such extensive & effective price
support operations have resulted in sustaining the income of farmers over munotes.in
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92 a period and in providing the required impetus for higher investment in
agriculture sector for improved productivity.
Whatever, stocks which are brought to the Purchase centers falling within
the Government of India’s specifications are purchased at the fixed
support price? If the farmers get prices better than the support price from
other buyers such as traders / millers etc., the farmers are free to sell their
produce to them. FCI and the State Government/its agencies ensure that
the farmers are not compe lled to sell their produce below support price.
10.12. POLICY AND SYSTEM
10.12.1. The Central Government extends price support to wheat and
paddy through FCI and State Agencies. Procurement at MSP is open
ended i.e., whatever food-grains are offered by the farmer s, within the
stipulated procurement period and which conforms to the quality
specifications prescribed by Government of India, are purchased at MSP
(and bonus/incentive ,if any) by the Government agencies including
FCI for central Pool. Some States also declare State bonus on wheat and
paddy over and above MSP.
Government agencies undertake MSP operation at mandis/ temporary
purchase centers/aggregation points. Location and number of purchase
centers to be opened are decided in consultation with /by the State
governments.
10.12. 2. Systems of procurement:
10.12. 2.1 Wheat - FCI undertakes direct procurement in non -DCP states.
In the major procuring states like Punjab and Haryana, wheat is mainly
procured by state agencies and they preserve the stocks under their
custody for which carry over charges are paid to them. FCI takes over the
stocks for dispatch to consuming states as per requirement /movement
plan. Payments are made to state govt. /agencies as per cost sheets issued
by Government of India after tak ing over the stocks. In the states like UP
and Rajasthan, the wheat procured by state agencies is immediately taken
over by FCI for storage /dispatch.
In DCP state like M.P, wheat is procured by the State agencies and only
the surplus wheat stocks over & a bove the State’s requirement under
TPDS/NSFA and Other Welfare Schemes are taken over by FCI for
dispatch to other consuming regions.
10.12. 2.2 Rice is procured through two routes –
a) Custom Milled (CMR) and
b) Levy rice.
CMR is manufactured by milling paddy p rocured by State govt. /State
agencies and FCI. In the states like A.P, Punjab,
Haryana, Chhattisgarh, Odisha, MP, Tamilnadu, UP & Bihar paddy is
mainly procured by State government /State agencies and the resultant rice munotes.in
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93 is delivered to State Government and FCI by getting the paddy milled
from rice millers.
In the states like Andhra Pradesh, Telangana, Uttrakhand, UP and West
Bengal, rice is also procured in Central Pool through levy route. The rice
millers deliver fix portion of their production at the percentage imposed
under State levy orders issued by the concerned State government with
concurrence of Government of India, at notified levy prices fixed by the
Government of India However, Government of India has decided to
discontinue levy system of rice procurement w.e.f. 1.10.2015.
Major responsibility of procurement of wheat and paddy is borne by the
State agencies whereas FCI procures almost 70% of total rice procured for
Central Pool.
10.12.2.3 Coarse grains - Coarse grains are being procured by the State
governments for central pool.
10.12.3. In major wheat and paddy procuring States like Punjab, Haryana
& some parts Rajasthan procurement from farmers is undertaken by the
FCI/State Agencies through Arhatiyas as per APMC Acts of the
concerned State for which commission @ 2.5% of MSP is paid in the
States of Punjab & Haryana and @2% in Rajasthan. In other States like
MP, Chhattisgarh, UP, Uttrakhand, AP, Tamilnadu, Bihar, Jharkhand,
Odisha, West Bengal procurement is made through Co -operative societies
and they are paid fixed remunerations at following rates -
Wheat: Rs 27.00 /Qtl
Paddy (Grade ‘A’): Rs 32/Qtl Paddy (Common): Rs 31.25/Qtl
10.13. CENTRALIZED AND DECENTRALIZED
PROCUREMENT SYSTEMS:
10.13.1 Centralized (Non -DCP) procurement system:
Under centralized pro curement system, the procurement of food-grains in
Central Pool are undertaken either by FCI directly or State Govt. agencies
procures the food -grains and handover the stocks to FCI for storage and
subsequent issue against Government of India allocations i n the same
State or movement of surplus stocks to other States. The cost of the food -
grains procured by State agencies is reimbursed by FCI as per cost-
sheets issued by Government of India as soon as the stocks are delivered
to FCI.
10.13.2 Decentralized (DCP) Procurement
Under DCP system, the State Government of India/its agencies procure,
store and distribute (against Government of India’s allocation for TPDS
& OWS) rice /wheat/coarse grains within the state. The excess stocks
(Rice & wheat) procured by the State its agencies are handed over to FCI
in Central Pool. The expenditure incurred by the State Government on munotes.in
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Rural Marketing & Finance
94 procurement, storage and distribution of DCP stocks are reimbursed by
Government of India on the laid down principles. The expenses such as
MSP, arhat iya/society commission, administrative charges, mandi labour
charges, transportation charges, custody & maintenance charges, interest
charges, gunny cost, milling charges and statutory taxes are reimbursed on
actual basis. The cost of excess stocks handed over to FCI is reimbursed
by FCI to the State Government/agencies as per Government of India
costs sheet.
10.14. EXERCISE
1. Explain the objectives of FCI
2. What are the Golden Principles of FCI for Preservation of Food -
Grains?
3. State the role of FCI as an agency in Agricultural marketing.
4. How the Procurement of Food -Grains procedure is implemented by
FCI?
5. Explai n the Centralized and Decentralized procurement systems of FCI.
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