Marketing Infrastructure & Agricultural Marketing Reforms - Essay Example

Introduction Agriculture has been the backbone of economic development in India with two-thirds of the population dependent on agriculture. Food production during the Green Revolution saw a four-fold increase. Even though there was significant increase in food, oilseed and fish production, security, poverty and management of natural resources remain an area of great concern. With the removal of trade barriers, India also has the challenge to effectively cope with the international trade regime. As of 2001, India had over 185 million small and marginal farmers who comprise 70 percent of all farming households in the country (Sharma, Ishige, Maeda & Sanada, 2004). These farmers face several constraints and do not receive timely information. Inefficient water management, land holdings, credit facility, marketing of their produce and lack of value addition at the farm level are some of the constraints that the farmers face. Thus managing these farmers and providing support services is what led to forming agricultural cooperatives in India. State of Agricultural Cooperatives in India Since the 1950s, cooperatives in various segments in the Indian economy have made a steady progress. Today India has the largest number of cooperatives in the world with a membership of over 200 million. Around 28 percent of the total cooperatives are the agricultural cooperatives with 137 million memberships dealing directly or indirectly with the agricultural sector (Ramesha, 2003). Agriculture contributes around 25% of the GDP and employs 65% of the workforce in the country. Agriculture and agriculture marketing is covered both by the states as well as the central government (AMR, n.d.). The cooperatives cover all the villages in the country and supply about 46 percent of the total rural credit. They are also responsible for distribution of fertilizers. The agricultural cooperatives credit structure has seen quantitative expansion but have structural defects and operational deficiencies. The main deficiencies are due to weak recycling of credit, poor resource mobilization, ineffective lending and poor recovery. It was in 1958 that department of agriculture formed a Department of Cooperation under the Ministry of Community Development. In 1966, the Ministry of Community Development and Cooperation was merged with the Ministry of Food and Agriculture, which then came to be known as Ministry of Food, Agriculture, Community Development and Cooperation (Agricoop, 2007). In 1971, this was again renamed as Ministry of Agriculture with four departments – department of agriculture, department of food, department of community development and department of co-operation. Consumer Cooperatives and the Tribal Areas Development program was added in 1973 and a new department created known as Department of Agricultural Research and Education. The agricultural cooperatives help to implement the national policies and programs. They thereby assist in achieving rapid agricultural growth thru optimum utilization of the country’s land, water and other resources. Through the cooperatives, the farmers get timely input and services of fertilizers, seeds, pesticides and implements. Besides, they also assist in rural credit for the farmers. To integrate the development of the dairy sector, National Dairy Development Board (NDDB) was set up while MAHAGRAPES is a cooperative of the grape farmers in the state of Maharashtra in India, which was set up in 1991 to explore new markets outside the country. This helped to eliminate the middlemen from the marketing process and encouraged agricultural export. The grape growers in the four districts of the state have formed 16 cooperatives and have nearly 2000 farmer members each of whom is a partner in MAHAGRAPES (Sharma, Ishige, Maeda & Sanada, 2004). Structure of Cooperatives The prominent cooperatives include Cotton Corporation of India Limited (CCI), the Jute Corporation of India Ltd. (JCI), the National Cooperative Development Corporation Ltd. (NCDC), the National Agricultural Cooperative Marketing Federation Ltd. (NAFED), the National Tobacco Growers Federation Ltd. (NTGF), the Tribal Cooperative Marketing Development Federation Ltd. (TRIFED), the National Consumers Cooperative Federation Ltd. (NCCF), etc for procurement and distribution of commodities; and the Tea Board, Coffee Board, Coir Board, Rubber Board, Tobacco Board, Spices Board, Coconut Board, Central Silk Board, the National Dairy Development Board (NDDB), National Horticulture Board (NHB), State Trading Corporation (STC), Agricultural & Processed Foods Export Development Authority (APEDA), Marine Products Export Development Authority (MPEDA), the Indian Silk Export Promotion Council, the Cashew nuts Export Promotion Council of India (CEPC), etc. for promotion of production and exports of specific commodities (AMR, n.d.). National Cooperative Development Corporation (NCDC) is another statutory Corporation under the Ministry of Agriculture (NCDC, n.d.). While it management vests in 51 members widely spread to give shape to its policies and programs the board of directors consist of 12 members that cater to day-to-day activities. The Managing Director is the Chief Executive and under him there are various functional heads to look after the programs. The Managing Director is usually assisted by the Vice-Chairman. The Board members represent various agricultural departments in the government sector. For instance, the Vice-Chairman of NCDC is the secretary of Department of Agriculture & Cooperation while the other members represent the Food Processing Industry or even NABARD. Most agricultural cooperatives have similar board structures where the field officers play an important role in project identification and oversee its implementation. NAFED National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) was established on the 2nd October 1958 with the objective of promoting co-operative marketing of Agricultural Produce to benefit the farmers. The main members are the farmers and they have a say in the working of Nafed. Nafed takes care of marketing, processing and storage of agricultural, horticultural and forest produce. It also undertakes distribution of agricultural machinery. The membership comprises of State and Apex level marketing Federations, State Level Tribal and Commodity Federations, Primary Marketing/ Processing Societies, Government of India and NCCF & Other National Level Coop. Organizations. As of 31st March 2007, the total number of members was 824 with the Primary Marketing/ Processing Societies alone having strength of 770 members. The management rests with the Board of Directors which includes the Chairman and the Managing Director. Apart from this, there are two standing committees - Executive Committee and Business Committee. In addition, the Board is empowered to constitute two more committees/sub-committees as per the provision of the MSCS Act/Rules and Bye-laws of NAFED. NAFED has the right to export its products and onions form the bulk of their exports. It basically exports through its associated shippers. Apart from onions, NAFED also exports potatoes, rice, red chillies, groundnut kernels, and turmeric. Nafed also provides storage and other infrastructural facilities to the farmers for storing their agricultural produce in different states of India. Nafed also trades in joint venture with MP MARKFED and NCCF. In joint venture they have marketed products ranging from yellow soybean, mustard seeds, potatoes, apples, red chillies, cotton and raw jute. Nafed also does contract farming by providing seeds to the farmers on a buy-back arrangement. It thus supplied seeds for potatoes, which it then exported to European countries. They also supply agricultural and garden hand tools to the farmers, in addition to plant protection equipments and spare parts. Role of government and Legislation To regulate the marketing of agricultural produce, to improve their efficiency and to ensure a more equitable distribution of grains, the Agricultural Products Market Act was enacted by the individual states in India. The Uttar Pradesh Krishi Utpadan Mandi Samitis Adhiniyam (1972) and the Punjab Agricultural Produce Markets Act (1961) are examples of this legislation. The marketing committees are empowered to regulate access to these markets, charge market and license fees, and even to issue, renew, suspend or cancel license (Sharma, Ishige, Maeda & Sanada, 2004). Agricultural cooperatives have been found to be more effective than individual marketing efforts. Cooperatives help the farmers to organize themselves into groups to ship their produce to the buyers or the market place. It helps to organize themselves and assemble their produce in a central location, which makes it attractive for the buyers to visit the farming community. Cooperatives help to disseminate market information and provide training to the farmers. The government has a significant role to play in agricultural cooperatives. The agricultural commodity markets operate under the normal forces of demand and supply. To protect the farmers’ interests the Government also fixes statutory or support prices for some crops and make arrangements to purchase at state level whenever the prices fall below the support level. The government further promotes organized agricultural marketing through a network of regulated markets and legislation helps to provide regulated markets. This creates environment for fair play of supply and demand forces and attain transparency in operations. By 2005, there were 7521 regulated markets in the country. The state governments are empowered to enact marketing legislation to promote competitive and transparent transactional methods in the interests of the farmers. Most of these markets are wholesale markets and apart form these the country has 27294 rural periodical markets, about 15% of which function under the ambit of regulation. The facility of regulated market is available to the farmers within a radius of 5 km. The legislation by the government provides for establishment of Private Markets/Yards, Direct Purchase Centres, Consumer/Farmers Markets for direct sale and promotion of Public Private Partnership in the management and development of agricultural markets in the country (NIC, 2005). The State Agricultural Produce Marketing Standards Bureau also helps in promotion of Grading, Standardisation and Quality Certification of agricultural produce. For the development of marketing infrastructure, the government has further implemented schemes like construction of rural godowns, which enhances the storage capacity with rural facilities. Financing Subsidy is also provided to the small farmers and in hilly areas. This scheme is implemented by NABARD and NCDC. For speedy collection and dissemination of information of market and price related information to farmers, electronic connectivity is provided under the scheme “Market Information and Research Network”. Investment subsidy is provided under another Central Sector scheme for "Development / Strengthening of Agricultural Marketing Infrastructure, Grading and Standardisation". NABARD approves of the project and there is no upper ceiling on the subsidy to be provided under the scheme. The government also provides modern terminal markets for fruits, vegetables and other perishables in important urban centres of the country. The terminal market under this scheme is linked to several hubs or spokes which are conveniently located and allows farmers to easily market their produce. Services offered to farmers and cooperatives The National Institute of Agricultural Marketing (NIAM) conducts training programs for farmers (NIC, 2005). The Small Farmers Agri-business Consortium (SFAC) registered by Department of Agriculture and Cooperation as a Society of which RBI, SBI, IDBI, EXIM Bank, Oriental Bank of Commerce, NABARD, Canara Bank, NAFED, United Phosphorous Ltd., are members. This consortium provides assistance in venture capital for agri business apart from assisting the farmers in preparation of quality Detailed Project reports. The government allocates a certain amount for assistance under the scheme every year. The cooperatives provide strong structural support apart from training and motivating the farmers. They also encourage dedicated and selfless leadership. They encourage members’ involvement and partnership and also have comprehensive programs for members’ education and information (Prakash, n.d.). Through the use of advance technologies they add value to the activities and provide for reasonable coverage of risk for loss of crops and deposits. Value-addition helps to get higher economic returns. The cooperatives also help in implementing the policies of the government and help in market reforms. They are also responsible for a reasonable rate of growth in agriculture and economy and provide the basic infrastructure. Cooperatives help to improve the standards of living of the members and the quality of life of its members. By increasing production and productivity of agricultural and allied activity and hence increases their income. The cooperatives now concentrate on maximizing services to the members. The goods and services are made available at as reasonable prices as possible. The members are allowed participation in decision-making process. Conclusion Thus, the government has played a very significant role in the promotion of agriculture in India in view of the fact that the majority of the population is dependent on agriculture. Agriculture in India contributes to about 25% of the GDP and is also responsible for a high percentage of employment. The agricultural cooperatives that have been formulated have served two-fold purpose – they have supported the government in implementation of the policies and programs while also serving to enhance the interest of the farmers. The members of the cooperatives have access to speedy information, subsidies in loans, in collecting and disseminating information. They also provide support in procurement of seeds and fertilizers while also extending marketing support. Training is an essential part of the support services which the cooperatives provide which leads to motivation and mutual cooperation. The cooperatives also encourage involvement and participation in decision-making. Apart from this, the cooperative also provide buy-back from the farmers after supplying them seeds. These measures from the government and the cooperatives have served the interest of the farmers who have been able to enhance their standards of living due to enhancement of services. References: Agricoop (2007), Department of Agriculture & Cooperation, 20 Dec 2007 AMR (n.d.), MARKETING INFRASTRUCTURE & AGRICULTURAL MARKETING REFORMS, 22 Dec 2007 Prakash, D., (n.d.), Capacity Building of Agricultural Cooperatives To Meet the Market and Human Resources Development Demands, 23 Dec 2007 Ramesha, K.,(2003), Cooperative Banking and Financial Sector Reforms in India, 22 Dec 2007 NAFED (2007), Nafed, < http://www.nafed-india.com/home.asp> 20 Dec 2007 NCDC (n.d.), Genesis and Functions, < http://ncdc.in/index_files/GenesisAndFunctions.htm> 02 Jan 2008 NIC (2005), Agricultural Marketing, 22 Dec 2007 Sharma, R., Ishige, K., Maeda, K., & Sanada, M., (2004), Strengthening Agricultural Support Services for Small Farmers, 21 Dec 2007 Read More