Thursday, March 20, 2008

Perspectives on Retailing in India and Rural Marketing V

Continues from previous post here. This is the fifth and the concluding part to a series of posts posted during last 5 days. Previous posts can be viewed by clicking Label Thoughts in the extreme left column of the blog. The middle column, where you see Recent Posts for now will automatically populate with the posts in this series as well as other posts in my Thoughts archive.

The India Context for Proactive Marketing

The glaring fact that the proportion of agri-dependent population in total rural consumption expenditure is almost the same as the population not involved in agriculture.[1]  Nearly 75 per cent of the rural population is dependent on agriculture, this indicates that much needs to be done to improve their consumption levels. This is also where the opportunities for pro-active marketers lie. An opportunity to improve the productive capacities of people and consequently derive benefits out increased consumption, and thereby, expanding the scope of marketing to creating the potential of rural markets.

The foremost task ahead of us is to strengthen our agriculture sector, more importantly, agriculture marketing. Agriculture in India still is in primordial stages with rudimentary production activities starting right from sowing to marketing. These include low capital availability, unbalanced fertilizer use, low seed replacement rate, poor yield, inadequate post harvest value addition, mass production of undifferentiated product not in sync with market needs, imperfect markets, multiple intermediaries substituting for infrastructure adding to costs and wastages. The current scenario does not portend well for agriculture growth, income generation and consumption expenditure. Bringing farmers to the forefront and helping them improve their earnings is an opportunity, which is going to have profound impact on the future of rural markets. And, this is where the challenge for a marketer lies.

Agriculture Marketing Scenario in India

Agriculture Marketing System is the critical link between the farm production system on one hand and the non-farm sector, industry and the urban economy on the other. In an ideal case the agri-marketing system is expected to facilitate not only the physical transfer of agri produce but also price discovery at different stages and dissemination of price signals. An efficient agri-marketing system would ensure increase in farm income, widening of markets and resource use optimization.

The agri-market scenario in India is far from ideal, it is laden with challenges, which encompasses both infrastructure and technology. These drawbacks to name a few, include, poor and unreliable infrastructure, fragmented supply chains with multiple intermediaries, outdated, inadequately maintained and inefficiently utilized processing technology. As such rendering agri-marketing practices undeveloped and unproductive across all the platforms where rural buyer-seller exchange transactions take place. These have been covered in the following section:

Rural Haats: Haats or Rural Primary Markets are estimated around 47000 in the country and of these, 75 per cent are held weekly, 20 per cent twice a week and 5 per cent daily. These haats, predominantly located in interior areas serve a large number of farmers, it is estimated that almost 90 per cent of the total marketable surplus in remote areas is sold through these markets.[2] Rural Haats are also a place where daily necessities like soaps, utensils, clothes etc are sold. However, rural haats disappoint in terms sales of spurious goods, no guarantee of quality, sale prices being higher than maximum retail price, clutter & congestion of markets and non-availability of supportive services[3].

Wholesale / Assembling Markets: There are about 7557 wholesale / regulated markets scattered across the Indian states. The sale purchase process in these markets is governed by the Agriculture Produce Market Committee (APMC) Act, which empowers the state governments to set up and regulate wholesale and regulated markets. In practice, from the farmers’ viewpoint, the Act has several inconsistencies that include restrictions on direct marketing of produce, setting up of private mandis, commission charged by the agents across the markets and commodities and non-uniformity with respect to loading/unloading charges (at present the Model APMC Act 2007, has provisions that allow such practices and check the irregularities, the Model Act is still to be adopted by respective state governments). As a result, farmers are not able to derive optimum benefits in the current status. It has been estimated that the effective realization by farmers on crops ranges between 30 – 40 per cent; various intermediaries appropriate the rest across the agri-value chain. The mandi are further marred by poor physical infrastructure, as a result, as much as 7 per cent of grains, 30 per cent of fruits & vegetables and 10 per cent of food species end up waste due to poor handling. It has been estimated that the inefficiencies in the present set-up result in an estimated loss of Rs 500 billion.


Inadequate Infrastructure in Wholesale / Regulated Markets[4]

  • Covered or open auction platforms exist in only 2/3rd of regulated markets

  • Only 1/4th of markets have drying yards

  • Trader modules, viz. shop, godown & platform in front of shops exist in only 63% of markets

  • Cold storage units exist only in 9% of markets

  • Grading facilities in less than 1/3rd of markets

  • Farmers’ resting facilities 50% of the markets

  • Basic facilities like internal roads, boundary walls, electric lights, loading & unloading facilities, weighing equipments etc. not available in nearly 20% markets

Vulnerability of farmers with respect to farm operations (a topic, which separately requires an in-depth analysis) and poor agri-marketing scenario negatively impacts their income generation capabilities and further affects their consumption. Proactive marketing strategies, effectively try to tackle these shortcomings by offering him good quality inputs, services like soil testing, best practices, price information and so on, thereby increase his chances of deriving optimal benefits from farm operations. Proactive marketers, then utilize the enhanced purchasing power of farmers by offering them products and services to improve their standards of living. These strategies have been successfully employed by organisations like ITC, DCM Shriram and Godrej through their initiatives e-choupal & Choupal Sagar, Hariyali Kisan Bazaar and Godrej Aadhar.

During recent years, agriculture sector has witnessed a flurry of activities from corporate sector, which has expressed interest to offer an integrated bundle of services ranging from technical help in agricultural package and practices, supply of inputs and so on. This has been a result of a slew of reforms measures, notably being amendments to the Agriculture Produce Market Committee (APMC) Act, that now provides for direct marketing of agri-produce, setting up of private mandis / yards and contract farming within the wholesale/regulated markets. Further, the Act makes provisions for rationalization of the license system and market fee, development of marketing infrastructure, organised retail and establishment of terminal and futures markets by the private sector. Yet still, the private sector though encouraged to make forays into the farm sector and develop appropriate agri-marketing strategies, faces numerous challenges, viz. lack of open and transparent price discovery mechanism and trading, restrictive marketing practices in some of the wholesale market / mandis, weak infrastructure and credit inclusion. These factors often act as hindrances for the companies to scale up their operations and also impinge upon farmers, who fail to derive expected benefits from direct sale and purchase.

As a result, the ongoing agri-reforms agenda must ensure that the inadequacies of the current marketing set-up be removed and that the free play of market forces is promoted. Two issues, that need careful consideration in this regards include (i) enabling appropriate linkages to improve crop productivity & price information flow and (ii) avoiding wastages by developing the entire supply chain i.e. sorting and grading centres, warehouses, temperature and humidity controlled warehouses, cold storage's, temperature controlled transport up to consumer location.


It is time that all the stakeholders redefine their roles. While the government should expedite the progressive reform measures that it has introduced, the corporate sector should come forward and contribute to enhancing the productive capacities of the rural populace. We have already alluded to a few innovative programmes. It is time that the corporate sector in conjunction with the government scales up these efforts. This is important for tapping the vast latent potential of the rural markets. Further, it is only through such a collaborative approach that the fruits of growth would percolate to the lowest strata and we as a nation can move forward in attaining today’s foremost public policy objective i.e. inclusive growth.

[1] Growing Rural Retail, Financial Express, November 25, 2006
[2] Report of the Sub-group on Agriculture Marketing Infrastructure for XI Five year plan on Agricultural Marketing Infrastructure & Policy required for Internal and External Trade, Planning Commission, October 2006.
[3] Growing Rural Retail, Financial Express, November 25, 2006
[4] Mr U K S Chauhan, Joint Secretary (Marketing) and Agricultural Marketing Advisor, Department of Agriculture & Cooperation, Ministry of Agriculture, GOI at National Conference on Emerging Platforms for Agriculture Marketing, September 20-21, 2007, FICCI

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