Sustainable Market Strategies.pdf

Asian Journal

of Research in

Marketing Asian Journal of Research in Marketing Vol. 4, No. 1, February 2015, pp. 203-214.

ISSN 2277-6621

203

www.aijsh.org

Asian Research Consortium

Sustainable Agri-business Development and Food

Marketing Management - Opportunities & Challenges in

India

MRK Murthy*; PM Naikwadi**

*District Agri-Business Expert & In-charge of Market Linkage Specialist,

Convergence of Agricultural Interventions in Maharashtra (CAIM),

GoM, IFAD, SRTT.

**District Agri-Business Expert,

Yavatmal.

Convergence of Agricultural Interventions in Maharashtra (CAIM),

GoM, IFAD, SRTT.

Abstract

A well-organized and efficient marketing system plays a vital role in the economic growth or a

nation. An efficiently organized marketing system not only facilitates the proper and smooth

disposal of the produce but also acts as a catalyst to stimulate increased production in terms of

incentive prices. A vast majority of the population lives in the rural areas. Rural prosperity is

largely linked with agriculture as about 56 per cent of the populations are engaged in agriculture

and about 18 per cent of the national income is generated through it. In order to usher rural

prosperity farm incomes has to be maximized by diversifying agriculture through integrated crop,

livestock, fisheries and horticultural enterprises, which pre-supposes the need for a well, organized

marketing system for these commodities.

Agri-business includes not only all the agriculture related activities but also that portion of

industrial sector which covers the sources of farm supplies i.e. farm machinery, fertilizers and

chemicals, etc., or the processors of farm products. Thus, there are five major agri-business

segments, namely, input manufactures, input suppliers, integrated agri-business, market

intermediaries, food processors and marketers. In the view of Agribusiness plays an important role

in improving the quality of products and accessibility etc. The changed economic scenario and the

global order have modified substantially the organization and management of agri-business. After

the 'Green Revolution‟, which ensured abundant production and food security in India, we should

gear up ourselves to have, Marketing Revolution with all its, rainbow colours so as to seize the

Murthy & Naikwadi (2015). Asian Journal of Research in Marketing,

Vol. 4, No.1, pp. 203-214.

204

opportunities provided by the liberalized international market. This would ensure a fair price to the

farmer and availability of qualitative products to the consumer at reasonable prices. The whole

gamut of agri-business is under scrutiny, since changes are swift, a serious thought on the question

of meeting the challenges sustaining of the transformation is the need of the hour.

Keywords: Agribusiness, Sustainable Agriculture, Food chains, Marketing Management.

________________________________________________________________________________

Introduction

The term „Agribusiness‟ was first used by John H. Davis of Harvard University in 1955.

Agribusiness can be broken down into economically independent sectors: input supply, farm

production and output. However, in the recent times two definitions of agribusiness have been

accepted (Downy and Erickson, 1993). The first includes a narrow and traditional definition of

agribusiness, which essentially refers to producers and manufacturers of agricultural goods

meaning only the input sector is considered. Secondly a broader view of agribusiness includes any

firm whose activities relate to any part of input, farm production, processing and distribution. In

short, agribusiness means the business and management activities concerning farm inputs, outputs,

processing, transportation, finance and marketing of finished farm products. The modern concept of

agribusiness is depicted in Fig. 1, which elucidates the various processes of inputs, farm production

and distribution (Downey and Erickson, 1993). It can serve as a useful guideline in structuring the

competencies required in farm graduates.

FARM INPUT SUPPLY SECTOR

FARM MACHINERY

FERTILIZER FINANCE

SEED OTHER INPUTS

FARM OUTPUT PRODUCING

SECTOR / FARM FIRMS

PROCESSING

PROCESSING UNITS

DISTRIBUTION

CONSUMERS

M

A

R

K

E

T

I

N

G


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205

Agriculture occupies the central stage of Indian economy. For ensuring growth of the agriculture

sector along with other sectors, an assured remunerative price to the farmers for their produce is

necessary, and so the role of marketing becomes important. Agricultural marketing is different from

marketing of other manufactured products, because of perishable nature of the products, seasonality

of production, bulk quantities, variation in quality, irregular supply, small size holdings and

scattered production. This indicated land is being fragmented in India, which also draws the

attention of concerned marketing authorities, especially for small and marginal farmers. Agri-

business includes not only all the agriculture related activities but also that portion of industrial

sector which covers the sources of farm supplies i.e. farm machinery, fertilizers and chemicals, etc.,

or the processors of farm products. Thus, there are five major agri-business segments, namely,

input manufactures, input suppliers, integrated agri-business, market intermediaries, food

processors and marketers.

Agribusiness and related industrial ancillary units are mostly in the private sector and to a

lesser extent in the public/cooperative sector. Their role is vital especially in the area of production

and propagation of plants and animals; manufacturing of engineering

goods/instrumentation/operation, chemical and non-chemical input products, and value-addition to

agricultural produce through storage, processing, quality control, transportation, marketing and

exports. Agricultural graduates who shall seek wage and self-employment in these enterprises need

to have comprehensive technical knowledge and skills and also need to learn basic agribusiness

management practices relevant to their area of operations (refer Mckinsey report 1993, on the

projected potential of Agribusiness). However, the concerned SAUs may undertake an in depth

study to survey the scenario as applicable regionally and accordingly plan for providing the

required skills for the farm graduates and post-graduates in the curriculum. The lead taken by Tamil

Nadu Agricultural University, Coimbatore and Tamil Nadu University of Veterinary and Animal

Science, Chennai, in this direction is indeed laudable. These Universities have introduced

commercial farm production courses and optional skill oriented courses on farm operations at UG

level. These are in addition to the Rural Agriculture Work Experience Programme (RAWE) for a

cropping season in the villages. The National Institute for Agricultural Extension Management

(MANAGE, Hyderabad), National Academy of Agricultural Research Management (NAARM,

Hyderabad) have already introduced a PG course in Agribusiness Management. There is an urgent

need for all the SAUs to adopt such innovations in the curriculum.

Objective

To improve Sustainable Agri-business development and Food Marketing system based on

experiences and evidences from the present study.

Research Method and Methodology

The study data was collected from mainly in-depth telephonic interviews with the sample size of 46

private colleges and 20 certificate course agricultural institutions in the year 2013. Secondary data

collected through literature, some existing own data.


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Fig 2. Aggregation Model for Smallholder Farmers

Source: Author

The potential for agribusiness varies as per the agro-ecological zones. Some of such competencies

can be identified as listed below.

1. Farm Input Generation: Farm input supply sector provides opportunities for farm

graduates and necessitates to develop competencies and skills in areas such as tissue

culture, biotechnology, hybrid seed production, vermin-culture, organic & inorganic

fertilizer production, feeds and fodders, breeding stock of animals, supply and servicing of

farm machinery etc.

2. Farm Production: Farm production sector also offers a lot of opportunities in areas such

as egg and meat products, dairy products, biotech products, fish products, fish products,

seed production and multiplication. Farm graduates can establish commercial enterprises

in the areas of floriculture, horticulture aquaculture, mushrooms, apiculture, sericulture

etc., whose products are export oriented.

3. Post Harvest Processing and Value Addition: It involves technologies of different kinds

of storage methods, transportation systems, processing and packing, quality control,

market research and strategies. Projecting demand and selecting appropriate value

additional technologies and then creating necessary business linkages to be able to

produce and market commercially viable technologies is an important and priority

component in the professional competence of graduates and post-graduates of agricultural

science in the future economic scenario.

SHGs (Mahila Bachat Gat)/

Producer Groups

Operated by SHGs

Transport

Processing (Cleaning,

Grading, Weighing,

Packing etc)

Warehouse

(Collection /storage)

Retailers

Consumers

Agreement with

Corporate Company

Consumers

Bank support

Farmer/Producer


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207

4. Business Management: Understanding of agricultural and economic policies, corporate

law and structures, banking, financial management and accounting systems, project

investment analysis, etc., are some of the important functions for agricultural professionals

to develop competencies at the graduate and post-graduate level.

5. Projects Management: Management tools and techniques such as Programme Evaluation

and Review Technique (PERT), Critical Path Method (CPM), log-frame, activity analysis

and scheduling, work-unit structures, resources generation and personnel management are

perhaps some of the necessary professional management competencies required in future

for graduates and post-graduates.

6. Information and Knowledge Centers: With the advent of fast changing technology in

Information dissemination and feedback the farm graduates have immense potential to

provide consultancy and other technical services using the concept of Agricultural

Technology Information Centers. The experience of MSS Research Foundation in this

regard will help in designing and developing the necessary skills and systems for farm

graduates to learn and contribute.

It was suggested in one of the recent documents (Steering Committee Report on National Livestock

Policy, 1996) that fresh veterinary graduates and those already in government departments will

have to take up private practice in their field of specialization both for earning livelihood and for

resource generation. In years to come, corporate agricultural services like in the West are likely to

emerge. In other words, privatization of agricultural profession is on the anvil, and it might assume

the proportions of medical and legal specializations. Hence, higher competency development for

graduates with the requisite personality attributes for providing service to the cause of the national

agricultural effort is to be envisioned.

There is an explosion of private sector involvement in collaboration with foreign agencies

in a variety of agribusiness sectors investing huge amount of money, which offer immense potential

of private sector employment and development of ancillary units around these corporations, which

in turn offer opportunities for self-employment.

One must give full credit to some of the State Agricultural University (SAUs) for the

dynamic initiative and leadership in this direction by developing post-graduate and vocational

programmes with such perspective I mind. However, more such initiatives are required to establish

management departments in the SAUs and the meager isolated efforts in this direction do not

suffice the purpose. In this context, an investment during the next five years to develop business

management curriculum and faculty development to handle new academic avenues should be a

priority on the agricultural front. It is also quite likely that agriculture might be accorded the status

of corporate sector as a policy in the coming years. Hence, it is all the more important to visualize

foreseeable changes that are likely to occur in such an event. It is very appropriate to suggest that

there is need for Agribusiness support system to provide professional extension services and to

create the necessary infrastructure to private sector entrepreneurs and commercial agriculture

operators as being done in Russia (Russian Initiative Self Employment, RISE, 1994).


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At present, there are about 46 private colleges and 20 certificate course institutions which

are offering degree programmes in agriculture outside the National Agricultural Research System.

These institutions of learning do not have adequate infrastructure and facilities for practical skills

and training. And it is also contingent upon us to note that these institutions are outside the purview

of accreditation of Indian Council of Agricultural Research (ICAR). Although these colleges are in

need of huge investments for infrastructure development, it is worthwhile to suggest that these

colleges and institutions can be developed for the purpose where investments for infrastructure

development can be judiciously spent without duplicating the effect of National Agricultural

Research System (NARS). Such of these private colleges can play a partnership role with ICAR

and SAUs in the area of agri-business and management so that there is a synergetic effort, and it

will also help the private colleges to play a major role in the area of social sciences and not

necessarily in the technical field of agriculture. Thus, the potential of the private institutions can

bring into the mainstream of NARS.

Agricultural Marketing System:

Salient features of the Indian Agricultural Marketing System are

1. Farm production and marketed surplus increased manifold with the adoption of new

technologies of production. The concept of production for home shifted to 'production for the

market'. Further, specialization in production increased and as a consequence marketed surplus

on almost all size groups of farms. This increased marketed surplus enthused the farmers to

become price conscious and marketing aspects started receiving greater attention.

2. Regulation of marketing system and establishment of regulated markets all over the country

brought changes in the farmers' marketing practices in terms of sale of their produce in

regulated markets instead of village sale or sale to the itinerant traders. The tendency of village

sale considerably went down. Presently, the farmers in regulated markets or towns/mandies sell

around 70 per cent of the marketed surplus.

3. Regulation also helped in reducing the charges paid by the farmers while selling their produce

in the regulated market yards. The rates of various services payable by farmers have been

standardized in several markets. Sale slips are issued to the farmers showing the quantity and

the price at which sold.

4. Farmers have been able to reduce their price risks by availing the facility of the price support

programme for 24 major agricultural crops put in place by the government. In the event of

prices falling below the support level, the farmers off-loaded their surpluses to the public

agency at the minimum support price (MSP).

5. Farmers have increasingly organized themselves in cooperative marketing societies. Under

such an arrangement, small and marginal farmers with low quantity of produce for sale also got

the same price as realized by large farmers.

6. Several practices, which worked against the farmer-sellers, have changed owing to the

abolition of barter system; introduction of standard weights and measures; abolition of sale by


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cover under cloth (hatha) system; discontinuance of realization of unauthorized deduction of

market charges; reduction of rates of commission; and provisions of storage facilities for

farmers at reasonable rates.

7. The availability of staying facilities in rest houses free of cost; quicker means of transportation;

and information about prices in the market have become common features that attracted the

farmers to the regulated markets.

8. The tendency among farmers to sell their produce immediately after harvest has not changed

much owing to the cash needs, requirement for repayment of loans, inability to bear risk of

holding the stocks and to an extent unavailability of storage and pledge-loan facilities.

Agriculture Marketing Reforms

Government of India in the Ministry of Agriculture appointed an Expert Committee on 19th

December 2000 to review the present system of agricultural marketing in the country and to

recommend measures to make the system more efficient and competitive. The Committee in its

Report has suggested various reforms as well as the reorientation of the policies and programmes

for development and strengthening of agricultural marketing in the country.

With a view to examining the findings and recommendations of the Expert Committee and

to suggest measures to implement them, the Ministry of Agriculture constituted a Task Force on 4th

July, 2001 under the Chairmanship of the secretary, Department of Agriculture & Cooperation. The

Task Force thereupon identified some priority areas to work out a road map for strengthening the

agricultural marketing system in the country. The important among the Identified is:

Direct marketing

Forward and future markets

Price support policy

IT in agricultural marketing

Marketing extension, training and research.

Direct Marketing

Innovative Marketing Channels

Direct marketing by farmers is being encouraged as an innovative channel. Some examples of these

channels are Apni Mandi, Hadaspar Mandi, Rythu Bazaars; and Uzhavar Sandies.

1. Apni Mandi: In Apni Mandi, there is a direct contact between the farmers and ultimate

consumers. These mandies are called Apni Mandies as farmer producers bring the produce for

sale directly to the buyers or consumers.


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2. Hadaspar Vegetable Market: Hadaspar vegetable market is a model market for direct

marketing of vegetables in Pune city. It belongs to the Pune Municipal Corporation and fee for

using the space in the market is collected by the Municipal Corporation from the farmers. This

is one of the ideal markets in the country for marketing of vegetables. In this market, there are

no commission agents/middlemen. The market has modern weighing machines for weighing

products. The purchasers make payment of the value of produce directly to the farmer in cash

3. Rythu Bazaars: Rythu bazaars have been established in Andhra Pradesh with the prime

objective to provide direct link between farmers and consumers in marketing of fruits,

vegetables and essential food items. Both producers and consumers are benefited from Rythu

Bazaars as producer's share in consumers rupee is more by 15 to 40 per cent and consumers get

fresh vegetables, fruit and food items at 25-30 per cent less prices than the prevailing prices in

nearby markets.

4. Uzhavar Santhaigal: The state Government of Tamil Nadu established Uzhavar sandies

(farmers markets) in selected municipal and panchayat areas of the state. In this market,

farmers enjoy better marketing infrastructure free of cost and receive considerable high prices

for the products than what they receive from middlemen at villages or primary markets at

towns. Farmers also get good quality seeds and other inputs in the market itself.

Forward and Future Markets

Introduction of a negotiable warehouse receipt system to facilitate increased liquidity in rural

areas, lower cost of financing, shorter and more efficient supply chains, enhance reward for grading

and quality, development of other productivity enhancing agricultural services and better price risk

management

Amendments to some of the provisions of the forward Contract (Regulation) Act, 1952 are

currently with the parliamentary standing Committee. These amendments include defining futures

trading, removal of ban on options trading, provisions of registration of brokers, strengthening of

FMC by including professionals as - time Members, enhancing the penalty provisions, etc.

Price Support Policy

Government intervention in purchase of agricultural commodities under minimum price support

programme, procurement of food grains, market intervention scheme (MIS), monopoly purchase

and open market purchases of commodities by NAFED, CCI, JCI and State Oilseed Federations

etc., have attained importance in recent years. The entry of these public and cooperative agencies

has alerted the existing channels and also their importance in terms of quantity marketed through

them. The basic objective of entry of these agencies in purchase of different commodities is to

safeguard the interest of producer - farmers alongside the protection of consumers from excessive

prices in some years.

There is a considerable variation in the structure of taxes and fee on the agricultural

produce in various states which also distorts the operation of the domestic market, gives wrong

signals to the producers and leads to considerable fallacy in the efficiency of the operation of


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private trade vis-à-vis farmers‟ cooperatives and public agencies. There is a need for bringing

uniformity in the state level tax structure for agricultural commodities for improving the marketing

efficiency. To avoid blockage of funds and consequent burden on government exchequer due to

huge compulsory procurements under price support operations, alternate systems may be devised to

compensate the farmers when the prices are abnormally low.

IT in Agricultural Marketing

Strengthening of ongoing central sector scheme of establishing Market Information Network and

making it as a vehicle of market led extension, providing facility of electronic trading or e-

commerce on the Market Information Network portal to enable producers to directly transact

business with the buyers. Use of information technology in agricultural marketing is becoming

increasingly indispensable. Encouragement needs to be provided to generate and host useful

portals, web sites, databases, information packages and other software, generic as well as

customized, on agricultural marketing. Info Kiosks should be promoted to be set up in the markets

and with farmer‟s organizations, associations of traders and other functionaries for exploiting the

opportunities of information revolution, especially for on line demand of different products. The

information that is important and useful rates to product specialization's with regard to quality, pack

size and packaging material; quantity and time frame of supply; transport cost involved and the

marketing charges likely to be delivered; facilities available to the farmers in the buying market;

rules and regulations of the destination markets, if they are located outside the state at a distant

place; other specific information as may be conducive for the seller to transact the business with the

purchasers; and the legal provisions related to storage, transportation and pyto-sanitary

requirements.

Marketing Infrastructure

Regulated Markets

The benefits available to the farmers from regulated markets depend on the facilities/amenities

available rather than the number of regulated markets in the area. Both covered and open auction

platforms exist in two-thirds of the regulated markets. One-fourth of the markets have common

drying yards. Traders modules viz., shop, godown and platform in front of shop exist in 63 per cent

of the markets. The cold storage units exist in only nine per cent of the markets and grading

facilities exist in less than one- third of the markets. The basic facilities viz., internal roads,

boundary walls, electric light, loading and unloading facilities and weighing equipment are

available in more than eighty per cent of the markets. Farmer's rest house exists in more than half of

the regulated markets.

The establishment of regulated markets helped in creating orderly and transparent

marketing conditions in primary assembling markets. Further, increase in the number of regulated

market yards, from a meager 286 at the time of Independence to 7177 in 2001, helped in increasing

the access of farmers to such orderly market places. This development, coupled with construction

of approach roads network linking primary markets with secondary wholesale and terminal

markets, also improved the process of price discovery at the primary market level where most of

the small farmers dispose of their produce. Expansion of such physical infrastructure in rural areas


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has helped small and marginal farmers more by increasing their access to the markets. During

1992-93, agricultural commodities worth Rs. 62000 crores were traded in these regulated wholesale

markets, which account for about 43 per cent of the value of marketed surplus.

Grading and good packaging have also acquired a very crucial role in marketing of

products at retail level in urban and semi-urban markets and also for export markets. Indian

Institute of Packaging (IIP) working since 1966 is evolving better packaging material and

packaging techniques. The demand for packaging services is growing at a very rapid rate. However,

the situation is far from satisfactory particularly at the farmer's level.

Alternative Marketing System

Role of government in managing markets is on the decline worldwide. The only way to modernize

marketing is to set up Alternative Marketing System' that may operate parallel to, and in addition to

present Mandies. The purpose of the proposed alternate marketing structure is to establish modern

and efficient trade practice as a catalyst for changes in the market towards improved transparency

and efficiency.

Forms of Alternative Marketing: The different forms of alternative marketing could be:

i. Direct marketing by producers

ii. Marketing through Farmers Interest Groups

iii. Setting up of terminal markets by the private sector

iv. Forward markets and futures exchanges

v. Electronic trading - e- commerce

vi. Setting up mega markets covering all marketing functions for domestic as well as

export trade

vii. Introduction of negotiable warehouse receipt system

Grading, Transportation & Storage

Grading of products per their quality standards before sale fetches higher price to the farmers. To

bring uniformity in grading over time and space, the Agricultural Produce (Grading and Marking)

Act, 1937 was enacted. Under this Act, grade standards for a number of agricultural commodities

have been prescribed for sale in domestic market, for export and farm level grading. Although there

has been a considerable increase in the railway route length, total road length, the length of national

highways and state highways in the country; the status of rural connectivity, which affects the

farmers most, continues to be poor. So far, only 48.4 per cent of the villages are connected by

roads.


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Cold Storage

The central government issued the Cold Storage Order in 1964 (amended in 1980) for construction

and maintenance of cold stores and storage of commodities in them in good condition. The cold

storage capacity increased from 300 thousand tonnes in 1960 to 4.0 million tonnes in 1980, 8.7

million tonnes in 1996 and further to 15.38 million tonnes by the end of March 2001. Presently, a

total of 4199 cold stores with the capacity of 15.38 million tonnes exist in the country in different

sectors.

Market Research and Development

This would be the most critical area, which is being strengthened. Through information technology,

the information on the type and nature of markets that are prevailing and based on the trends of the

production of different commodities in the national as well as international markets, the new

concepts could be developed. This would also help us for dissemination of information on various

related issues. This would also include research and development of market infrastructure.

Investment for Market Reforms

Market Infrastructure

The investment for development of market infrastructure has been projected. During the next five

years, a total investment of Rs. 40306 million has been envisaged for development of marketing

related activities such as Market Infrastructure, Grading, Standardization, Testing, Facilities,

Marketing Information Network, Market Research Surveys, etc.

Storage Infrastructure

The Government of India has also formulated a National Storage Policy aimed at harnessing the

resources of the public and private sector for augmentation of infrastructure to handle food grains,

including construction of bulk storage facilities and also conventional godowns under "Gramin

Bhandaran Yojna". The additional storage capacity of 130 lakh tonnes is likely to be created in the

country with a total investment of Rs. 34800 million, including back-ended subsidy of Rs. 5700

million from the Government of India.

Cold Storage and Cool Chain Infrastructure

In view of the expected market surplus of fruits and vegetables by 2007 and the available cold

storage capacity, it has been envisaged to create an additional capacity of 56.50 lakh tonnes during

the Tenth Plan period.

Conclusion

After the 'Green Revolution‟, which ensured abundant production and food security in India, we are

gearing ourselves to have “Marketing Revolution”. With all its rainbow colours so as to seize the

opportunities provided by the liberalized national and international market. This would not only


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214

ensure a fair price to the farmer but also ensure availability of quality products to the consumer at

reasonable prices.

References

Downey W. David and Erickson P. Steven, “Agribusiness Management”, McGraw-Hill

International Publications, Agricultural Series, 1993.

Documents

Sustainable Market Strategies.pdf