Retrospects and prospects

The socio-economic change in rural areas and development of agriculture in India are synonymous to a large extent as the agricultural economy forms the base for the development of millions of people living in the villages. We have spent enormous time, energy, resources and promotional inputs in an attempt to make agriculture a commercial proposition. Yet, these have not led to visible success. The reasons thereof have been debated at length in various forums since the new economic policy has emerged in the country. There are some scientific considerations listed below to enlighten a further debate on commercialisation of agriculture.

1. Agricultural marketing may not be looked upon only as an exchange function of farm produce, on the contrary it needs to be considered as a resource-bed for better ways of investment in farms for augmenting the production.

2. There is a need to develop agro-industrial avenues in the country to absorb the agricultural produce as raw material and pay a value added price to the farmers inculcate a business oriented attitude among them.

3. Better marketing opportunities and practices determine cropping pattern and develop logistics of agribusiness at grassroots level.

4. Innovative approaches in marketing need to be generated by evolving better marketing practices by providing infrastructural support, credit-marketing linkage, marketing extension network and effective public intervention policies.

The history of agricultural marketing since the medieval period to the end of the colonial era in India reveals the dominance of intermediaries in the trade3. After setting-up Directorate of Marketing and Inspection, the regulated marketing practice was introduced formally in the country. As of now there are about 6730 regulated markets operating all through the country. However, it could not make any significant contribution in changing the agricultural marketing scenario in the country except in some notable states like Punjab, Haryana, western Uttar Pradesh and Rajasthan, and of late, in Karnataka. The regulated markets largely suffered with the setback of low participation. This issue in a broad sense may be viewed in macro perspective of "performance trap" in agriculture4. The prominent factors which contribute to this concept are as listed below:

* low marketable surplus,

* poor performance of institutional channels,

* lack of farmers participation,

* low bargaining power of farmers,

* lack of institutional support,

* high marketing costs or price spread,

* poor market management,

* high rate of litigation in regulated markets,

* complexities in procedures, and

* lack of value additions in pricing.

In the post-independence period substantial efforts were made to organise the farmers to protect their economic interest in agribusiness. However, barring a few agribusiness co-operatives a large number of such institutions have become liabilities either on the government or the members themselves. The dissection of many sick co-operative revealed that they failed to find logical answers for some of the moot questions of a marginal farmer, hypothetically the strongest member of the co-operative, who is in agricultural occupation to fulfill his bare need of two square meals a day. These moot question are:

i. Why are farmers unorganised?

ii. What is the gulf between the myth and reality of giving agriculture the status of an industry?

iii. How far is the rural power structure from agricultural marketing?

iv. How do the factors of time and distance affect the farmer’s decision in order to bypass the conventional channel of marketing and look to the regulated markets?

v. Is it possible to eliminate the intermediaries from agricultural trade for building up an institutional image?

vi. How far are the farmers responsible for sticking to their conventional marketing practices?

vii. Is there a missing link in the entire process of commercialising agriculture, if so, where is it?

It is essential to evolve a macro framework for promoting agribusiness in the country where the socio-cultural factors are more dominating than the commercial considerations in agricultural occupation. Besides, the ratio of labour intensive methods and capital intensive investments in agriculture shows a serious imbalance for the known face of high population pressure on agriculture. It is very difficult to substantially put an argument for capital intensive agriculture development because so far we could not develop a strong alternative sector in rural areas where the disguised population employed in agriculture could be absorbed. However, our policies largely run into trade offs of the various options for developing business in agriculture. The issues for debate for and against is presented in Table III.

Table III Issues for the Debate

Economic gains	Vs	Social costs
Blue print approaches	Vs	Collective decision
Formal control	Vs	Informal control
Institutionalising trade	Vs	Privatisation
Minimising risks	Vs	Maximising profits
Regulated markets	Vs	Socialised markets
Value based considerations in cooperatives	Vs	Member controlled
Multi agency approach in agribusiness	Vs	Single window system
Top down approach	Vs	Rapid market survey
Capital Subsidies	Vs	Price incentives
Credit-marketing linkage	Vs	Profit linkages

It has been observed in many research studies conducted on analysing the factors affecting the agricultural marketing over the post-independence period that the dominance of private traders in the agribusiness is very high in general and to the extent of 95 percent in particular to the trade of fruit and vegetables, two of the most perishable commodities. The fruit and vegetables are sold through contractors to the tune of 3 percent and only 2 percent is directly sold to the consumers. The value addition at the intermediate levels is very low and so about 68 percent of fruit and vegetables are sold in raw form only. The crux of marketing is lack of infrastructural facilities like pre-cooling units, cold storages, roads, transport, finance, forward marketing linkages and managerial support for achieving commercial propositions in the farming occupation.

The dynamics of cooperativisation in agriculture had begun since the Second Five Year Plan period with a view to building up an effective alternative marketing channel for the large number of farmers engaged in growing food crops, commercial crops, plantation crops and the like. However, the co-operative established with an intervention of government such as Large Scale Multi Purpose Societies, Forest Labourers Cooperative Societies, Agro-industrial Cooperative Societies, etc., could not be successful due to the lack of vertical and horizontal linkages pertaining to administrative decisions and members’ stake respectively. These societies had a very low expertise in marketing management with respect to performing decisions on marketing-mix components, developing professionalism in sales and maintaining business relationships. However, one of the major bottlenecks from the business point of view could be the lack of operational flexibility which a private marketeer enjoyed to position his markets. Further, the non-productive investment in these agencies was found to be very high which was borne by the state by issuing subsidies. Besides the lack of autonomy, growth of vested interests and political intervention damages the image of agricultural non-credit co-operatives having state patronage.

The new economic policy which emerged in 1991 has invited global attention and promoted the concept of high technology oriented projects in agriculture. It has become evident in floriculture where the cultivation of flowers made a dent in contributing to the export markets. Similarly, in production of fruit and vegetables also, such high technology projects have been initiated. These projects are high capital oriented and require high managerial skills. Some of the potential areas in the export processing zone of horticulture and floriculture are as designated below:

 

Vegetables

Tomato

Pea

Cabbage

Cauliflower

Carrot

Capsicum

Flowers

Rose

Orchids

Carnation

These projects are considered under consortium financing by a group of financing institutions. However, an entrepreneur has to obtain clearances from a number of organisations. These projects have an impact of WTO agreement as the entrepreneur has to import mother plants every three years but can not multiply them in the green house. If he could obtain permission for further multiplication of plants he has to impart royalty to the company as stipulated. The agro-high-technology projects require suitable land, water, uninterrupted power supply, clearance from the Reserve Bank of India, controller of exports and from the government. Besides, it is essential that the unit is registered with the Agricultural Produce Export Development Authority (APEDA). The project can only be launched with valid technical collaboration agreement with a foreign firm specifying the buy-back agreement of at least two years. These projects may be helpful in developing villages within 60 kilometres radius of prominent airports. Besides, the potential export processing zones (EPZ) are tobacco, cotton, spices, tea and coffee in commercial crops while in the allied agricultural sector are the processed dairy products, specifically, cheese has been identified as export commodity. Agribusiness thus, may see the vision of international marketing by 2000 AD.

 

References

1. Annual Survey of Agriculture (1994), "Agricultural Situation in India", August, pp.363-369.

2. Report of the High Power Committee on Agricultural Marketing (1993), Agricultural Marketing, 35(4), January-March, pp.33-38.

3. Rajagopal, "Indian Marketing: History, Development, Policy and Practice",Rawat Publications, Jaipur (in press).

4. Rajagopal (1995), "Developing Agribusiness in India", Bihar Journal of Agricultural Marketing, January-March.