Storage, Transport And Marketing Of Agricultural Produce

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Storage, transport and marketing of agricultural produce

Storage

The agricultural sector in India accounts for about 14% of GDP and 10% of export earnings. India’s arable land area of 159.7 million hectares (394.6 million acres) is the second largest in the world, after the USA. Its gross irrigated crop area of 82.6 million hectares 9215.6 million acres) is the largest in the world. It ranks among the top three global producers of many crops like wheat, rice, pulses, cotton, peanuts, fruits and vegetables. In spite of these achievements, the crop yields in India are still around just 30% to 60% of the best sustainable crop yields achievable in the farms of developed countries. These are likely to be negated in the coming decades due to scientific and technologically improved crop production measures which would increase the quantity of food grains harvested and therefore the storage requirement would further increase. About 65-70% of the total food grains produced in India is retained by farmers for their selfconsumption or meeting their other financial requirements. The food grains at farm level are stored in traditional as well as in modern storage structures.Food grains are stored in bulk in these storage structures, which are neither rodent proof nor moisture proof. There are estimates that substantial quantity of food grains (about 6.0% to 10% of total production) are damaged in these storage receptacles due to moisture, insects, rodents and fungi and also due to transportation.

It has been estimated that about 65% of their total produce are held by the farmers for their consumption and use which is stored in a crude and unscientific method. The balance quantity is supplied to the central pool and delivered at the nominated warehouse or at the local mandi earmarked for procurement or delivery. The procurement agency collects the quantity deposited to the central pool by the farmer and transports the same to the FCI or nominated warehouse. Often the stock stored in the warehouses remain in storage for more than its shelf life due to want of off-take of stock by allotees like Targeted public distribution system (TPDS) and flour mill owners. Such long storage, if not taken proper care of, causes damage to the stock. Since the stock stored in the warehouse is not lifted, the storage space cannot be utilized for fresh arrivals of the ensuing season.

Challenges of storage facility in india

Storage of food grains in open space

Normally storage in open in the form of CAP is supposed to be resorted to during peak procurement seasons. The storage in the CAP should not be more than a year with at least one turn-over of the stock every 6 months to retain the quality of the food grains. Further, for proper aeration, the cover is to be removed at least 2 to 3 times in a week. Unfortunately, lot of stock is lying in the open where even the plinths are not available. During procurement season, for want of adequate CAP storage facilities, stocks are simply dumped/stacked on open spaces wherever feasible and much of these stock gets damaged because of seepage of water from the ground in the absence of proper plinth or height of ground or due to floods and rains.

Poor condition of storage facilities

Utter disregard to safe and scientific storage practices have resulted in excessive damages to food grains in the central pool maintained by SGAs in various states of india. In addition, failure to ensure early disposal of damaged stock led to blockage of storage space. The loss due to damaged stock is in million tones.

Efficient capacity utilization

For optimum capacity utilization of the existing capacity, timely and proper planning of movement and distribution of food grains across pan India is a pre-requisite. Despite storage constraints in FCI, the utilization of existing storage capacity in various states/UTs was less than 75% in majority of the months during the period 2011-12-2016-17. However, the capacity utilization may not be optimal due to reasons of sudden unanticipated increase in offtake for a particular region or due to unanticipated decrease in procurement.

Following important steps sgould be taken in order to boost the storage facilities:

  • With proper foresight and planning in lifting the stock of the central pool in time from SGAs,money paid as hiring charges and carry over charges to SGAs can be utilized for construction of new storage spaces.
  • Adequate manpower and supervision is required for scientific and safe storage in CAP storage.  
  • To save costs, proper plinths should be constructed in vacant government lands which can be used for temporary storage of food grains during peak procurement seasons.  
  • Hiring charges of FCI would continue to shoot up substantially in future unless owned storage capacity is augmented proportionately as against creation of storage capacity for guaranteed hiring by FCI.
  •  Poor and reckless management and cumbersome paperwork leading to non-availability of storage space even if the space is held by damaged stock for want of disposal approvals from FCI should be dealt with appropriately by decentralized decision making.  
  • Non adherence of safe and scientific storage methods should be dealt with an iron hand and the strictest of punishment is to be enforced and accountability fixed.  
  • The total number of covered storage required for meeting the deficiency of 35 million MT is 7000 godowns at the rate of 5000 tonnes per godown. At approximately 1,450 INR21 per tonne requirement of funds for the godowns, the total funds requirement at current rates for constructing 7000 numbers of covered storage is 5,075 Cr INR excluding the cost of land.

Transportation of agricultural produce in india

Transport is considered to be an important aspect in improving agricultural efficiency. It improves the quality of life of individuals, structures a market for agricultural productions, makes interaction possible among geographical as well as regions and opened up new areas to economic focus.  

Road transport is the most regular and multifaceted network that includes wide range, physically expedient, highly bendable and generally the most operationally suitable and readily available means of movement of goods.  There are several problems and limitations linked with transportation of agriculture productions. In case transport services are not common, cheap quality or costly then agriculturalists will be at an inconvenience when they try to sell their crops. An expensive service will naturally lead to low farm gate prices (the net price the farmer receives from selling his produce).

The seasonally blocked routes or sluggish and irregular transport services, together with unsatisfactory storage, can actually lead to high losses as specific items such as milk, fresh vegetables, tea, get worse quickly after a while. In case the agricultural products are moved through bumpy road network, then several other crops such as mangoes & bananas might also suffer losses from staining. This will also show up in reduced rates to the agriculturalist.

Agriculture marketing

Agricultural Marketing, rather than production, is the key driver of the agriculture sector today, thanks to the new market realities posed by the increasing accent on globalization, liberalization and privatization of the economy. Market-driven production is an idea whose time has come. With the gradual shifting of agricultural system from subsistence to commercial one, there is increasing focus on Agripreneurship and Agri-marketing. It is the need of the time to tune up the Agricultural Marketing System of the country to enable the farmers to face the new challenges and reap the opportunities as well. This summons us to revisit our traditional statistic policies and laws and bring about the requisite reforms in the sector.

Agricultural Produce Market Committee act 2003

Agricultural Produce Market Committee (APMC) is a statutory market committee constituted by a State Government in respect of trade in certain notified agricultural or horticultural or livestock products, under the Agricultural Produce Market Committee Act issued by that state government.

Under Constitution of India, agricultural marketing is a state (provincial) subject. While intra-state trades fall under the jurisdiction of state governments, inter-state trading comes under Central or Federal Government (including intra-state trading in a few commodities like raw jute, cotton, etc.). Thus, agricultural markets are established and regulated mostly under the various State APMC Acts.  Most of the state governments and Union Territories have since enacted legislations (Agriculture Produce Marketing Committee Act) to provide for development of agricultural produce markets and to achieve an efficient system of buying and selling of agricultural commodities. Except the States of Jammu and Kashmir, Kerala, Manipur and small Union Territories such as Dadra and Nagar Haveli, Andaman and Nicobar Islands, Lakshadweep, etc. all other States and UTs in the country have enacted such State Marketing Legislations. The purpose of these Acts is basically the same i.e. regulation of trading practices, increased market efficiency through reduction in market charges, elimination of superfluous intermediaries and protecting the interest of producer-seller.

Problems with APMC’s and Model APMC act

The APMC system was introduced to prevent distress sale by farmers to their creditors, to protect farmers from the exploitation of intermediaries and traders and to ensure better prices and timely payment for their produce through the auctions in the APMC area. However, APMC Acts restrict the farmer from entering into direct contract with any processor/ manufacturer/ bulk processor as the produce is required to be routed through these regulated markets.  Over a period of time, these markets have acquired the status of restrictive and Monopolistic markets, harming the farmers rather than helping them to realise remunerative prices.

The APMC Act treats APMC as an arm of the state and the market fee as the tax levied by the state, rather than as a fee charged for providing services, which acts as a major impediment in creating a national common market.   

Various taxes, fees/charges and cess levied on the trades conducted in the markets or Mandis are also notified under the APMC Act.  APMCs charge a market fee from buyers, and a licensing fee from the commissioning agents who mediate between buyers and farmers. They also charge small licensing fees from a whole range of functionaries (warehousing agents, loading agents etc.). In addition, commissioning agents charge commission fees on transactions between buyers and farmers. The levies and other market charges imposed by states vary widely. Statutory levies/mandi tax, VAT etc. all add up to hefty amounts, create market distortions with cascading effects and  strong entry barriers. Further, multiple licences are necessary to trade in different market areas in the same State. All this has led to a highly fragmented and high-cost agricultural economy, which prevents economies of scale and seamless movement of agri goods across district and State borders.

APMC operations are hidden from scrutiny as the fee collected, which are at times exorbitant, is not under State legislature’s approval.  Agents in an APMC may get together to form a cartel. This creates a monoposony (a market situation where there is only one buyer who then exercises control over the price at which he buys) situation. Produce is procured at manipulatively discovered price and sold at higher price, defeating the very purpose of APMCs.

In order to deal with the challenges of APMC’s Central government introduced Model APMC act in 2003. Salient features of the act are as follows:

  • Legal persons, growers and local authorities are permitted to apply for the establishment of new markets for agricultural produce in any area. Under the existing law, markets are setup at the initiative of State Governments alone. Consequently, in a market area, more than one market can be established by private persons, farmers and consumers.
  • There will be no compulsion on the growers to sell their produce through existing markets administered by the Agricultural Produce Market Committee (APMC). However, agriculturist who does not bring his produce to the market area for sale will not be eligible for election to the APMC
  • Separate provision is made for notification of ‘Special Markets’ or ‘Special Commodities Markets’ in any market area for specified agricultural commodities to be operated in addition to existing markets.
  • A new Chapter on ‘Contract Farming’ added to provide for compulsory registration of all contract farming sponsors, recording of contract farming agreements, resolution of disputes, if any, arising out of such agreement, exemption from levy of market fee on produce covered by contract farming agreements and to provide for indemnity to producers’ title/ possession over his land from any claim arising out of the agreement
  • .Provision made for direct sale of farm produce to contract farming sponsor from farmers’ field without the necessity of routing it through notified markets.
  • Provision made for imposition of single point levy of market fee on the sale of notified agricultural commodities in any market area and discretion provided to the State Government to fix graded levy of market fee on different types of sales.
  • Licensing of market functionaries is dispensed with and a time bound procedure for registration is laid down. Registration for market functionaries provided to operate in one or more than one market areas.
  • Commission agency in any transaction relating to notified agricultural produce involving an agriculturist is prohibited and there will be no deduction towards commission from the sale proceeds payable to agriculturist seller.
  • Provision made for the purchase of agricultural produce through private yards or directly from agriculturists in one or more than one market area.

Agriculture marketing and e-NAM

Union Budget 2014-15 and Union Budget 2015-16 had suggested the creation of a National Agricultural Market (NAM) as a priority issue. In July 2015, Union Cabinet unveiled its plan to go ahead with the project amidst the constitutional constrains as mentioned above.  

The National Agriculture Market is envisaged as a pan-India electronic trading portal which seeks to network the existing APMCs and other market yards to create a unified national market for agricultural commodities. NAM is a “virtual” market but it has a physical market (mandi) at the back end. NAM is proposed to be achieved through the setting up of a common e-platform to which initially 585 APMCs selected by the states will be linked. The Central Government will provide the software free of cost to the states and in addition a grant of up to Rs. 30 lakhs per mandi will be given as a onetime measure for related equipment and infrastructure requirements. In order to promote genuine price discovery, it is proposed to provide the private mandis also with access to the software but they would not have any monetary support from Government.