Food and Agricultural Marketing Sector

Dr. Anusree PaulSymbiosis School of Economics

Pune

National Competition Policy and Economic Growth of India

PAC Meeting - ComPEGCIRC, 7th February 2013

Structure of Presentation

• Background • Aim of the Study• Agricultural Marketing Chain• Institutional Framework• Legal and Regulatory Framework• Policy Framework• Competition Distortions in the Marketing Chain• Constraints Identified• Survey Objective • Sampling Note• Pilot Survey • Challenges and Issues to Ponder

Background

• Agriculture is one of the major driving forces of economic growth

• Market-mediated linkages of agricultural sector• In India, the agricultural sector is the most diverse sector

and supports majority of its population for livelihood.

Aim of the Study

To promote effective implementation of National Competition Policy by advocating for legislative changes identified in the select sector

Scope of the Study: Review of existing Laws/ Acts. Identification of the competition distortion issues Suggest new reforms to make the agricultural marketing

sector competitive.

Agricultural Marketing Chain

Source: Author’s Compilation

Institutional Framework

1. Institutions regulate market conduct, structure, performance (efficiency):

Regulation of primary agricultural produce markets Legal and regulatory provisions relating to storage,

transportation, packaging, processing, buying/selling, quality specifications, e.g. DMI, SAMBs, APMCs etc

Institutional Framework

2. Institutions provide and maintaining marketing infrastructure (physical and institutional): SAMBs, APMCs etc.

3. Institutions involved in administered prices, e.g. NAFED, FCI, CACP etc.

4. Institutions influence foreign trade: APEDA

Legal and Regulatory Framework

• Laws and Orders: Agricultural Produce Marketing (Grading & Marking) Act, 1937.

Amended in 1986. The Essential Commodities Act, 1955 National Cooperative Development Act,1962 Food Corporation of India Act, 1964 Prevention of Black Marketing & Maintenance of Supply of Essential

Commodities Act, 1980 The Bureau of Indian Standards Act, 1986 Agricultural Produce Marketing Committee (APMC) Model Act 2003 Forward Contracts (Regulation) Amendment Act, 2006 Act, 1952. The (Warehousing Development and Regulation) Act, 2007

Policy Framework

• National Agricultural Policy• Price Support Policy• Credit Policy• Trade Policy

Competition Distortions in the Marketing Chain

• Agricultural marketing: poorly organised, over regulated-leading to low price to producers, high marketing cost and large physical losses.

• Marketing monopoly – due to restrictive provisions of the APMC act

• Model APMC has failed to establish a competitive structure in the system

• Overtime the balance of power in transactions has moved back in favour of middlemen and the trading class.

• Traders, commission agents, and other functionaries organised themselves into associations, created entry deterrence for new players and hindered the competitive functioning of markets

Constraints Identified

• Undue emphasis on fee collection• Under-performance of regulated markets:

Grading Market Intelligence Method of sales Payments of sales proceed

Survey Objective

• To conduct an institutional and stakeholder analysis by studying the pattern supply chain of the product/sector understanding the political and social interest of the

stakeholders towards reform identifying the institutional (political, economic and social)

constraints that is hindering the institutional efficiency understanding the cost structure of the supply chain ( this

cost related information will help us to do the economic analysis)

Sampling Note

• Selected States• Representative Product*• Selection Criterion• Sampling Technique• Stakeholders*• Sample Size• Questionnaire

Pilot Survey

• Bethua market in Nadia district, West Bengal• Established in 2010• No APMC• Cold storage and arats/sheds are present but yet not have

started functioning. • No License required for buying/selling• No separate sorting grading facility though labourers are

available and traders pay these labourers

15

FARMERS

Aratdars/Auction Agents

PRODUCE

TRADERS

Retailers/Wholesalers in

the vicinity of the Regulated markets

Aratdars in other states / cities/

wholesale markets

Consumers in the vicinity of the

Regulated markets

RETAILERS

Consumers in other

states/cities

Rs.5/Kg

Rs.8-10/Kg

Rs.20-25/Kg

No clarity on how the first auction-price was determining

Aratdars lend money to the farmers

Traders have clear information about the price of similar product in Arats/wholesale market in other states

Challenges and Issues to Ponder

• Stakeholders are reluctant to share information• Time of visit to the market yard• Total time span of the survey and the study

Thank You