Pemasaran Hasil Tani Untuk Petani

The ROAD MAP : Linking Small Farmers to Markets
1
The Road Map

Linking small farmers to markets
Mukesh Pandey
Fulbright Fellow
Michigan State University,
East Lansing, Michigan, USA
mukeshpandey22@gmail.com
K Sudhir
Professor of Marketing
Yale School of Management,
New Haven, Connecticut, USA
k.sudhir@yale.edu
Deepali Tewari
Subject Matter Specialist (Horticulture)
Directorate of Extension Education,
GBPUAT, Pantnagar, India
deepalitewari@gmail.com
Navin Nainwal
Assistant Director and Head
Amity Institute of Horticulture Studies and Research
Amity University, India
ncnainwal@gmail.com
2
August 2010
Data Collection Team
1 . Gaurav Joshi, PhD (Agribusiness Management)

2 . Sunny Sindhu, MBA (Agribusiness)
3 . Pankaj Thakur, MBA (Agribusiness)
4 . Hemant Thakur, MBA (Agribusiness)
5 . Brijendra Pratap Singh, MBA (Agribusiness)
6 . Pankaj Joshi, MBA
7 . Vikas Pandey, BBA
3
About us
Gates Foundation Bill & Melinda Gates Foundation (www.gatesfoundation.org)

is the largest transparently operated, private foundation in
the world. It aims to enhance healthcare and reduce extreme
poverty globally and in America, to expand educational
opportunities and access to information technology. BMGF
is the funding organization behind ACDI-VOCA/ASI under
whose aegis this study was conducted.
ASI /ACDI-VOCA Agribusiness Systems International (ASI), the funding

organization for the study, is a U.S. nonprofit corporation,
organized and operated exclusively for the purpose of
supporting the work of ACDI-VOCA, its parent organization.
ACDI-VOCA (www.acdivoca.org), promotes broad-based
economic growth and development of civil society in
emerging democracies and developing countries. ACDI-VOCA
has worked since 1963 in 145 countries and its practice areas
are agribusiness, food security, enterprise development,
financial services and community development.
SEEDS A SEED (Socio Economic Entrepreneur Development Society),

the research and consulting organization for this study, is an
Uttarakhand; India based non-profit NGO dedicated to
guiding small farmers through agricultural extension, credit
advice, market linkages and entrepreneurial guidance.
4
Preface The aim of this research work is to come out

with a policy paper titled ‘The Road Map: Linking
small farmers to markets’ by analyzing fruit and
vegetable marketing in the states of Himachal
Pradesh and Uttar Pradesh.
The idea is to study the effect of APMC act

amendment on marginal and small farmers in
Himachal Pradesh vis-à-vis Uttar Pradesh where
APMC reforms are still pending. This research
study, as such, primarily focuses on three
important issues viz.:
A . Holistic impact of development process that

took place in horticulture industry of
Himachal Pradesh post APMC reforms and
learning thereof (both successes and
pitfalls). The idea is to learn whether
and how APMC reforms in Himachal Pradesh
helped in empowerment of the small and
marginal farmers there.
B . Potential impact of APMC amendment in Uttar

Pradesh as and when it happens.
C . Impact on small and marginal rural farmers

as the core target segment of this study.
While new opportunities are unfurling in
food retailing and processing, the key
challenge is how to successfully link the
marginal and small farmers with the
emerging markets.
5
Expression of This report would not have been possible but for the
gratitude intellectual and overall leadership that was provided at every
stage of the project by Mr. Alex Pavlovic, Managing Director
ASI India, Mr. Deo Datt Singh, Deputy Managing Director ASI
India and Mr. Vinay Tuli, Senior Value Chain Expert ASI India.
We sincerely thank the entire ASI team for organizing various
brainstorming meets, undertaking field visits, training of data
collection team and channelizing energies of the entire team
of researchers towards a common goal. We truly value the
effort and cooperation provided by them at every stage of
this project.
We offer our sincere gratitude to officials of National

Horticulture Board, Horticulture and Agriculture Marketing
Departments, APMC officials of Himachal and Uttar Pradesh,
farmers, consumers and logistics providers who actively
participated in our surveys, NGOS, farmer organizations,
corporate managers of various retail chains who talked to
us at length on challenges in marketing of horticulture
produce in India.
Mukesh Pandey
K Sudhir
Deepali Tewari
Navin Nainwal
6
INDEX
Preface
Expression of gratitude
Chapter 1 Can India Fly.................................................................................................................................................................................................. 13
1.1 India: A Dominant World Economy

1.2 India’s Demographic Advantage
1.3 India’s Agri Advantage
1.4 Rising GDP of India
1.5 Poverty Reduction in India
1.6 Food: The Largest Share of Indian Wallet
1.7 Organized Retail in India
1.8 Globalization of India Diets
1.9 Indian Agriculture and Small Farmers
1.10 Need for Second Green Revolution
1.11 Horticulture: A Possible Solution for Small Landholders
1.12 Regulatory Environment in India
1.13 Horticultural Supply Chain: The Biggest Bottleneck
1.14 Objectives of the Study
Chapter 2 Horticulture in Himachal Pradesh .................................................................................................. 31
2.1 Geography of Himachal Pradesh

2.2 Administrative units of Himachal Pradesh
2.3 Agro-climatic zones
2.4 Agriculture in Himachal Pradesh
2.5 Horticulture: The strength of Himachal Pradesh
2.6 Cold Chain Infrastructure for horticultural crops.
2.7 Horti-processing industry in Himachal Pradesh
2.8 Key Food Processing Players in Himachal Pradesh Cremica Foods
2.9 Role of Himachal State Government
2.10 Strategic Thrust Areas Identified by Himachal Pradesh
Chapter 3 Horticulture in Uttar Pradesh .......................................................................................................... 51
3.1 Geography of Uttar Pradesh

3.2 Administrative units of Uttar Pradesh
3.3 Agro-climatic zones
3.4 Agriculture scenario in Uttar Pradesh
3.5 Status of fruits and vegetables production in Uttar Pradesh
3.6 APMC F&V Mandis in Uttar Pradesh
3.7 SWOT Analysis of UP
3.8 National Horticulture Mission in UP
7
Chapter 4 F & V Consumption and Retailing ........................................................................................................ 72
4.1 Indian Food Consumption Behavior

4.2 Indian Retail Sector
4.3 Low Penetration of Modern F &V Trade in India
4.4 Criteria consumers consider while choosing a Fresh F&V store
4.5 Emerging Trends in Food Retail in India
4.6 Challenges to Fresh Produce Retailing in India
4.7 Conclusion
Chapter 5 F & V Supply Chain in India ...................................................................................................................... 86
5.1 Fresh Fruits: India versus the World

5.2 Traditional Fresh Produce Supply Chain in India
5.3 Huge Post Harvest Losses in Fresh Produce Value Chains
5.4 Regulatory Framework for Marketing of Farm Produce
5.5 Recent Status of APMC Reforms: Uttar Pradesh and Himachal Pradesh
Chapter 6 Value Chain Analysis ................................................................................................................................. 104
6.1 Research Methodology

6.2 Fresh Produce Value Chain of Himachal Pradesh
6.3 Fresh Produce Value Chain Analysis-Uttar Pradesh
6.4 Conclusion
Chapter 7 Horticulture Road Map of Uttar Pradesh ....................................................................................... 163
7.1 State of Uttar Pradesh: From a Regulator to a Facilitator

7.2 Increasing Role of Private Sector
7.3 Offering Options
7.4 Steps for inclusive growth
7.5 Step 1: Changes in Market Legislation
7.6 Step 2: Improving Supply Chain Environment
7.7 Step 3: Rationalizing Fiscal Structure
7.8 Step 4: Creating a Conducive Investment Climate
7.9 Step 5: Strengthening ICT Enabled Horticultural Information Network
7.10 Step 6: Upgrading Infrastructure & Extension Services
7.11 Step 8: Ensuring access to Credit
7.12 Human Resource Development
7.13 Recommended F & V Supply Chain for Small Farmers
References ........................................................................................................................................................................ 202
8
Tables
1.1 Global giants: Painting BRIC by numbers

1.2 Distribution of Operation Land Holdings in India (2000-01)
1.3 Decline in Land Holding Size in India
2.1 Horticultural crops grown in different Agro climatic zones of Himachal Pradesh
2.2 Himachal Pradesh : Distribution of Land Holdings (2000-01)
2.3 Land Utilization in Himachal Pradesh (1970-71 Vs 2000-2001)
2.4 Cultivated net area Irrigated from different source in Himachal Pradesh
during 2000-01 over 1970-71 (in hectares)
2.5 Proportion of ‘Area under Crops’ to ‘Cultivated area’ in Himachal Pradesh
during 2000-01 over 1970-71 (in percentage)
2.6 Vegetable Productivity of Himachal Pradesh versus India versus World’
Best (Year: 2000-2001, Unit: kg per hectare)
3.1 Size of Holdings in Uttar Pradesh ( in thousand hectares)

3.2 Land Utilization in Uttar Pradesh (2007-2008)
3.3 Area and Production Fruits and Vegetables in UP
3.4 Top Ten Vegetable Producing Districts in Uttar Pradesh (2008-09)
3.5 Leading vegetable producing districts of Uttar Pradesh .
3.6 F & V Markets in Uttar Pradesh
3.7 Agri-Export-Zones established for Export Promotion
5.1 Major Fruits Producing Countries in the World

5.2 Major Vegetable Producing Countries in the World
5.3 Production of Fresh Fruits in India
5.4 Production of Fresh Vegetables in India
5.5 Progress of Reforms in APMC Acts in India
6.1 Survey Locations
6.2 Descriptive Statistics-Himachal Pradesh
6.3 Cropping Pattern, Labour Requirement and Income level
of households surveyed in Himachal Pradesh
6.4 Descriptive Statistics-Uttar Pradesh
6.5 Characteristics of recent transactions of farmers and retailers
6.6 Descriptive Statistics-Wholesalers & Commission Agents-
9
Traditional vegetables (Uttar Pradesh)
6.7 Information Transmission on Quality
6.8 Information Transmission on Quantity
6.9 Service Delivery
The and
6.10 Choices in Outlets ROADin Commission
MAP : Linking (CA)
Agent Small Farmers to Markets
6.11 Search Cost

6.12 Credit and Insurance Services Provided by the CA
6.13 Advances for Agri-Input provided by the CA
6.14 Constraints faced by farmers of Uttar Pradesh in production of
fruits and vegetables
10
Figures
1.1 Population trend of various countries
1.2 Percent Population 20-60 years
1.3 India-Horticulture Production Trends
1.4 GDP forecast for India showing compound annual GDP growth
1.5 Share of population in each income bracket
1.6 Share of average household consumption in India
1.7 Dynamics of modern Indian food value chain
2.1 Map of Himachal Pradesh
2.2 Increase in vegetable production-Himachal Pradesh (1950-51 to 2009-10)
2.3 Production Share of Different Vegetables in Himachal Pradesh (2008-2009)
2.4 Fruit Production in Himachal Pradesh
3.1 Location of Uttar Pradesh
3.2 Map of Uttar Pradesh
3.3 Sectoral Contribution to UP’s GDP
3.4 Different crop growing areas of Uttar Pradesh
3.5 Production (in 000' tons) of Wheat and Paddy in Uttar Pradesh
3.6 Increase in Vegetable Production in Uttar Pradesh 1990-91 to 2008-09
3.7 Proportion of various major vegetables grown in Uttar Pradesh
4.1 Evolving food supply chains
4.2 Stages of building supply chain in India
4.3 Criteria those consumers consider while choosing a Fresh F&V store . 11
5.1 Lending Fruit Producing states of India (2008-09)
5.2 Lending vegetable producing

The ROAD MAP states
: ofLinking
India (2008-09)
Small Farmers to Markets
5.3 Indian fresh F & V supply chain
5.4 Agricultural Poduct Flow from Rural Producers to urban consumers in India
5.5 A closer view of APMC wholesale markets
6.1 Marketing channel for Fruits Traditional vegetables-Himachal Pradesh
6.2 Marketing channel for exotic vegetables
6.3 A Broccoli Filed in of Himachal Pradesh
6.4 A Himachal farmer holding Joichoi
6.5 Price Build up in Tomato and Exotic Vegetable Chain in Himachal Pradesh
6.6 Marketing channel for Traditional vegetables-Uttar Pradesh
6.7 Price Build up in Okra chain in Uttarakhand
7.1 Steps Recommended for inclusive horticultural growth
7.2 Contract Farming Model
7.3 Recommended F & V Supply Chain for Small Farmers
12
13
1.1 India: A Dominant World India, with its population of 1.15 billion (growing at about
Economy 1.7 % per annum), is predicted to become among the four
most dominant economies in the world by the year 2050
besides Brazil, Russia and China. (Neill, 2006)
14
1.2 India’s Demographic India is likely to see a much favorable demographic trend
Advantage in the next three decades than any of the other BRIC (Brazil,
Russia, India and China) nations. India is one of the
youngest countries in the world. In 2020, the average
Indian will be only 29 years old, compared with 37 in China
and the United States, 45 in Western Europe, and 48 in
Japan. This demographic trend means India will have a
large and growing labour force (in the age group of 20- 60
years), which is expected to deliver unexpected spin-offs
in terms of growth and prosperity.
Figure 1.1: Population trend of various countries
15
Figure 1.2: Percent Population 20-60 years
1.3 India’s Agri Advantage India has some intrinsic advantages. In India, 52% of total
land is cultivable as against 11% in the world. India is
blessed with over 20 agro-climatic regions where sunshine
hours and day length are ideally suited for round the year
cultivation of crops.
Figure 1.3: India-Horticulture Production Trends
16
India is world’s third largest producer of agricultural

commodities after China and USA. India accounts for about
8% of the world’s fruit and about 15% of the world’s
production of vegetables. In fact, India produces 41 percent
of the world’s mangoes, 30 percent of cauliflowers, 28
percent of tea, 23 percent of bananas, 24 percent of
cashew nuts, 36 percent of green peas and 10 percent of
onions. India also accounts for 28 percent of world’s pepper
production, 35 percent of ginger and about 90 percent of
turmeric production. India meets around 70 percent of the
world demand for spice oils. This strong base in agriculture
provides a large and varied raw material base for food
retailing/processing.
1.4 Rising GDP of India India is in a phase of rapid economic and demographic
transition. Per capita income has been rising steadily since
the 1980s. The following GDP forecast for India assumes
a 7.3 percent compound annual GDP growth.
Figure1.4: GDP forecast for India showing compound
annual GDP growth
17
1.5 Poverty Reduction in India As recently as 1985, more than 90 percent of Indians lived
on less than a dollar a day. Yet India is poised to undergo a
remarkable transformation. New research from the
McKinsey Global Institute (MGI) shows that within a
generation, the country will become a nation of upwardly
mobile middle-class households and in two decades India
will surpass Germany as the world’s fifth largest consumer
market. After reforms were initiated in early 1990s to open
up the Indian economy, poverty levels continue to decline
as does the incidence of malnutrition and stunting.
Figure 1.5: Share of population in each income bracket
18
1.6 Food: The Largest Share of In India, food products constitute the single largest
Indian Wallet component of private consumption expenditure,
accounting for as much as 42% of the total spending.
(McKinsey Global Institute India consumer Report, 2005)
Figure 1.6: Share of average household consumption

in India
19
1.7 Organized Retail in India In India, although organized food retail is a mere 2% of its
food retailing industry but its growing rapidly. With a
projected growth rate of 8.3 percent per annum, industry
experts expect it to appropriate a share of over 20 percent
of the total retailing by 2015.
The first reason for this growth projection is that

organized food retailing gives consumers a wider choice
of eatables, more convenience, a better shopping
environment and often lower prices. Second, changes in
consumption patterns are driving fast changes in
production baskets especially in case of large and
progressive farmers. Rising per capita income,
urbanization and globalization are changing the
consumption basket in the developing countries like India
towards high-value commodities like fruits & vegetables,
milk, meat, poultry, fish, etc. (Minten et.al.2009).
Indian agriculture on account of the varied climatic zones

has tremendous potential to sustain domestic population
and also earn revenue by exporting the surplus. Thus, both
for local consumption as well for export there is a year
round opportunity for cultivating fruits and vegetables. The
silver lining is that the industry is now aware of the
potential and opportunities. With a little support of
government by way of facilitating policy, India can become
a major player in the world food market.
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1.8 Globalization of India Diets As India is getting more integrated with the world economy,
transformation of food consumption patterns of Indian
households especially in urban areas is becoming
particularly evident. Indian consumers are increasingly
substituting traditional staples with food products that are
more prevalent in western diets. The influence of
globalization is clearly visible with increased consumption
of proteins, sugars, fats, fruits, vegetables and lifestyle
foods. This change in consumer tastes and demand has
critical implications for the entire Indian food supply
system (Pingali & Khwaja, 2004).
1.9 Indian Agriculture and Agriculture forms the backbone of the Indian economy as
Small Farmers it employs about two third of the total work force despite
the fact that share of agriculture in India’s GDP has
declined from 48.7% in 1950 to around 17% in 2010.
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India is a land of small farms, of peasants cultivating their

ancestral lands mainly by family labor and despite the spread
of tractors in the 1990s, by pairs of bullocks. About 82% of
the land holdings in India are less 2 ha.
Further, the size of operational holdings in India is

continuously declining with every successive generation.
The continuous decline in size of land holdings has raised
serious questions on the survivability of these small holders,
their ability to access food markets and benefit from the
opportunities presented by the growth revolution.
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1.10 Need for Second Green

0Need India got independence in 1947 and in over sixty
Revolution years post its independence has emerged from famine
ridden colonial times to a famine free Republic.
However, the Green Revolution which ushered this
great era of self-reliance has thrown up its own set
of problems. The use of HYVS (High Yielding Varieties
of Seeds), fertilizers and pesticides no doubt ushered
in the Green Revolution but prolonged use of chemicals
also depleted our soil fertility and poisoned our
environment. Also because this form of agriculture
is capital intensive, it is mostly the large farmers
who benefitted from it. The profits of the Green
Revolution have not spread evenly in society and the
poor have little means to buy. Worst of all yields
are beginning to fall. Turning agriculture into an
organized business with the farmer as the entrepreneur
should be the key to the second green revolution and
for the much desired evergreen revolution in India.
1 . 1 1 Horticulture: A Possible “We need a Second Green Revolution. By 2020, India
Solution for Small will require to produce over 340 million tones of
Landholders food grains to feed its growing population. An increase
in production would necessitate surmounting many
impending factors. Land requirement for afforestation
and environment preservation activities would force
a situation where the present 170 million hectares
arable land would not be fully available for
agriculture. It might shrink to 100 million hectares
by 2020. In addition there will be shortage of
water. The number of farmers available for agriculture
will reduce to less than 50 percent.”
—Former President A P J Abdul Kalam.
Questions have been raised by experts as to the
survivability of marginal and small farmers in India.
23
Horticulture, which is people-intensive, is being

put forward as an option for marginal farmers by
various government agencies and private sector
companies. Farm incomes rise by as much as 30-40 per
cent by growing fruits and vegetables as against
traditional crops of wheat and rice. This
diversification seems logically sustainable because
a shift is being seen in the food basket of Indian
consumers toward more varied and nutritious diet of
fruit, vegetables, milk, and meat (Ravi and Roy,
2008).
The small and marginal land holdings have higher

cropping intensity compared with that of the medium
and large farmers, mainly owing to higher irrigated
area as percentage of net sown area. An agro-
diversification into horticulture can lead to a second
Green Revolution and provide much needed impetus to
the growth of Indian agricultural sector, which has
been finding it difficult to manage the problems
involved with transition of agriculture from a supply-
driven value chain to demand-led market oriented
supply chain (Viswanadham, 2006). However,
diversification largely depends upon the opportunities
and responsiveness of farmers to technological
breakthrough, consumer demand, government policy,
trade arrangements and development of irrigation,
roads, and other infrastructure (Kumar and Mittal,
2003). Some of these issues get accentuated where
small and marginal farmers are concerned, as they
have limited investment capabilities and low cushions
against loss. Major constraints in production and
24
marketing in fresh fruits and vegetables in

India are non-availability of good quality of
seeds, inadequate irrigation, lack of soil
testing facility and extension staff,
inefficiency in pest management, lack of
availability of adequate and timely credit,
high cost of production, lack of market
information, huge post-harvest losses, lack
of roads, cold storage, inadequate space and
high transportation cost (Kumar et al 2004).
1.12 Regulatory
2Regulatory Environment in India’s current food-distribution system is a
India legacy of the 1940s and 50s, when chronic food
shortages led the government to crack down on
hoarding of produce by unscrupulous cartels.
The governments of the day introduced the
concept of Minimum Support Prices (MSP) which
assured the farmers a guaranteed price in case
they grew three crops viz. rice, wheat and
sugarcane. This in the long run acted as a
strong disincentive for crop diversification.
On the production side, if pricing of cereals
in India is left to the market forces, land
will be released from rice and wheat cultivation
to meet the growing demand for non-cereal crops
such as oilseeds, fruits and vegetables in
accordance with the diversification in
consumption pattern (Mittal, 2006).
25
1.12.1 APMC Act Marketing of agricultural products is a state

subject and is governed by respective state
APMC (Agricultural Products Marketing
Committee) Acts. The Indian APMC Act of 1960s
requires all agricultural products to be sold
only in government-regulated markets (mandis
pronounced as mundees ). This has resulted in
creation of marketing monopolies, detrimental
to the growth of agriculture and farmers. APMC
markets impose substantial taxes on buyers,
in addition to commissions and fees taken by
middlemen, but typically provide little service
in areas such as price discovery, grading or
inspection. Farmers also are unable to legally
enter into contracts with buyers which leaves
no incentives for farmers to upgrade, and
inhibits private and foreign investments in
the food processing sector (CII Meet, 2009).
The law, which aimed to give farmers a fair
and consistent price, and was initially done
with a good purpose over the years grew into
a monster, gaining layer upon layer of
intermediaries, none of whom added any value
to the fruits and vegetables they traded even
as they added on their own margins. The result:
a grossly inefficient system in which farmers
are divorced from market feedback and often
must wait months to be paid. Many farmers
routinely go into debt to the very traders
who buy their produce and then sell them seeds
and fertilizers for the next crop. Customers,
meantime, had little choice but to accept food
of uneven quality and unreliable supply.
26
Something that was designed to protect farmers

and consumers ended up hurting them.
The Ministry of Agriculture in India formulated
a model APMC Act in 2003, and advised states
to implement the act. This Model Act is quite
comprehensive and if adopted, will help in
improving the efficiency of the marketing system
and in encouraging private sector investment
in the field of agricultural marketing. Under
the new Act amendment, private players are
allowed to open and operate agriculture markets,
where farmers can sell their produce. There
is no compulsion on the farmers to bring their
produce to the market yard as they now have
the option of selling their produce directly
to private parties, food chains and retailers.
Contract farming has been allowed so that the
food processing and retail industry can get
desired quantity and quality of the produce,
without any need to route it through the
notified markets. The amendment is expected
to end the state monopolies and result in
competitive pricing for the farmers.
1.13 Horticultural
3Horticultural Supply The single most important problem facing the
Chain: The Biggest Indian agricultural industry is its highly
Bottleneck inefficient supply chain. The small and marginal
farmers, which constitute the bulk of Indian
farming, are engaged in diversified subsistence
farming and lack market intelligence, extension
services and access to credit and insurance
27
facilities. Generally, these small farmers are price–

takers and their contact with “markets” is often
limited to dealing with a produce collector or to
sales at the local/ village market and district
market. At present, the traditional Indian
agricultural value chain is typically crowded by
many players and the layers of intermediaries that
operate all along the chain result in weak farm-firm
linkages. These weak linkages and poor coordination
result in post-harvest losses, low value addition
and thus low incomes of the farmers. The producers’
share in wholesale price continues to be small (about
35 percent) with the major share going to market
intermediaries as marketing cost, because of
inefficient supply chains. Therefore, supply chain
management may be a powerful tool in linking farmers
to the markets for sustainable income generation
(Singh et al, 2009).
Well established practices like supply-demand

matching, collaborative forecasting, sharing of market
information and efficient transport scheduling are
yet to find their way in to the Indian food supply
chains. Major constraints in production and marketing
in fresh fruits and vegetables in India are non-
availability of good quality of seeds, inadequate
irrigation, lack of soil testing facility and
extension staff, inefficiency in pest management,
credit availability constraint, high cost of
production, lack of information, huge post-harvest
losses, lack of roads and cold chain infrastructure,
28
poor market intelligence, high transportation cost

etc. (Kumar et.al. 2004). Some of these issues get
accentuated where small and marginal farmers are
concerned, as they have limited investment capabilities
and low cushions against loss. The recent developments
in the processing and retailing sectors have resulted
in new marketing and trading opportunities, but the
challenge lies in linking farmers with these emerging
markets in order to make the process inclusive,
competitive, sustainable, and scalable.
Fruit and vegetables are perishable in nature and

lack of coordinated supply chains result in significant
post harvest losses and low net returns to the farmers
as well as the firms. Horticultural commodities are
vulnerable to both production and price risks, and
the lack of risk-mitigating measures such as crop
insurance or assured markets compound these risks.
The lack of assured prices for horticultural crops,
in contrast to support prices for paddy and wheat,
serves as a deterrent for farmers to shift from
traditional grain crops to the high value segment.
Although India is among the world’s largest producers

of fruits and vegetables, it is also among the most
inefficient. An estimated 25-40 per cent of farm
produce worth $12 billion (Rs 50,400 crores) rots
every year even before it reaches consumers, thereby
squeezing both ends of the chain-namely, the farmer
and the retail consumer (Dagar, 2007). Fruits and
vegetable processing in India is a mere 1.7% of
production as compared to 60-70% in USA (Blatt, 2008).
29
The major concern is that the front-end of the

Indian agri-food system is changing differently than
the back-end. While the retailers, processors,
logistic suppliers and others are seemingly scaling
up very fast, the back-end is consistently fragmenting.
It seems there is a movement towards a “consolidating
top” and “fragmenting bottom” with farmers suffering
the most.
Figure: 1.7 Dynamics of modern Indian food value chain
There is also a fear that small farmers might be

excluded from these emerging markets or that if
modern retailers buy direct from farmers, they will
exercise monopsony power and pay low prices
(Gopalakrishnan and Sreenivasa, 2009).
30
31
2.1 Geography of Himachal Himachal Pradesh (meaning region of snowy mountains)

Pradesh lies in the lap of Himalayas between 31 o22’40" and
33o12’40" N latitudes and at 75o45’ 55" and 79o04’20" E
longitudes.
The State is surrounded by Jammu & Kashmir on North,

Punjab on West and South-West, Haryana on South, Uttar
Pradesh on South-East and China on the East. The altitude
across the state varies from North to South from 350 m to
6975 m above mean sea level.
Figure 2.1: Map of Himachal Pradesh
32
2.2 Administrative units of The capital of Himachal Pradesh is Shimla. Himachal

Himachal Pradesh Pradesh is divided into 12 districts namely:
1. Kangra, 2. Hamirpur, 3. Mandi, 4. Bilaspur, 5. Una,
6. Chamba, 7. Lahul and Spiti, 8. Sirmaur, 9. Kinnaur,
10. Kullu, 11. Solan and 12. Shimla.
Each district is divided into sub-divisions which are
further sub-divided into blocks. Blocks in turn consist of
Panchayats (village councils) and town municipalities.
2.3 Agro-climatic zones There is great variation in the climatic conditions of
Himachal Pradesh due to extreme variation in elevation.
Its climate varies from hot and sub-humid tropical in the
southern tracts to cold, alpine and glacial in the northern
and eastern mountain ranges with more elevation. The
state of Himachal Pradesh is divided into four Agro-
Climatic Zones (ACZ) as under:
a. ACZ 1-Shivalik Hill Zone (Sub-tropical, Sub-

mountain and Low hills): This zone consists of foothills
and valley area. It lies from 350 to 650 meters above sea
level. It occupies about 35% of the geographical area and
about 40% of the cultivated area of the State. The major
crops grown in this zone are wheat, maize, paddy, black
gram, sugarcane, mustard, potato, vegetables, pulses and
barley. This zone includes the districts of Solan, Bilaspur,
Una, Hamirpur and Kangra.
b. ACZ 2-Mid Hill Zone (Sub humid mid hills): This

zone extends from 651 meters to 1800 meters above sea
level and has a mild temperate climate. It occupies about
32% of the total geographical area and about 37% of the
cultivated area of the State. The major crops are wheat,
33
maize, barley, black gram, beans, paddy, pulses and forages.

This zone has very good potential for the cultivation of
cash crops like off-season vegetables, ginger and
production of quality seeds of temperate vegetables like
cauliflower and root crops. This zone includes the districts
of Sirmaur and Mandi.
c. ACZ 3-High Hill Zone (Wet Temperate High hills):

It lies from 1801 to 2200 meters above sea level and has a
humid temperate climate. It occupies about 25% of the
total geographical area and about 21% of the cultivated
area of the State. The commonly grown crops are wheat,
barley, lesser millets, pseudo-cereals (buckwheat and
amaranthus), maize, rice and potato etc. This area is
ideally suited for the production of quality seed potato
and temperate vegetables. This zone possesses good alpine
pastures and meadows. This zone includes the districts of
Kullu and Shimla.
d. ACZ 4-Cold Dry Zone (Dry Temperate High Hills):

It comprises of Lahaul-Spiti and Kinnaur districts and
Pangi tehsil of Chamba district lying above 2200 meters
above sea level. It occupies about 8% of the geographical
and 2% of the total cultivated area of the State. The major
crops grown are wheat, barley, rajmash, pseudo cereals
like buckwheat and amaranthus. It is ideally suited to the
production of quality seed potato, temperate and
European type of vegetables and their seeds, seed potato
and pea’s seed.
34
2.4 Agriculture in Himachal Agriculture contributes nearly 45% to the net domestic
Pradesh product of Himachal Pradesh. It is the main source of
income as well as employment in Himachal. Over 93% of
the population in Himachal depends directly upon
agriculture. It also provides direct employment to 71% of
its people. (Government of Himachal Pradesh, 2001).
35
2.4.1 Farm Size Himachal Pradesh is a state of small land holders (Pathania
and Vashisht, 2001). According to Agriculture Census of
1970-71, the average size of operational holdings per
family in Himachal was 1.50 hectare which decreased to
1.1 hectare in 2000-01. The majority of the farmers are
small and marginal cultivators. As per 2000-01, Agriculture
Census, marginal and small farmers constitute 86.4% of
total land holdings which corresponds to about 50.8% of
the operational area in Himachal Pradesh.
2.4.2 Land Utilization: Most of the fields in Himachal Pradesh have been carved
out on sloping hill sides exposing them to large-scale erosion
of the fertile top soil. Undulating topography and climatic
factors also limit availability of land for agricultural
purposes. The increase in net area sown and gross cropped
area have been only 1.51 and 3.93 percent respectively
36
between 1971 and 2001 indicating that although some new

area has been brought under plough and lands have been
cultivated more rigorously but this is still not sufficient
keeping in view the population increase.
The cultivated waste land has declined by about 26 percent

but instead of being brought under agriculture, it appears,
this land has degenerated to be grass land. This is negative
trend as far as sustainability of agriculture is concerned
and indicates irrationality of land use in the state.
37
2.4.3 Irrigation Himachal Pradesh had 89,237 hectares of area under

irrigation during 1970-71 which increased to 1,25,606
hectares during 2000-01.
Other sources like kuhls and lift irrigation system are

major source of flow irrigation and about 1,07,420
hectares of the total irrigated area was irrigated through
such sources during 2000-01. The increased availability
of irrigation is adding to agricultural sustainability in the
state.
2.4.4 Cropping Pattern of The main crops grown in the state are: wheat, maize, rice,
Himachal Pradesh pulses, vegetables, fruits and potatoes. Wheat is the highest
ranking rabi crop of Himachal Pradesh. Maize is mostly
grown under rain fed conditions in the state. Paddy is
another important crop in the Kharif season, though labour
intensive but it still grown on irrigated lands.
38
2.5 Horticulture : The strength The unique topography of Himachal Pradesh offers an
of Himachal Pradesh excellent opportunity to produce all kinds of fruits and
vegetables ranging from temperate to sub tropical species.
The difference in Himachal’s climate vis-à-vis its
neighboring states makes it possible to grow vegetables and
fruits that mature early or late in season i.e. off season
vegetable supply. Since, growers fetch better prices for
their off season vegetable produce in neighboring states,
majority of the farmers of Himachal Pradesh have started
shifting from traditional farming to the cultivation of cash
crops which are more profitable than traditional food grain
crops. In fact, vegetable production in Himachal Pradesh
increased from 25 thousand tones during 1951-1952 to
1120 thousand tones during 2009-2010 (Figure 2.2).
39
Various new pockets in Himachal Pradesh have emerged

as vegetable cultivation zones particularly off season and
exotic vegetable cultivation which is improving the
economic conditions of farmers of Himachal Pradesh.
Fig 2.2: Increase in vegetable production-

Himachal Pradesh (1950-51 to 2009-10)
1200
1120
1000
800
Vegetable
Vegetable
Production 600
Production
(000
('000MTs)
MTs)
400
200
25
0
1951-52 2009-10
Source: Department of Agriculture, Himachal Pradesh
The most important vegetables grown in Himachal Pradesh

are tomato, green pea, cabbage and cauliflower. Other
crops like beans, onion, garlic, radish, turnip and carrot,
okra and capsicum are also grown in sizeable quantities.
Figure 2.3 shows production share of different vegetables
in Himachal Pradesh during 2008-09.
40
Figure 2.3: Production Share of Different Vegetables

in Himachal Pradesh (2008-2009)
Source: Department of Agriculture, Himachal Pradesh
Productivity of vegetables cultivated in Himachal Pradesh

is much higher than average productivity of India (Table
2.6) and with requisite support from both public and
private sector, it can now look forward to emulate the
world’s best.
There is a huge craze for off-season vegetable farming in

Himachal Pradesh. Shimla (Theog and Matiyana areas),
Solan, Sirmour, Kullu, Una and Kangra are the main districts
41
that grow off- season vegetables. Thousands of Himachali

farmers grow peas, cabbage, cauliflower and tomato in
May, June and July when production of vegetable crops in
rest of India is very low. Off-season vegetable production,
which was nearly 34-35 thousand MTs a decade earlier,
has now increased to 10 lakhs MTs as per estimates of
industry persons (Industry reports, 2009).
Besides off-season vegetables cultivation, non-traditional

export oriented exotic vegetables such as asparagus, bell
pepper, baby corn; brussels sprouts, broccoli, red cabbage
etc are also getting considerable attention in Himachal
Pradesh. The seed production of temperate vegetables is
another attractive option availed by the growers. A sizable
number of farmers in certain pockets of Solan and Shimla
also produce cut flowers of rose, carnation, orchids,
chrysanthemum, gerbera, hybrid lilies and other annuals.
The area under fruits increased from 163330 hectares
(1990-91) to 204629 hectares (2008-09). During the same
period production of different fruits grown in Himachal
Pradesh increased from 386314 MTs to 628076 MTs.
Fig 2.4: Fruit Production in Himachal Pradesh
* Above figures are in MTs.

Source: Directorate of Horticulture, Himachal Pradesh
42
2.6 Cold Chain Infrastructure for Considering the importance of perishable horticultural
horticultural crops. crops in its economy, Himachal Government has established
six cold storages with in the state (at Gumma, Rohroo, Oddi
and Jarol in Shimla district; Patlikuhal in the Kullu district
and Parwanoo in the Solan district) with an aggregate
storage capacity of 8,000 MT. Besides, three cold storages
have also been established in the terminal markets of Delhi
Mumbai and Chennai with an aggregate storage capacity
of 8250 MT. Private players like Adani AgriFresh and
Devbhumi Cold Chain Private Ltd. have also put up CA
(Controlled Atmosphere) integrated projects with a
cumulative capacity of around 30,000 MT for grading,
packing and CA storage in Himachal Pradesh (Adanis at
Rohru, Kumarsain, Sainj and Devbhumi at Theog) during
last five years.
2.7 Horti-processing industry in Almost 70-80% of total horticultural produce of Himachal

Himachal Pradesh Pradesh is marketable surplus which is either sold to
neighboring states, other countries or can be processed.
There are about 80 fruit processing units established all
over Himachal Pradesh with processing capacity of about
80,000 MT of fruits and vegetables annually. The State
Government has also plans for the diversification of the
fruit processing industry for the manufacture of value
added products like fruit wines and ciders and there is a
proposal to set up two projects for the manufacture of fruit
based wines. There is also a great possibility for the
establishment of the fruit dehydration industry for the
manufacture of products like apple and pear rings, fruit
toffees, dried mango products etc. Some of the processing
industries existing in Himachal Pradesh are given below:
43
2.7.1 Potato The potato based processing infrastructure is presently

nonexistent. Himachal produces about 160 thousand MT
of potatoes which are mostly utilized as seed potato and
table vegetable. About 30,000 MT of quality potato suitable
for chips production is produced in the Kangra valley of
the state and can provide raw material to the potato chip
making industry. M/s Regal Snacks Pvt. Ltd has proposed
to set up a unit for the manufacture of potato chips in
district Una with estimated investment of Rs. 1764.55 lacs.
2.7.2 Maize The total annual maize production of Himachal ranges

from 650 to 700 thousand MT out of which about 200
thousand MT is available as marketable surplus. There is a
great scope to increase the maize production by use of
hybrid varieties and the marketable surplus can be
increased to 350-400 thousand MT. In addition, the
farmers of the State have also taken up the cultivation of
baby corn in many areas. As such maize is one of the
important locally available raw materials, which can
support a viable maize processing industry. M/s Sukhjit
Starch & Chemicals Ltd. is in the process of setting up a unit
for the manufacture of maize starch, liquid glucose,
dextrose, monohydrate, dextrin, malt dextrin powder, maize
gluten (poultry feed), maize oil, maize oil cake(cattle feed)
with an estimated investment of Rs. 2600 lakhs in district
Una for the processing 150 MTs of maize per day.
2.7.3 Ginger The present production ginger in the State is 16,000 MT
out of which about 10,000 MT is available as marketable
surplus. The ginger produce of the state can be converted
into value added products like ginger powder, ginger candy,
dry ginger, ginger chutney, ginger appetizer etc.
44
2.7.4 H o p s Himachal Pradesh also produces small quantity of hops,

which are used in the brewing industry. The production,
however, is likely to register considerable increase in the
coming years. Modern processing facilities are needed for
the manufacture of hop extracts and hop oils which are
now in use by the brewing industry instead of the dry hop
flowers. One unit at Baddi in Solan is already processing
hops for the manufacture of hop pallets and hop oil.
2.8 Key Food Processing Cremica Foods: It is setting up an automated plant having
Players in Himachal Pradesh a monthly manufacturing capacity of 5,000 tonnes at
Tahliwal Industrial Area, Una, for manufacturing biscuits
and Indian snack foods.
Adani Agrifresh Limited: AAL ( of the US $ 6 billion

Adani Group) is also in the fresh fruit and vegetables
industry and has set up three controlled atmosphere
storage units in Himachal with an investment of US $ 33
million and capacity of 6,000 metric tonnes each. It is
presently involved in procurement, storage and
transportation of apples, apricots and vegetables.
Dharampal Satyapal Group: DS Group, a diversified

conglomerate having its presence in chewing tobacco,
spices, beverages and hospitality has set up two plants in
Himachal Pradesh. It also produces Catch brand of mineral
water and Pass Pass mouth freshener at its Kullu facility.
Reliance Retail: It has created a supply chain for

procurement of apples, peaches, apricots, vegetables in
Himachal.
45
Other agribusiness organizations presently operating in

Himachal Pradesh are:
a. Mahindra Shubh Labh
b. FieldFresh Foods
c. Devbhumi
d. Shimla Hills Offerings Pvt. Ltd
e. Inka Foods Pvt.Ltd.
f. Himalya International Ltd.
g. Shivambu International Ltd
h. Shri Ram International
i. Aromatrix Flora Pvt. Ltd
j. Himalyan Vegetable Fruit Ltd
k. Minocha Industries
l. Green Valley Foods
m. Green Valley Cider Pvt. Ltd
n. Himland Agro Foods Ltd
o. Himgiri Food Products
p. Noble Agro Foods Ltd.
q. Nector Pulps and Juices Pvt. Ltd
r. Shakti Implex
s. A.B Agro Foods
2.9 Role of Himachal State The State Department of Horticulture is carrying out
Government various activities to aggressively promote horticulture in
Himachal Pradesh. It has formulated and implemented
special schemes for production and post harvest
management of fruit crops, vegetable crops, commercial
floriculture, hops, herbs, medicinal and aromatic plants.
The Department of Horticulture, Himachal Pradesh assists
various categories of farmers in taking up horticulture
under its different subsidy programs, as follows:
46
(a) Subsidy on horticulture production inputs @ 25% to

small farmers, 33.3% to the marginal farmers and 50%
to the scheduled caste, tribe and backward area
farmers.
(b) Subsidy on pesticides @ 50% to the small farmers and
30% to the big farmers.
(c) Subsidy on various kinds of packaging material like
• Corrugated fiberboard cartons for the packing of the
fruits.
• For the purchase of the plastic crates, 50% subsidy is
provided.
• Subsidy on the transportation of the wooden packing
cases ranging between Rs. 0.50 to Re. 1.00 per box is
provided for the import of such material from the
adjoining States for the packing of fruits depending
upon the distance.
• The transportation subsidy of wooden logs for
packing boxes for orchardists owning land less than
10 bighas, is Rs. 500/- to Rs. 1000/- per truck,
depending upon distance.
(d) Other incentives provided by state of Himachal
Pradesh to boost horticulture include:
• Exemption from the payment of VAT and other levies
for a period of 10 years for new units and existing
units on their substantial expansion setup/being set
up in eight Tribal Development Blocks, 15 other
backward Blocks and all the backward panchayats
of the State (Tax Free Zone “C” category area) .
• Deferment from payment of VAT or rebate of 35% on
payment of VAT for a period of 5 years in category A
blocks (industrially potential border areas of Solan and
47
Sirmour districts) and for 8 years in category B blocks

(other intermediate areas).
• 5% subsidy on rate of interest for a period of 3 years
subject to a ceiling of Rs. 2 lakhs per annum.
• Subsidy towards preparation of feasibility report.
• Pandit Deen Dayal Kisan Bagwan Samridhi Yojna:
Under this project launched by Department of
Agriculture on polyhouse cultivation of vegetables and
other crops, 80 per cent subsidy is given on the
construction of polyhouse. Presently more than 650
hectares of area is under polyhouse cultivation in
Himachal Pradesh.
(e) Horticulture Technology Mission working with State
Department of Horticulture, Himachal
Pradesh provides assistance to small and marginal
farmers under “Horticulture Technology Mission Mini
Mission –II” to promote horticultural growth in the
state. Areas in which such assistance is provided are:
• Expanding area under horticultural crops.
• Creating water sources for ensuring irrigation to
horticultural crops.
• Promoting innovations on farm water.
• Establishing on-farm handling unit for grading, sorting
and storing produce at the farm level itself.
• Production of planting material.
• Transfer of technology through training, front line
demonstrations and publicity.
• Promoting organic farming and use of bio-fertilizers.
• Promoting modern horticultural equipments.
• Promoting Integrated Pest Management
48
2.10 Strategic Thrust Areas a. The cultivation of exotic varieties of fruits has vast
Identified by Himachal potential in Himachal Pradesh. In the mid-hills of
Pradesh Himachal, due to global warming, there is decline in
chilling hours and subsequently, apple crop is suffering.
The farmers of this area have an option to switch over
to farming of peach, pear and plums instead of apples.
For this purpose, the state government is regularly
importing those new fruit varieties (germplasms) from
Switzerland, Holland, US and China which can be
adapted to the agro climatic zones of Himachal.
b. Cultivation of medicinal and aromatic plants is another
area of significance. More than 1,000 species that have
great demand in pharmaceutical industry have already
been identified in the state. Out of these, 300 species
have been documented and package of practices has
been developed for 35 species. The farmers have taken
initiative in cultivation of these medicinal and aromatic
plants on commercial scale. Constant efforts are being
made by the Government of Himachal Pradesh to
standardize systematic exploitation and domestication
of the herbal wealth of the state on a sustainable basis.
c. The Department of Horticulture in Himachal Pradesh
fully realizes that its average productivity and quality
of horticultural crops and fruits, in particular, need
improvement. Physical appearance of horticultural
crops like shape, size, colour, and other parameters like
Total Soluble Solids (TSS) and aroma are very important.
Horticultural crops need very specific climatic
conditions if one has to obtain high quality yield. These
characteristics are governed by a particular set of
climatic conditions. The state is working on identifying
49
those niche production areas which can be harnessed

to its full horticultural potential. Each physiographic and
agro-climatic zone is further divided into micro
situations, more befitting crop zones within the already
classified zones. Plans are now being worked out to
diversify the horticultural crops i.e. fruits, vegetables and
flowers and their varieties, in each zone of Himachal
Pradesh.
d. The state is creating mechanisms whereby it can tap its
huge potential of export of fruits like apple, kiwi, walnut,
hazelnut and litchi; various exotic vegetables, cut
flowers, their seeds and propagules etc.
e. Keeping in view the strengths and weaknesses of the
horticulture farming in Himachal Pradesh, prevailing
situation of global competitiveness, the research agenda
of the state has been re-oriented. Horticulture based
diversification, development of elite planting material,
high density planting, water management including
micro-irrigation and fertigation, green house cultivation
of vegetables and flowers as well as integrated nutrient
and pest management are high priority areas for
horticultural research in Himachal Pradesh.
The major strategies adopted by Himachal Pradesh to

minimize its post harvest losses include pre- and post-
harvest practices, development of varieties with longer
shelf life, value addition and processing. Infrastructure
development including the establishment of cold chain,
market led technology transfer modules, mobile pre-cooling
and cold storage facilities in the vicinity of production sites
is also in the priority agenda of the state.
50
51
3.1 Geography of Uttar Pradesh The state of Uttar Pradesh (UP) is located in the northern
part of India, between latitude 24 0 to 31 0 and longitude
77 0 to 84 0 East and has an area of 242.02 lakh hectares. It
is the most populous (over 16 per cent of the country’s
population) although in terms of area it is the fourth largest
state of India. In sheer magnitude it is half of the area of
France, three times of Portugal, four times of Ireland, seven
times of Switzerland, ten times of Belgium and a little bigger
than England. (NIC, Government of UP)
Figure 3.1 Location of Uttar Pradesh
Uttar Pradesh
UP shares an international border with Nepal to the north

along with the Indian state of Uttarakhand, Himachal
Pradesh to the north-west, Haryana, Delhi and Rajasthan
52
on the west, Madhya Pradesh on the south,

Chhattisgarh and Jharkhand on the south east and Bihar on
the east.
Figure 3.2 Map of Uttar Pradesh
UP has high population density with regional variations.

As against the state average of 690 persons per sq.km, the
population density in 2001 was as low as 280 in Bundelkhand
but as high as 776 in the Eastern U.P. (Census report of
India). Uttar Pradesh covers a large part of the highly fertile
and densely populated upper Gangetic plain. The state, with
its rich alluvial soils, adequate water resources and
immense manpower resources, has a very considerable
potential of economic development.
53
3.2 Administrative Units of Uttar Pradesh is grouped into eighteen divisions (as
Uttar Pradesh follows) which are further subdivided into seventy one
districts:
1. Agra Division
2. Aligarh Division
3. Allahabad Division
4. Azamgarh Division
5. Bareilly Division,
6. Basti Division,
7. Chitrakoot Division,
8. Devipatan Division,
9. Faizabad Division,
10. Gorakhpur Division,
11. Jhansi Division,
12. Kanpur Division,
13. Lucknow Division,
14. Meerut Division,
15. Mirzapur Division,
16. Moradabad Division,
17. Saharanpur Division
18. Varanasi Division.
The largest district of UP in terms of area is Lakhimpur

Kheri. However, the largest district of UP in terms of
population is Allahabad, followed by Kanpur Nagar (Census
2001). The administrative and legislative capital of Uttar
Pradesh is Lucknow. Various big sized and populous cities
of Uttar Pradesh besides Lucknow are Kanpur, Allahabad,
Varanasi, Agra, Gorakhpur, Meerut, Aligarh, Bareilly,
Ghaziabad and Noida.
54
3.3 Agro-climatic Zones Based on agro-climatic conditions, UP is divided into 9

zones as follows:
Tarai Region: Some part of the district Saharanpur,

Muzaffarnagar, Bijnaur, Moradabad, Rampur, Bareilly,
Pilibhit, Shahjahanpur, Lakhimpur, Bahraich and Shravasti
come under this zone. The soil in this zone is mostly alluvial
and clayey alluvial and contains sufficient quantity of
carbonic materials. The average annual rainfall in this zone
is 1150 mm.
Western Plan Region: District Bijnaur, Moradabad, Jyoti-

ba-phule Nagar, Rampur, Bareilly, Badaun and Pilibhit come
under this zone. This is very fertile region and the soil is
mostly sandy & clayey. The average annual rainfall in this
zone is 700-1000 mm.
Central Western Region/Zone: District Saharanpur,

Muzaffarnagar, Meerut, Bagpat, Ghaziabad, Gautambudh
Nagar and Bulandshahar come under this zone. The soils in
this region are clayey- alluvial, alluvial, sandy alluvial and
sandy types. The average annual rainfall in this zone is
600-965 mm.
South-Western Region/Zone: District Agra, Firozabad,

Mainpuri, Etah, Aligarh, Mahamaya Nagar and Mathura
come under this zone. The soil is mostly sandy, sandy-
alluvial, alluvial and clayey alluvial. Some areas also have
saline & sodic soils. The average annual rainfall in this zone
is 750 mm.
55
Central Plain Region/Zone: Lucknow, Unnao,

Raebareilly, Sitapur, Hardoi, Kheeri, Kanpur-Nagar, Kanpur-
Dehat, Etawah, Kannauj, Farrukhabad, Auraiya, Allahabad,
Kaushambi, Fatehpur and Shahjahanpur are in this zone.
Saline & sodic soil covers major area of this zone. Alluvial-
sandy, alluvial clayey, alluvium, & fine clayey soil is
abundant here. The average annual rainfall is 850-900 mm.
Bundelkhand Region: Jhansi, Lalitpur, Jaluan, Hamirpur,

Mohaba, Chitrakoot and Banda fall in this zone. The soil is
mostly rocky. The average annual rainfall is 800-1000 mm.
North Eastern Plain Region: Gonda, Bahraich,

Balrampur, Shravasti, Gorakhpur, Mahrajganj, Kushinagar,
Siddharthnagar, Basti, Sant Kabir Nagar and Deoria come
in this zone. Major soil types are sand-alluvial, clayey
alluvial & diara. The average annual rainfall is 1000-1200
mm.
Eastern Plain Region: District Barabanki, Faizabad,

Ambedkarnagar, Sultanpur, Pratapgarh, Jaunpur,
Azamgarh, Mau, Ballia, Sant Ravidas Nagar, Ghazipur,
Varanasi and Chandauli come under this zone. Major soil
types are sandy alluvial, clayey & sodic. The average annual
rainfall of this region is 1000-1200 mm.
Vindhya Region: District Muzaffarnagar, Sonbhadra and

Allahabad come under this zone. The maximum portion in
this region is undulated and rocky. The soil is light black
clay and red alluvial. Average annual rainfall of this zone is
1100 mm.
56
3.4 Agriculture Scenario in The economy of Uttar Pradesh is predominantly agrarian

Uttar Pradesh and performance of agriculture and allied activities such
as horticulture, animal husbandry, dairying and fisheries
are critical in determining the growth rate of the State.
Agriculture involves about 72 per cent of the total work
force in Uttar Pradesh .The share of agriculture in the total
income of the state is 32 per cent (Figure 3.3).
Figure 3.3: Sectoral Contribution to UP’s GDP
Industry Service
26% 42%
Agriculture
32%
Source: Government of Uttar Pradesh, 2003-04.
The state has total area of 242.02 lakh hectares out of which
164.17 lakh hectares is cultivated. About half of the total
land area suffers from degradation problems. A lot of soil
conservation and other land improvement measures have
been taken to restore the fertility of the land. Till 2009, over
58 lakh hectares of land has been treated (Dhar and Gupta,
2009). Figure 3.4 shows important crops grown in various
divisions of Uttar Pradesh.
57
Figure 3.4: Different crop growing areas of Uttar

Pradesh
Source: Department of Agriculture, Uttar Pradesh
3.4.1 Farm Size Uttar Pradesh is predominantly a land of poor peasants

surviving on small and uneconomical size of landholdings.
The average size of holdings is continually declining in
Uttar Pradesh. As per 2001 Agriculture Census on Uttar
Pradesh, 75.4% of the farmers are marginal and 15.6% of
the farmers are small farmers. The average size of 90% of
these small and marginal farmers in Uttar Pradesh is about
0.55 hectares (Department of Planning, Government of
Uttar Pradesh, 2005). These small and marginal farmers
who represent a major chunk of the population, need
diversified cropping pattern involving allied sectors of
agriculture like horticulture to compete in the present era
58
of globalization. Details of size of holdings in Uttar Pradesh

are given in Table 3.1 below.
3.4.2 Land Utilization in Uttar Data shown in Table 3.2 give brief information about land
Pradesh use pattern in Uttar Pradesh during 2007-08. The cropping
intensity of the state is around 155 which is a serious issue
and needs drastic improvement. Approximately 16 plus lakh
hectare of land is covered with forest whereas 5 lakh
hectares is infertile and uncultivable. Utilization of such
lands is a big challenge for state.
59
3.4.3 Irrigation Uttar Pradesh has the highest irrigation intensity at 66 per
cent (www.ibef.org) but there are wide regional
imbalances in irrigation availability. In 2004-05, the
comparative percentage figures were 91.40% for Western
UP, 81.60% for Central UP, 73.50% for Eastern UP and as
low as 50.10% for Bundelkhand. The districts of Hamirpur,
Banda, Chitrakoot and Balrampur had less than 40% of the
60
net area sown as irrigated. The proportion of net irrigated

area to net cropped area in UP has increased from 36.12%
in 1966-67 to 76.30% in 2001-02. Majority of irrigation in
UP is provided by private sources. Canals, which are wholly
state funded, provide irrigation facilities to only 27.19 lakh
hectares, which is about 21 % of net irrigated area. Around
28123 state tube wells merely account for 8% of net
irrigated area. The net area irrigated by private sources
such as private tube wells/ pump sets constitute nearly
87.09 lakh hectares, which is 68% of net irrigated area of
UP. There are 35 lakh private tubewells/pump sets in Uttar
Pradesh of which about 28 lakh are diesel operated and 7
lakh are electricity operated. There has also been steady
decline in water table due to over exploitation of ground
water and insufficient recharge from rainwater. Declining
trend of groundwater has been observed in 559 of 819
blocks in the State. Between 1987 and the year 2000,
percentage groundwater used for irrigation has gone up
from 30 to 57.31% for the State as a whole (Kumar, S.2005).
3.4.5 Crop Production: Present Uttar Pradesh is the largest producer of wheat, pulses,
Status sugarcane, tobacco, potato and milk in the country. It
produces 35 % of India’s wheat, 20% of paddy, 48% of
sugarcane, 38% of potato and 18% of milk. UP is also called
the “sugar bowl” of India. It also has the highest yield in
the country of pulses and tobacco. Despite such remarkable
production figures, 40.3% households in Uttar Pradesh are
in debt (NSSO data reported by Kumar, S. 2005). On one
hand, there is continuous rise in cost of inputs like seed,
fertilizers and pesticides whereas on the other hand
farmers even today sell wheat, corn and sugar at prices
that are in reality half of those twenty years ago. Returns
61
on investment are reducing further. Though retail food

prices are significantly higher than ever before, over the
past two decades, the prices of nearly all the major
agricultural commodities declined in real terms, i.e.
inflation adjusted or relative to movement in prices overall.
Various researches reveal that in case of paddy and maize,
the Minimum Support Price (MSP) is less than the cost of
production and in case of wheat; the MSP barely helps
farmers recover their cost of production. Since paddy and
wheat are the predominant kharif and rabi crops in Uttar
Pradesh, this situation is really alarming and needs
immediate attention. Agricultural production in Uttar
Pradesh has been fluctuating over the years and not much
growth has been observed in the last decade.
Figure 3.5: Production (in 000' tons) of Wheat and

Paddy in Uttar Pradesh
Product ion (in 000' tons )of W heat and Paddy in Uttar Pradesh
50000
40000
30000 Paddy
W heat
20000
10000
0
1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004-
96 97 98 99 2000 01 02 03 04 05
Paddy 9788 11197 11678 10826 12633 11679 12856 9596 13022 9559
W heat 21077 23287 22147 22781 25551 25168 25498 23748 25567 22514
Source: Department of Planning, Government of Uttar Pradesh (2005).
62
3.5 Status of Fruits and Uttar Pradesh is blessed with rich bio-diversity and agro-
Vegetables Production in climatic conditions making it an ideal destination for
Uttar Pradesh growing a large variety of horticultural crops. It is
estimated that horticulture contributes about 19.5% to
agriculture and allied sectors income in the Uttar Pradesh.
Presently Uttar Pradesh produces 8 % of fruits and 14 % of
vegetables of total national production (Dhar and Gupta,
2009). The area and production of fruits and vegetables in
Uttar Pradesh is given in Table 3.3.
Uttar Pradesh ranks sixth in fruits production among all

states. Major fruits grown in the state are mango (leading
state in India in terms of production), guava (ranked fourth
in India), banana and litchi. The overall productivity of fruits
in the state is 12.8 MT/ha against national average of 11.2
MT/ha (National Horticulture Mission, 2006).
Uttar Pradesh ranks second in vegetables production among

all states after West Bengal. Production of vegetables in Uttar
Pradesh increased from 0.96 million tones in 1991-92 to
18.95 million tonnes in 2008-09 (Figure 3.6).
63
Figure 3.6:Increase in Vegetable Production in Uttar

Pradesh 1990-91 to 2008-09.
Source: Directorate of Horticulture, Uttar Pradesh 2009 and

Department of Planning.
Major vegetables grown in Uttar Pradesh are potato and peas

(where Uttar Pradesh is leading state), sweet potato (second
among states), cabbage (sixth among states). Figure 3.7 gives
an idea about ratio of different vegetables produced in U.P.
Figure 3.7:Proportion of various major vegetables

grown in Uttar Pradesh.
Source: Directorate of Horticulture, Uttar Pradesh 2009.
64
The top ten districts of Uttar Pradesh in terms of production

of vegetables are as per Table 3.4.
The productivity of vegetables in UP is 19.2 MT/ha against

a national average of 16.2 MT/ha. Significant increase in
area under vegetables has been recorded on small and
marginal farms. Studies have revealed that small and
marginal farmers were diversifying the cropping pattern
on their land towards extra short duration crops like
65
vegetables to augment and stabilize their income over

seasons. Moreover, vegetable production engages more
labour from vulnerable population groups such as women.
It is also beneficial to soil health and utilizes water more
efficiently in terms of both production and economic
efficiency. In Eastern Uttar Pradesh and Central Uttar
Pradesh, there is tremendous scope to increase vegetable
and fruit production as in several districts up to 90% of
farmers are small and marginal farmers and 70-75%
holdings are of one acre or less (National Horticulture
Mission: 2005-06, Government of Uttar Pradesh).
66
3.6 APMC F&V Mandis in Uttar Various Fruits & Vegetable Markets in Uttar Pradesh are as per
Pradesh Table 3.6.
67
68
The state of Uttar Pradesh has set up three Agri-Exports –

Zones for promotion of export of mango, potato and
vegetables, (Table 3.7). Uttar Pradesh Horticulture Produce
Marketing Federation also organizes horticulture
producers as user-groups/Self Help Groups/ Primary
Societies and facilitates marketing of their perishable
produce.
3.7 SWOT Analysis of UP If we analyze the strength, weakness, opportunities and

threats of horticulture sector of UP, it can be clearly inferred
that horticulture sector can be a flourishing sector provided
that weaknesses are converted into opportunities.
Strengths • Endowed with agro-climatic conditions suitable for a

large number of horticultural crops with plenty of sun
shine and large area of fertile soil and water.
69
• Number of cultivars and their adoption in different

agro-climatic condition increase the availability of
horticultural produce for expanded period.
• Network of research infrastructure to support
horticultural development.
• Uttar Pradesh has the longest rail length, the second
longest road length and highest number of post offices
in India ensuring good connectivity. Uttar Pradesh has
over 4,800 km of national highways and over 10,000
km of state highways (www.ibef.org).
• Changing dietary habit of the people with rise in income
would need more horticultural produce.
Weaknesses • Lack of sufficient qualitative planting material, certified

& improved variety seeds.
• Comparably low productivity of various horticultural
crops.
• Lack of technical personnel at block and grass root level.
• Poor backward and forward linkages
• Poor pre and post harvest management practices.
• Unorganized marketing facilities
Opportunities • Adequate availability of raw material for processing

industry.
• Uttar Pradesh has a strong research infrastructure and a
large number of ICAR, CSIR institutions to support its
development programs.
• Horticulture is a labor intensive industry and labor
availability is not a problem in Uttar Pradesh.
• Large tract of alluvial soil with rivers like Ganga,
Yamuna, Rapti, Ghaghara, etc.
70
Threats • Reduced productivity in the absence of improved

technology.
• If the present opportunity is not availed, UP may lag
behind in its overall development and horticulture.
3.8 National Horticulture The state of Uttar Pradesh is giving lot of importance to
Mission in UP horticulture development which has resulted in spectacular
changes in recent years. Production of horticultural crops
has increased many folds as a result of which UP has
become the second largest producer of fruits and vegetables
in the country. To sustain the pace of growth and increase
productivity levels, it is necessary to create adequate
marketing infrastructure, excellent policies for small and
marginal farmers, strengthen backward and forward
linkages, develop safe and pollution free environment and
relevant mechanism for articulating the technological need
of producers and processors. Uttar Pradesh has launched
National Horticulture Mission in its 26 districts with an
objective to double its horticulture production by 2011-
12. This will allow Uttar Pradesh to develop concentrated
pockets of plantation, rejuvenate old orchards and create
post-harvest and marketing infrastructure. Major crops
identified for implementation under mission program (a)
fruits like mango, guava, aonla, banana and litchi (b)
vegetables seed production of potato, peas and onion (c)
flowers like gladiolus, tuberose (d) spices like turmeric,
chilli and garlic (d) aromatic plants like Demark rose and
mentha.
71
72
4.1 Indian Food Consumption As with most emerging economies, food accounts for over
Behavior half the expenditure of an average family in India. Fresh
produce (fresh fruits and vegetables) accounts for 50
percent of the Indian shopper’s food and grocery bill
compared to 15 percent in the US. (Indo - US Economic
Summit 2007).
India has a large and growing population of over 1.15

billion people of which over 300 million are categorized
as middle class consumers having significant purchasing
power. The country also offers a relatively young market
with 54 percent of the population below 25 years of age.
This sector of the population earns more, spends more and
demands more from the market, making India a dynamic
society.
In the affluent and middle Indian class, the percentage share

of food expenditure vis-à-vis other products/categories
has been going down whereas the total expenditure on
foods has increased across all classes. In addition, the rise
in the numbers of working women is likely to be one of
the most significant factors in altering the food landscape
in India. In the 1970’s, the food expenditure was
concentrated around basic food items like food grains,
vegetable oils and sugar; there is now an inclusion of fruits
& vegetables, eggs, meat, beverages and processed food in
the consumer’s repertoire, contributed both by increased
availability and affordability. This change is happening
courtesy rapid urbanization, higher disposable incomes,
increasing number of nuclear families, less time available
for cooking, mobility and exposure to global markets. The
73
demand for ready-to-cook and ready-to-eat convenience

foods is also rising. Demonstration effect through explosion
in information and communication technologies is creating
a new demand for value-added foods.
The following diagram shows a conceptual framework

which explains the changes in food supply chains that are
happening in India between rural producers and urban
consumers.
Figure 4.1: Evolving food supply chains
74
India’s long history of vegetarianism is a strong influence

on its food consumption pattern. Meals typically include
pulses (e.g. daal), wheat-based flatbreads or rice, with
vegetable dishes and accompaniments including curd
(yoghurt), chutney, and raita; non-vegetarian meat or fish
dishes have Mughal influences (Wikipedia, 2007e). In
2006, an estimated 31% of Indians were vegetarian (341
million), with the lowest proportion in the coastal areas of
Kerala (2%), West Bengal (3%), Andhra Pradesh (4%),
Tamil Nadu (8%), and Orissa (8%). The inland states in the
north and west have the highest proportion of vegetarian
families: Uttar Pradesh (33%), Madhya Pradesh (35%),
Gujarat (45%), Punjab (48%), Haryana (62%), and
Rajasthan (63%) (Yadav and Kumar, 2006).
4.2 Indian Retail Sector India’s retail sector is currently dominated by more than
12 million mom-and-pop stores, most of them tiny and
dusty which offer a small and unreliable selection of goods.
But now some of India’s biggest companies have begun
opening the first of what they say will be thousands of
flashy new retail stores in different formats across the
country. The McKinsey Global Institute, a think tank,
estimates India’s retail market will be worth $1.52 trillion
by 2025, up from $370 billion in 2005. Though the relative
importance of comestibles will shrink as people earn more
disposable income, McKinsey estimates the food-and-
beverage category will still account for 25% of all retail
spending in 20 years.
Despite the slow start, the supermarket revolution in India

is spreading at a phenomenal pace. According to the AT
Kearney study, India tops the list of most attractive
75
countries for international retail expansion. Almost every

other day, the press reports highlight new plans by some
or the other major Indian firm for investment in the retail
sector. According to the India Retail Report, the top ten
players in the modern retail trade are likely to invest US$
18-20 billion in the next five years to generate as much as
US$ 50-60 billion in revenue by 2011. It is reported that
this investment will be made in the top 150 cities, although
its impact will be visible in at least the top 500 if not more
(Technopak Consulting Group, 2006).
Figure: 4.2: Stages of building supply chain in India
76
4.3 Low Penetration of Modern The organized retailing of fresh fruit and vegetables is
F &V Trade in India highly evolved in many developing countries such as Kenya,
Brazil and the People’s Republic of China. In comparison,
organized retail chains in fresh fruit and vegetables are
relatively new in India. India’s retail market is largely
dominated by unorganized players, representing a major
growth opportunity for modern trade. The share of
organized retail, currently between four to five percent, is
expected to increase to 10 percent by 2012. Organized
retail market share averages in other Asian countries like
the People’s Republic of China and Vietnam are much higher
at 20 percent and 22 percent respectively. In South Africa,
Brazil and the United States of America, the figures touch
32 percent, 75 percent and 82 percent respectively (Batt
and Cadilhon, 2007). However, this situation is changing
very rapidly with the entry of prominent industrial groups
such as Reliance, Adanis, Airtel, FoodWorld, Spencers,
Future Group, CONCOR, ITC, Godrej, Tata, Aditya Birla
Group and Premium Farm Fresh etc. In marketing
terminology, the F&V segment is considered as the
“destination category”, implying that F&V purchase brings
the consumers into the stores (Neilson, 2003).
Most of the retail action so far has happened in the southern

states of Andhra Pradesh and Karnataka, followed by other
metropolitan centres like Delhi, Mumbai and Kolkata. The
most common retail format in the emerging chains is the
neighborhood stores (with 2000-5000 sq. feet) which
focus on fresh fruit and vegetables (F&V) and other food
items. Other bigger formats such as supermarkets and
hypermarkets also exist, but are much fewer in number.
77
Fresh fruit and vegetables are an important category for

the retail chains and they are making significant
investments in developing their supply chains, improving
back-end systems, instituting processes and applying
technologies to ensure smoother transfer from farms to
points-of-sale, to improve customer services and to achieve
increased operational efficiencies. Some retailers, in order
to address the absence of supply chain and logistics systems
are establishing captive systems comprised of cargo
planes, railway hubs, warehouses, distribution centers and
cold chain infrastructure. Establishing an efficient supply
chain that links farmers directly with retailers, will
maximize value for all stakeholders.
4.4 Criteria Consumers Fresh fruits and vegetables are the most crucial category
consider while Choosing in communicating freshness, and are the most important
a Fresh F & V store fresh food category overall. The bright colors and firm
texture make a positive impression and image for the whole
store. Relationships with retailers are also important to
consumers when they make the decision on where to shop.
In this area, traditional wet markets have the advantage
over modern retailers. The traditional retailer has the
advantage of one-on-one relationships with his customers,
built up over many years. He understands their needs and
preferences and is often happy to barter with them on
price. The experience with modern retailers is more
impersonal. However, their bigger scale gives operators
the ability to build up brand values which, when
effectively communicated to consumers, can inspire trust
and loyalty (Coca Cola-Accenture report). Consumers in
India consider a wide range of criteria and have different
78
priorities attached to them while choosing a Fresh Food

store (Figure: 4.3)
Figure 4.3:Criteria consumers consider while choosing

a Fresh F&V store
79
4.5 Emerging Trends in Food Some of the trends that are observed to emerge in the
Retail in India Indian retail sector include:
a. Increase in Private Labels: Private labels enhance the

profitability levels of product categories, increase retailers’
negotiation powers and create consumer loyalty. Retailers
in India are continuously introducing private labels in
groceries.
b. Foray into Retail Agribusiness: India’s most

prestigious business houses and many global retailers are
planning to enter retail agribusiness. Market entrants plan
to invest in the entire value chain, moving goods “from the
farm to the fridge at home.” Viewed as India’s next “sunrise
sector,” retailers are exploring opportunities to use contract
farming to access land, manpower and farming skill without
having to purchase land. Multinational companies also keen
to obtain a share of this food retail market and may enter
the market through cash-and-carry or franchisee models.
c. Selling to Tier II and III Cities: Indian retailers are

planning to extend their operations into Tier II and Tier III
cities. People living in Tier II and III cities are typically
well-educated and are increasing spending more on fresh
F & V category.
d. India as a Sourcing Hub

Hub: India is already a sourcing
location for textiles and apparel. Global retailers like Wal-
Mart, GAP, JC Penney and Target are increasing their
sourcing volumes from India. These companies, which
accounted for 50 percent of the apparel outsourced from
India in 2005, are now rationalizing their vendor bases
80
and limiting their sourcing to a fewer countries like India

and China. In a similar manner, India can become the food
supplier of the world. It has the cultivable land, all the
seasons for production of all varieties of fruits and
vegetables, an agribusiness system that works although it
needs to be vastly improved. By building an efficient and
effective supply chain using state of the art techniques it is
possible to serve the population with value added food while
simultaneously ensuring remunerative prices to the
farmers.
4.6 Challenges to Fresh Produce Organized food retailing industry is clocking impressive
Retailing in India growth in India. Almost three fourth of the retailers that
were interviewed expect to grow at rates in excess of 35
percent per annum in the coming five years. Although, most
of the modern retailers in India have a regional footprint
today but almost two-third of them have plans to set up
national chains in coming five years. As per industry
reports, India should see a doubling of the retail outlets and
retail space in the next five years. However, the retailers
surveyed mentioned various bottlenecks that can sour
their big plans.
4.6.1 Absence of Well-oiled India is a fragmented country with 70 percent of the

Fresh F & V Supply Chains population residing in rural areas. A general absence of
infrastructure and logistics system means that reaching
consumers and transporting goods is difficult. With
growing urbanization, the necessity of roads, highways and
public transport systems is essential. Due to the presence
of large local and multinational companies, India has a
fairly organized and developed non-food manufacturing
supply chain. However, the food supply chain in India is
81
fragmented and unorganized. As modern trade grows,

supply chain efficiency will become essential in offering
competitively priced products, responding to customers’
changing needs and providing good customer service.
4.6.2 Supplier Integration Almost all the retailers we interviewed have manual
information exchange with their suppliers. Data
integration, financial flow management, supply-demand
matching, collaborative forecasting, information sharing,
goods movement synchronization through efficient
transport scheduling, are well practiced in high technology
industries with immense benefits. Food chain clusters can
be formed with the participation of all stakeholders such
as farmers, seed growers, merchants, transporters,
wholesalers, retailers, financial institutions and insurance
companies. Information sharing is essential for generating
efficiencies. In developed countries, retailers practice
Vendor Managed Inventory (VMI) systems, where the
supplier has access to the point of sales data of the retailer
and plans automatic replenishments responding to the
stocks available at the retailer. Food retailers in India can
leverage such expertise available to implement efficient
supply chain management techniques.
4.6.3 Supplier Maturity Suppliers more often than not do not adhere to delivery
schedules both in terms of quality and quantity. More than
60 percent of the retailer’s surveyed felt that there was a
need for suppliers to enhance their service levels.
Organizations like McDonald’s spent significant time and
efforts when they came in to augment the capability of
local suppliers by bringing in their international suppliers
to either partner with or transfer key capability to Indian
suppliers.
82
4.6.4 Lack of Strategic Sourcing Ordering by retailers is more tactical than strategic in India
and very few retailers have long term purchase agreements
with suppliers. Retailers in India also face constraints due
to regulations like the APMC Act which prevent large
volume, direct purchases of fresh produce from farmers.
4.6.5 High Distribution Costs A key bottleneck mentioned by respondents is the absence
of distribution networks connecting Tier-II towns with
regional logistics hubs. There is scope for organized
logistics players like regional transport companies/ third
party logistics (3PL) players to develop these distribution
networks including warehouses, cold chains and truck/
multi-modal services connecting these locations.
Investments are being made in warehouses and hubs by
Indian corporate houses. Outsourced logistics service
providers are also emerging; McDonald’s working with
Radhakrishna Foodland is a case in point.
4.6.6 Low Technology Adoption Technology usage is low in India today, compared to levels
and Usage achieved in advanced economies. Retailers like Wal-Mart
and Metro have started experimenting with Radio
Frequency Identification (RFID) technology which is
expected to provide much better inventory visibility and
hence facilitate efficient management of inventory.
Retailers in India are still to adopt bar coding completely.
However, most of the retailers surveyed do have plans for
implementing integrated IT systems in the coming years.
4.6.7 Real Estate Issues Most retailers interviewed expressed concerns about the
high cost of real estate today. Availability of quality retail
space is a critical enabler for the anticipated rapid growth
of modern retailing in India. With most Indian cities
undergoing rapid urbanization, spiraling costs of retail
83
space is a key concern among retailers. On the other hand,

the average purchase ticket size in India is still low. This
could lead to a situation of high fixed cost, with low
contribution per sale for retailers. High footfalls would be a
necessary condition for success. With the demand from
the commercial properties remaining strong, the cost of
real estate in most top tier cities has been rising in the last
few years, thereby escalating the lease rentals and the time
it takes to break-even.
4.6.8 Regulatory Aspects A point that kept emerging in various discussions with the
retailers was the dated regulations in the country. For
example Weights and Measures Act expects all goods to be
available in the factory packed form in the stores. Similarly
Agricultural Produce Marketing Committee (APMC) Acts
consider even small volume purchases to qualify as
wholesale deals. There are also variations among states with
respect to aspects like store timings. All these are
hindrances that can restrict rapid growth of retailing in
India.
4.6.9 Arguments for FDI While 100 percent foreign direct investment (FDI) in
retailing is not currently permitted in India; international
giants are entering the market as joint venture partners
with Indian firms. One of the arguments in favor of FDI is
that it will bring with it the technologies and expertise
required to build robust food supply chains. While
inefficiencies increase consumer prices, farmers suffer due
to low realizations. To unlock operational efficiencies,
facilitate growth, reduce costs and improve the time it takes
fresh produce to move from point of manufacture to point
84
of consumption, robust and scalable supply chains need to

be built.
4.6.10 Skilled Retail Personnel A key concern raised by most respondents has been the
shortfall of trained manpower to meet expansion plans.
While ostensibly, there should be no manpower shortfall
in India, given its large working population, the gap lies in
finding people with the right skill-sets like supply chain
perspective, collaborative working with farmers,
customer orientation and need-based selling which are
critical.
4.7 Conclusion Developing supply chains in fresh F&V category involves a

lot of effort to develop linkages with farmers, especially in
gaining the trust of the farmers and to motivate them to
work with the supermarket. Developing farmer linkages
is relatively easier for the firms that have been involved
with farmers over time, either through input supply or
other means. To be successful, a retail firm has to develop
region-wise crop plans based on consumer requirements,
agro-climatic conditions and skills set of farmers in the
area, ensure timely and adequate availability of agri-inputs,
extension services and post-harvest management and
monitor that there is no breach of contract from either
side while procuring fresh produce from the farmers.
85
86
5.1.1 Fresh Fruits: India versus India is the second largest producer of the fruits in the
the World world after China.
87
5.1.2 Fresh Vegetables: India India is also the second largest producer of vegetables in the
versus the World world after China.
88
The production of major fruits in India is as follows:
89
The production of major vegetables in India is as follows:
90
Figure 5.1: Leading Fruit Producing States of India (2008-2009)
Figure 5.2: Leading Vegetable Producing States of India (2008-2009)
91
5.2 Traditional Fresh produce In India, over 95% of sale of fresh produce happens
supply chain in India through traditional supply chains. There exists a long chain
of intermediaries between the farmer and the final
consumer. Various stakeholders in fresh produce value
chain (farmers, wholesalers, food manufacturers, retailers)
work in silos rather than in an integrated and coordinated
manner resulting in a chain replete with inefficiencies. A
typical Indian fresh fruit and vegetables supply chain under
traditional marketing through government regulated
APMC market is as follows:
Figure 5.3: Indian Fresh F & V supply chain
92
The existing and most common traditional system of fresh

produce value chain includes a local trader (village
merchant, itinerant trader, pre-harvest contractor) and an
APMC wholesale market where a commission agent
facilitates the sale of fresh produce brought by the farmers
right at his doorstep. Typically, farmers bring their produce
to the shop of the commission agent, located at the APMC
wholesale market, with whom they would like to work.
Buyers then pick the produce up from there. Transactions
take place mostly by means of an open-outcry auction,
managed by a commission agent who does not take
possession but deducts his commission. As lots are
auctioned by these commission agents, new prices are set.
Many a times, there are more than one commission agents
in the chain. The recent research on these traditional
marketing systems indicates that these markets
(1) Are not efficient (Matoo et.al. 2007; Ramaswami and
Balakrishnan, 2002; Deininger and Sur, 2001 and
Thomas, 2003),
(2) Lack integration (Palaskas and White 1996),
(3) Are plagued by trader collusion (Banerji and Meenakshi
2004), and
(4) Are characterized by a high level of physical wastage
(Matoo et.al. 2007).
These middlemen, protected by regulatory environment,

not only cause delays but also charge exorbitant margins
in an arbitrary manner for the services, they render. The
farmers, especially small farmers, being largely
unorganized lack market power and as such receive a low
share of the final price paid by the consumer. The
commission agents who distribute the produce have no
93
incentive for quality. Moreover, the wholesale markets are

poorly designed and congested (Coulter, 2004).
The fresh produce retailers in India include roadside/

neighborhood stalls/kiosks and doorstep delivery by hand
carts. The last link in the chain is the consumer. In the
present supply driven market, the consumer has no choice
but to consume what is available. There is inconsistency in
supply in terms of quality, quantity, specifications and yield.
If a customer (a food processor or an end consumer) wants
a particular quality of fresh produce, he finds it extremely
difficult to get it (Pandey and Tewari, 2010).
Figure 5.4: Agricultural Product Flow from Rural

Producers to Urban Consumers in India
94
5.3 Huge post harvest losses in In India, a large portion of fruits and vegetables (almost 40
fresh produce value chains percent) are lost due to inadequate post harvest handling,
cold storage, processing facilities and lack of convenient
marketing channels (Singh et al, 2002).
Marketing of fresh F & V in India through traditional means

is characterized by scant attention to grading, sorting and
storage, weak institutions and poor handling during
loading, unloading and transport. The high percent of post-
harvest damage can largely be explained by such poor
handling of such a highly perishable produce (Gandhi and
Namboodiri, 2006).
On an average, fresh F & V pass through six or seven

middlemen before a consumer can buy it, resulting in
tortuous journeys, big markups and poor quality. Modern
retailing, which is emerging through the growth of
supermarkets, convenience stores, and their supporting
supply centers, offers a silver lining for the introduction
of technologies and improvement in fresh produce
handling and storage.
5.4 Regulatory framework for The challenge of accelerating horticultural growth in Uttar
marketing of farm produce Pradesh can not be met without public investment in
irrigation, research and extensions, enhanced credit flow
and improved delivery systems for improved seeds. While
paying careful attention to public investment, it must also
be understood that the problems of horticulture will not
be solved only through on-farm investment. Non-farm
activity is essential for farmer prosperity as it tends to
have a greater proportional impact on the income of
poorest members of the village but, this requires adequate
95
social and physical infrastructure to ensure that the rural

non-farm sector has the capacity to adjust and modernize
in response to conditions brought about by increasing
competition, and changing demands from consumers. For
this, it is extremely important to understand the present
regulatory framework of APMC through which most of
fresh produce is marketed in India.
5.4.1 Agricultural Products Marketing of agricultural products in India is a state subject

Marketing Committee Act and is as such regulated by respective state APMC
(Agricultural Products Marketing Committee) Acts. The
APMC Act in each state of India requires all agricultural
products to be sold only in government-regulated markets
(mandis pronounced as mundees) under the auspices of
their nearest local Market Committee.
Many of these regulated wholesale markets have a large

area with a number of sub-yards attached to the principal
market. The number of regulated market yards in India
increased from a meager 286 at the time of independence
to 7566 in year 2007. These regulated markets consist of
2429 principal markets and 5137 sub yards. Today, these
APMC mandis, which work through a series of commission
agents and other middlemen, have a vice-like grip on trade
in every farm commodity imaginable: be it grains, pulses,
oilseeds, fruits, vegetables, meat, fish, dairy products or
forest produce. There is perhaps not a square inch of space
in India that is outside these State-governed APMC mandis.
The licensing of traders in these regulated APMC markets
acts as a major entry barrier for other entrepreneurs, which
is detrimental to the income of small and marginal farmers,
who form the bulk of Indian agriculture. Each day farmers
96
are deprived of fair-market prices by unionized

commission agents by virtue of their strong hold on mandi
operations. Thus, the APMC Act constrains the adjustment
toward a modern marketing system by imposing significant
restrictions that affect flow of farm-products.
97
The traditional APMC markets merely offer basic facilities

like internal roads, boundary walls, shops, electric light,
loading and unloading facilities, weighing equipments and
godowns for traders in two-third of the markets. In fact, cold
storage units exist in only 9 percent of the markets and
grading facilities exist in less than one-third of the markets.
Although, both covered and open auction platforms exist in
two-thirds of the regulated markets but the facilities created
in these APMC market yards continue to be inadequate.
There hardly exist any facilities for cleaning, grading and
packaging of agriculture produce before sale by the farmers.
The number of regulated APMC mandis is relatively more in
geographically larger states like Andhra Pradesh, Bihar,
Maharashtra, Madhya Pradesh, Uttar Pradesh and West
Bengal. These six states account for 53% of total regulated
markets in the country. However, some of the regulated
markets are non-functional, as actual transactions do not
take place in their market premises but market fee is
collected by the APMC at designated check posts. In such
cases, it is more of a fee collection activity rather than
providing marketing functions.
The state has made wholesale mandis its prerogative; it

decides who may come there and licenses the buyers. The
APMC Act puts restrictions that farmers and buyers have to
operate within the APMC mandi premises only, as such the
fresh produce has to be unloaded and reloaded, leading to a
loss of quality because of multiple handling and the time
involved. Exporters, processors and retail chain operators
cannot get desired quality and quantity of produce for their
business due to restrictions on direct marketing. The
processor cannot buy the produce at the processing plant
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or at the warehouse. The produce is required to be

transported from the farm to the APMC market yard and
then only it can be purchased and taken to the plant.
On an average, there are six to seven handlings of

horticultural produce in the existing APMC mandi system
that leads to almost 40 per cent of the fresh produce going
waste. Other factors include paying the market tax and at
times paying multiple market taxes associated with
different APMC mandis within the state or from other
states. Paying the market tax is not the only problem to
reckon with; the bigger problem is the inordinate delay in
completing the formalities. To compound matters, since
most commission agents also finance growers’ production
and other sundry needs, these small and marginal farmers
feel morally and financially indebted to the commission
agents. The price ultimately paid by commission agents to
farmers is then “adjusted” to deduct the loan principal and
disguised interest, the latter generally exceeding the
statutory limits.
A commodity moving from Punjab to Kerala has to pass

through dozens of APMC markets, attracting ‘mandi fee’
every time it enters a new regulated market. In fact, it’s
easier to import wheat from Australia into Kerala than
from Punjab. Various studies conducted on India’s
vegetable market show that the farmer only gets 35-40 per
cent of the retail price and the rest is cornered by the
middlemen that exist between the farmer and the
consumer.
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There is the additional problem of what World Bank

economists, Aaditya Mattoo and Ashish Narain, call the
logistics tax. In a recent report, they point out that a 20 per
cent reduction in transportation and logistics could drive
down final prices by as much as 12 per cent. The sheer
absolute cost of transport is quite sensitive to scale and
predictability of domestic supplies. The emerging retail
chains with pan-India footprint are expected to solve these
problems somewhat.
Considering that agriculture is a ‘state’ subject under the

Constitution, the challenge of reforms becomes even more
formidable; each state must move separately to get its act
together. While governments, for example, collect hundreds
of millions of rupees in mandi taxes, they barely invest
anything in improving infrastructure in these markets. Most
of the APMC mandis are in a pathetic state and characterize
a supply chain that allows large wastage of commodities
and their nutritional values. Various state marketing
boards, which manage the APMC markets, collect mandi
fee, and that’s a reason why some of them aren’t keen on
letting go of the controlled mandis even after many states
amended their APMC laws to allow for private
participation.
The APMC Act was initially formulated to provide a

transparent and fair platform for sale of farm produce so as
to minimize exploitative business practices by traders.
Perhaps, when originally conceived, the various rules and
regulations were meant to help consumers but today, they
are outdated, harmful and detrimental to farmer interests.
While the Indian government spent more than 50 years
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engineering labyrinthine regulations for the farm sector,

inefficiencies piled up, population kept growing, food
insecurity persisted, technology advanced while the world
at large became a lot smarter. India has also taken another
‘irrational’ approach of treating all commodities at par, e.g.
wheat and rice are given the same status as fruits and
vegetables instead of exploiting their commercial potential.
There’s plenty to do in reforming agricultural laws. A good
time to start would be now.
5.4.2 Model APMC Act Being acutely aware of the limitations of APMC Act, the
Ministry of Agriculture, Government of India, amended
APMC Act that removed certain rigidities of the original
APMC act and introduced the concepts of parallel private
markets, contract farming and designed new roles for
cooperatives. This amended act called the Model Act is quite
comprehensive and if adopted, will help in improving the
efficiency of the marketing system and in encouraging
private sector investment in the field of agricultural
marketing. The amended act aims at complete
transformation of agricultural marketing in India to make
it more market and growth oriented. The Model APMC Act:
1. Allows establishment of private yards and direct

purchase of agricultural produce from producers in one
or more market areas. It permits establishment of
markets that would allow a farmer to sell directly to the
end consumer.
2. Allows for establishment and running of a National

Integrated Produce Market (“Terminal Market”) to
market fruits, vegetables and flowers.
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3. Allows setting up of special markets and has provisions

for providing infrastructure and services required for
special commodities.
4. Allows for contract farming under written agreement,

recorded with the Market Committee, between a sponsor
and an individual producer or a producers’ association.
All disputes arising from the contract farming agreement
are to be referred to a prescribed authority for resolution
within 30 days. There is also a provision for appeal.
5. Enables e-trading, defined as trading in which billing,

booking, contracting, negotiating information exchange,
record keeping and other connected activities are done
electronically.
6. Allows for produce to be sold in the market yards/ sub

market yards and also in private yards and other places
to a license holder, without necessarily carrying the goods
to the market yards. It also makes it essential for a buyer
to pay the seller on the same day or pay a penalty of 1%
per day for the next 5 days. Non-payment after 5 days
would lead to cancellation of the license/ registration of
the party and buyer would not be permitted to operate
under the Act for a period of one year.
7. The Model Act allows market committees to fix their

market fee between 1% and 2% of the price which can
be charged once within the state against the earlier
provision covering the market area. When the produce
is transacted outside the yard limits, the fee must be
deposited within 14 days or before the produce leaves
the state.
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8. Requires market fees to be paid by the buyer and not to

be deducted from the price payable to the seller.
5.5 Recent Status of APMC The status of APMC reforms as on January 2010 is as per
Reforms: Uttar Pradesh and the following table:
Himachal Pradesh
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104
In Uttar Pradesh and Himachal Pradesh, the APMC

wholesale markets are the nodal points in the traditional
fresh produce supply chain and majority of fruits and
vegetables marketed pass through them. Diversification
of agriculture is advocated as one of the most important
strategies to stabilize and enhance farm incomes, increase
employment opportunities and conserve natural resources.
However, the returns from diversification depend on the
availability of infrastructural facilities like irrigation,
electricity, transportation, storage, markets etc. It was
therefore felt important that a thorough review of a
Northern India state which has implemented APMC
reforms is conducted, its holistic impact on marginal and
small farmers studied, learning recorded (both successes
and pitfalls) before designing a ‘Horticulture Road Map for
Uttar Pradesh’.
6.1 Research Methodology To better understand the functioning of these wholesale

markets and how they fulfill their role in the supply chain
between rural producers and urban consumers, a formal
survey of farmers, APMC commission agents, logistics
providers and food retailers was conducted between April
and August in the year 2010. A three stage stratified
sampling technique was used for selection of sample. Five
districts from Uttar Pradesh and four districts from
Himachal Pradesh were purposively selected because they
were the leading fruit and vegetable producers, had a large
consuming population and were close to bigger metro
markets and Class I cities. Three blocks from each district
and six leading F & V producing villages from each block,
which were within 50 kms of APMC market, were then
selected. A list of farmers having at least 175 percent
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cropping intensity in these villages was then compiled. A

total of 270 farmers, 45 commission agents and 90 retailers
were surveyed in Uttar Pradesh and Himachal Pradesh. To
ensure that the sample selected is representative of the
universe of farmers, due care was taken that almost 85%
of the farmers surveyed were marginal and small farmers.
Commission agents were interviewed at their work place

in the early morning hours while most of the fresh produce
transactions happened at the mandis. After few surveys, it
was felt that the information provided by commission
agents operating at the mandis as well as the wholesalers
did not match with the information provided by the
farmers and retailers. We found out that commission agents
and wholesalers were not the most reliable sources of
information, so the study focused on unobtrusively
observing farmers and retailers who were actively engaged
in a sales transaction at the APMC markets and then
interviewing them immediately after the transaction got
over. Farmers were also interviewed later at their fields
right at their villages. The information that was thus
collected was then corroborated with the commission
agents who had facilitated the sales process. The vegetable
and fruit retailers were interviewed at major retail markets
across the city. Besides farmers, commission agents and
retailers, we also interviewed policymakers, officials
involved in APMC mandis, horticulture officers, fresh
produce procurement officers and extension personnel in
public, cooperative and private sector. We also conducted
open ended interviews with transporters, packers, cold
store and warehouse providers in both the states.
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The research instruments used included pre-tested

questionnaires, personal interviews and focus group
discussions. The survey inter alia contained detailed
questions on the demographic profile of the farmers,
marketing channels used, reasons for the choice of a
particular marketing channel/commission agent, prices/
costs associated in transactions, process of quality and
quantity assessments by buyers, various risks faced by the
farmers in production and marketing of fresh produce.
The present status of marketing infrastructure, supply
chain for different group of vegetables and fruits, vertical
linkages established by various marketing groups of
farmers with retailers and processors, existing market
information system and policy issues were also analyzed.
Different districts/ blocks surveyed are as per Table 6.1:
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The above two states were selected because of their

difference in status of APMC reforms as follows:
6.1.1 Himachal Pradesh Himachal Pradesh implemented reforms to APMC Act in

the year 2005. Under the new Act amendment in Himachal
Pradesh, private players are allowed to open and operate
agriculture markets, where farmers can sell their produce.
There is no compulsion on the farmers to bring their
produce to the market yard as they now have the option of
selling their produce directly to private parties, food chains
and retailers. Contract farming has been allowed so that
the food processing and retail industry can get desired
quantity and quality of the produce, without any need to
route it through the notified markets. The amendment is
expected to end state monopolies and result in competitive
pricing for the farmers. However, whether the amendment
has been adopted full heartedly or not and whether any
real impact is evident needs to be studied.
6.1.2 Uttar Pradesh

6.1.2Uttar Uttar Pradesh has not implemented the model APMC Act till
August 2010 despite the radical changes that the model
APMC Act can usher in. A key impact of this regulation is
the inability of private sector processors and retailers to
integrate their enterprises directly with farmers or other
sellers, eliminating middlemen in the process. The resistance
to the adoption of the model act is from the state
government and traders / commission agents. The states /
APMCs have the fear of losing market fee if alternative
markets are established. The traders/ commission agents
have the fear of losing their business/income.
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6.2 Fresh Produce Value Chain Himachal Pradesh is gifted with a variety of agro-climatic
Analysis-Himachal Pradesh conditions due to variation in elevation, an aspect which
makes the state an ideal place for the production of a wide
range of vegetable crops. As on 2010, Himachal Pradesh
has emerged as an important vegetable growing state
particularly for the production of tomato, capsicum,
French bean, cauliflower, cabbage, tomato, green peas and
cucumber during off season. Due to cooler climatic
conditions in Himachal Pradesh, these vegetables are
harvested in summer and rainy season from May to August
when the rest of the country does not produce them thereby
creating a readily available market for the vegetable
growers of Himachal. Besides vegetables, the survey in
Himachal Pradesh also focused on various players involved
in apple value chain there.
Small group discussions conducted by us raised some

expectations among the villagers. At times, their hope of
getting some assistance influenced their responses.
However, and not surprisingly, farmers were reluctant to
discuss absolute figures and whenever they parted with
such information, it was probably understated. We
therefore used relative proportions in preference to
absolute estimates. Women were not freely allowed by men
to participate in the group discussions. This may have been
partly because the men thought that the women might
divulge information that could affect their prospects of
receiving benefits.
The survey revealed the following information about fresh

produce business of Himachal Pradesh:
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110
6.2.1 Profile of a Himachal Villages in Himachal Pradesh can be as small as 5 households,

village ranging up to 75-80 households depending on their
geographical location. Houses are scattered over a
considerable area. Almost all villages have electricity and
telephone facilities, and larger villages usually have a
school, a post-office and access to a pucca road. All rural
households own some land, partly grazing land and partly
cultivable land.
6.2.2 Social Caste Hierarchy in The economic categories in Himachal Pradesh were found
Himachal Pradesh to match the social caste hierarchy to some extent.
Nevertheless, there is considerable overlapping across caste
and in comparison to other areas of North India; caste
distinctions did not seem strong. During our field work,
we were able to interact with mixed social groups in which
all the groups were equally vocal irrespective of their
castes.
6.2.3 Consultative decision Decision-making within a household was found to be

making consultative. In general, women were found to play an
important role in family decisions: be it choice of crops,
use of fertilizers or spending. In vegetable cultivation,
women were found to participate as equal partners in
every aspect of farm activities except for land preparation
tasks like ploughing of fields, application of fertilizers,
composting etc.
6.2.4 High focus on vegetable Farmers of Himachal take a keen interest in vegetable
cultivation cultivation because of the high return it offers. Marketing
conditions also appear favorable and there is a huge
summer demand for fruits and vegetables in the big city
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markets of the plains (mainly Delhi-NCR and Chandigarh).

Moreover, easy and quick access of Himachal Pradesh
(especially the border districts of Solan and Shimla) to major
markets in the plains of Northern India: both in Punjab and
in Delhi make vegetable cultivation an attractive business
proposition for farmers of Himachal. The relatively short
distance to the Delhi market in particular makes transport
by trucks relatively fast. It takes 10-12 hours journey by
truck from Solan, 12-14 hours from Shimla and 15-17 hours
from Kullu/Mandi to reach Delhi which helps the farmers
in realizing competitive prices.
6.2.5 Changes in cropping In almost all villages of Solan, Shimla, Kullu and Mandi the
pattern from cereals to major cropping system followed a decade earlier was maize-
vegetables wheat; maize-barley and vegetable based cropping system.
Paddy was also found to be an important crop in Nalagarh
and Kunihar blocks of Solan. A decade ago, off season
vegetables were grown in specific niches but now major
vegetables like peas, tomato, cabbage, French bean,
capsicum, lady finger and brinjal are increasingly grown in
almost all blocks under irrigated conditions. Nearly all the
households, from all social and economic classes, grow
vegetables on at least 1 bigha (1/15 hectare) of land. During
the survey in Himachal Pradesh, we found that the area
under cereals had a sharp decline from 36 percent in 2005
to 14.5 percent in 2010. This has largely been due to
replacement of cereals by vegetables in the cropping pattern.
During the survey, we also found that fodder crops were

almost eliminated from the cropping pattern because the
farmers had started feeding the livestock with vegetable
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leaves. The pulses and oilseed crops have also disappeared

from the cropping pattern. From Table 6.3, it can be seen
that maize, paddy, wheat, barley and locally grown Kodra
were the major cereals and mash, rajma and gram were the
important pulse crops in cropping pattern of 2005. The
average farm size / net cropped area of farmers surveyed
also reduced from 1.13 ha to 0.96 ha over the same period
due to division of holdings and use of land for construction
of houses.
However, the cropping intensity of the farmers surveyed

increased from 165 percent to 217 percent between 2005
and 2010 because of increased cultivation of short-duration
vegetable crops, some of which were grown throughout the
year. Although the introduction of mechanical farm
operations has made various intercultural operations easier
in cereals in bordering state of Punjab, however, vegetable
crops being labour intensive, the requirement of labour per
farm in Himachal Pradesh increased by 26 percent from
2005 to 2010. Moreover, the income of farmers of Himachal
Pradesh doubled between 2005 and 2010, which can be
explained due to significant change in cropping pattern
towards vegetables and overall inflationary trend leading to
large increase in prices of vegetables.
113
114
6.2.6 Irrigation-A key resource Vegetables are grown universally in Himachal Pradesh
in vegetable cultivation wherever irrigation facilities are available. Water for
irrigation is scarce making it difficult, if not impossible,
for lots of farmers to undertake vegetable cultivation.
Irrigation is one of the main factors that determine the
area that a farmer in Himachal devotes to vegetable
cultivation. Various village surveys and focus group
discussions that we had with farmers of Himachal Pradesh
revealed that they are increasingly shifting more and more
area under cultivation to vegetable crops due to increased
availability of irrigation and higher returns from vegetable
crops. A large chunk of farmers surveyed ( around 38%)
also planted fruit trees in the last 5 to 7 years as they were
perceived to be more sturdy and did not require regular
irrigation yet yielded a good cash income.
6.2.7 Labour requirement-A Vegetable cultivation is more labour intensive than cereal
limiting factor in vegetable crops. Vegetables need a lot of additional care during
cultivation weeding, irrigation, spraying of insecticides/pesticides,
harvesting and packaging. Vegetable cultivating households
of Himachal Pradesh, as such, remain very busy during the
main part of the season from March to August. Upper and
middle economic categories of farmers usually hire some
laborers. Almost every farmer surveyed (91% of the
farmers) complained of difficulty in availability of labour
during the vegetable cultivation season. Lots of large
farmers (around 37%) despite having major portion of
their land as cultivated land under irrigation, at times do
not opt for large scale vegetable cultivation. The limiting
factor for them, which emerged from the survey, is the
high requirement of labour for vegetable cultivation. Middle
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category households in most of the villages’ surveyed

cultivate vegetables in nearly all the irrigated land they
possess, because they are able to work on fields themselves
with little or no hired labour. The lower category households
(around 87%) in almost all the villages grow vegetables
even if it is on just one or two bighas of land. In the lower
economic categories, family members (men, women and
children) carry out almost all farm activities themselves.
All categories of farmers, however, need to hire labour for
packaging and transport.
6.2.8 Productivity and quality Productivity of vegetables in Himachal is quite high when
of vegetables in Himachal compared to all India figures and other progressive states
Pradesh of India. For e.g. Productivity of tomatoes in Himachal is
quite high i.e. 35.2 MT per hectare against an average of
18.2 MT per hectare on an all India basis (NHB report,
2009). Productivity of cauliflower in Himachal is about
the same as All India average. During the survey, two things
were observed: (i) Even small and marginal farmers
achieved 62% higher productivity in tomatoes compared
to the national average. (ii) Fresh peas cultivated in
Himachal were considered excellent quality by buyers in
Azadpur Mandi of Delhi and accordingly fetched a
premium in the market especially the off-season variety.
During the survey, we found that the productivity of

medium sized farmers was around 27% more than the
small farmers. The main reason was the ability of the
former to invest more on the crop and a higher awareness
level of modern cultivation practices. Productivity is quite
closely linked to investment. Those farmers who applied
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better inputs: in terms of quality seeds, requisite amount

of fertilizers, timely irrigation and spraying of pesticides
usually got better results. Overall productivity of fruit and
vegetables was found to be better in Solan and Shimla
district as compared to Kullu and Mandi. There are mainly
three reasons for this: (a) better quality of land, (b) easier
access to irrigation and (c) a more suitable climate (villages
in Kullu/Mandi are located at a higher altitude).
Productivity in Himachal Pradesh is also affected by natural
factors. Low temperatures, hailstones, and untimely rains
are very common in the mid to high hills. The villagers did
point out many specific cases and said that in general they
experience about 15-20% loss due to these factors.
6.2.9 Market channel for fresh In Himachal Pradesh, farmers mainly grew four vegetables
produce in Himachal viz. tomato, peas, cabbage and cauliflower during the study
Pradesh period. Almost the entire quantity of these traditional
vegetables was sold through APMC mandis. In Himachal
Pradesh, 10 Agriculture Produce Market Committees
(APMC) cover 12 districts and work under the supervision
of Himachal Pradesh Agriculture Marketing Board. Each
APMC has the responsibility of controlling regulated
market and submarket yards. Currently, there are 39
market yards functioning as wholesale markets in Himachal
Pradesh. In market yards, farmers come and handover their
produce to the Commission Agents who carry out the
auction and charge a commission of 6% from the buyers.
After deduction of commission, the Commission Agent pays
the money to farmers. Commission Agents, barring a few
exceptions, were not found charging any fee from farmers.
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Figure 6.1: Marketing channel for Fruits &

Traditional vegetables-Himachal
Pradesh
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6.2.10 Separate marketing In all the districts that we surveyed in Himachal Pradesh,
channel for traditional the private players and APMC commission agents did not
and exotic vegetables share a common platform as they dealt in different set of
vegetables altogether. A few commission agents in APMC
mandis of Solan and Shimla did deal in broccoli but that
was more of an exception than a rule. During our survey,
we did not find any private player who was involved in
direct procurement of common vegetables like peas,
cauliflower, tomato and cabbage from farmers.
6.2.11 Major fresh produce The vegetable business in Himachal Pradesh is supported
dispatches to Delhi by a number of market players. Commission agents
(adhatiyas) based in the Delhi’s Azadpur mandi play a key
role in marketing of vegetables for farmers of Solan &
Shimla. Other players involved in fresh produce business
are timber traders, box- suppliers/makers, laborers and
truckers. During the survey we found that almost two-
third of the vegetables produced in Solan and Shimla are
dispatched to Delhi’s Azadpur market. Himachal Pradesh
is able to reap its competitive advantage in vegetable
cultivation during the offseason from May to August by
targeting Delhi-NCR market and states neighboring it like
Punjab and Haryana. Peak summer tourist season of
Himachal Pradesh is another great business opportunity
which is beautifully used by its farmers for selling as well
as advertising their fresh produce. Local adhatiyas of
Himachal Pradesh play a minor role in Solan & Shimla but a
major role in Kullu and Mandi districts.
6.2.12 Marketing channel for Many private players dealt in exotic vegetables such as
exotic vegetables asparagus, pakchoi, joichoi, snow peas, leeks, cherry
tomatoes, fennel, celery, colored bell pepper and zucchini.
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Exotics which are dealt by private players were not being

traded by the commission agents at the APMC mandis.
Figure 6.2: Marketing channel for exotic vegetables
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Intervention by private retailers has helped to reduce the

length of the supply chain of exotic vegetables. The
appointment of a field level representative to purchase
vegetables from the grower at the collection points is the
major strategy underlying the change. Some of the private
players operating in Himachal Pradesh are:
a. Aroma Nurseries
b. Jain Irrigation
c. Meena Agritech
d. Bihari Bhai
e. Trinity Agricon International
f. Khalsa Farm
Aroma Nurseries is a major private player in the trading of

exotic vegetables. They practice contract farming in the
region such as Nagwain, Mohal and Naggar region.
Presently they deal in broccoli, lettuce and zucchini which
they in turn supply to upmarket retail stores as well as star
category hotels in Chandigarh and Delhi. Aroma Nurseries
generally buy the entire produce except the ones which
are deformed or diseased.
Jain Irrigation is involved in the contract farming of onion

seed production. They themselves provide seed to the
farmers which they then buy after they are harvested.
Then they further supply these seeds to the farmers for
the purpose of onion production. Finally, they buy the
entire onion produced themselves from the farmers and
supply it further. The rates provided by Jain Irrigation are
5 to 10% better than what they would otherwise get from
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APMC mandis. Moreover, the onions are picked up very

close to the farmer’s doorstep which reduces the cost and
time of transportation for farmers.
Another vegetable in which private players are involved is

garlic. As far as garlic is concerned, commission agents from
other states such as Gujarat, Maharashtra etc come to the
special markets where open auction is carried out for
garlic. In some cases, the commission agents themselves
contact the farmers and buy garlic directly from them. Also
there are many wholesalers in Kullu which deal directly
with farmers for garlic. Thus, in case of garlic both private
players as well as commission agents at the APMC mandis
are involved.
6.2.13 Little procurement of During our Focus Group Discussions with farmers in Solan
traditional vegetables and Shimla, it was revealed that when APMC Act was
by private players amended in 2005, some supermarket chains had
approached farmers especially the midsize and bigger
farmers in Saproon valley (Solan), Theog and Matiyana (in
Shimla) for procuring traditional vegetables like capsicum,
peas, tomatoes, cabbage and cauliflower. However, this
relationship did not sustain itself beyond the first
harvesting season as these private players selected only
the A grade of vegetables (around 30 percent of total
production in Himachal Pradesh). The result was that the
farmer still had to depend on the local commission agent
to sell the rest of his vegetable crop at the APMC mandi. It
reduced his overall profitability as well as bargaining
power with the commission agent at the mandi. Farmers
who initially supplied capsicum, tomatoes, cauliflower and
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cabbage to the private players also said that had they sold
all their produce to the local commission agent at the APMC
mandi, they would have got a higher average price.
Commented a farmer during the focus group discussion,
“The supermarkets wanted only the ‘A’ grade, high quality
produce. Of course, they also paid a higher price for it. But
the lower price that I got and higher selling effort that was
need to sell the rest of the produce at the APMC mandi
totally offset any of my gains”. However, there was a definite
silver lining to this development as most of the farmers
agreed that it made them increasingly aware of
opportunities beyond mandis. Almost 23% of the farmers
surveyed felt this helped them negotiate better with APMC
commission agents and demand more price transparency
in dealings.
6.2.14 Why direct procurement We also had detailed discussions with fresh produce retailers
by private retail chains in on two issues to understand their point of view also
traditional vegetables (i) Little amount of direct procurement from farmer
category not taken off in (ii) Procurement of only A’ grade F & V . The findings that
Himachal Pradesh? we obtained during our survey can be summarized as: A
good fresh F & V retail store needs to have a sufficient
number of stock keeping units and a supply of quality F &
V at all times. The main challenges that a fresh produce
retail store faces in terms of inventory management are:
(a) going out of stock leading to empty shelves (b) lack of
range of quality F & V and (c) being left with large stocks of
stale unsold F & V. Since the private retailers deal with small
groups of farmers in far off locations, it is seldom possible
for them to meet all their F & V requirements through direct
sourcing from farmers. The variety of F & V required at a
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retail store is large and produce is grown in different parts

of the country. As on 2010, there are hardly any private
retailers who are buying traditional vegetables like
capsicum, peas, tomatoes, cabbage and cauliflower etc for
their stores directly from farmers of Himachal Pradesh and
whenever, they do so, they have tied up with agents in APMC
mandis who ensure that they get the required variety of F
& V for their stores. However, most of the retailers
interviewed said they find it difficult to assure quality from
the APMC market because there is no control over the
production at the farm level. Over time, as the amount of
quality produce increases, this issue will become less
important. Furthermore, as some supermarkets are
diversifying into processing, they can buy all grades of the
produce from farmers and can then use this different
quality of produce to satisfy different market needs.
6.2.15 Shift towards HYVS Traditionally the farmers of Himachal have been using farm
yard manure and seeds saved from previous vegetable crops
or bought locally from agri-input dealers. Off-season
cultivation has becoming a booming business in Himachal
Pradesh and a lot of private players have entered fresh
produce business though not in traditional vegetables. As a
result, even marginal and small farmers have become
increasingly conscious of appropriate character, variety,
quality and certification of seeds bought. They realize that
seed is the most important determinant of horticultural
potential on which efficacy of other agri-inputs depends.
For the farmers surveyed, the area under HYVS for
vegetables under irrigated conditions was found to increase
from 33% in 2005 to 67% in 2010, which clearly reflects
the growing importance of vegetable crops for the farmers.
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6.2.16 Grading and packing In Himachal Pradesh, no authorized standards were found
for grading and packing of vegetables. The supermarkets
who are establishing supply chains for F & V are setting up
their own grades and standards and communicating these
to the farmers working with them. During the survey, we
found that 83% of the farmers clearly understood the
importance of grading and accordingly carried out simple
grading and packing to add more value into their fresh
produce. In other countries of the world, where government
grades and standards exist, the retail sector still has to invest
in setting up their own quality standards because their
quality requirements are higher than the government
standards. Thus, in setting up supply chains in F & V,
developing quality norms and communicating these
standards to the farmers is crucial.
6.2.17 Increased usage of The consumption of chemical fertilizers in the Himachal

chemical fertilizers Pradesh is around 40 kg per hectare as compared to an all
India average of 95 kg per hectare. The government of
Himachal offers 50% subsidy on chemical fertilizers to
small and marginal farmers. However, with increase in area
under vegetable cultivation, it was found during our survey
that use of fertilizers has increased by 34% over the last 5
years.
6.2.18 Crop diversification I In Himachal Pradesh, there are several instances of farmers
towards cherry farming diversifying into horticultural crops. One such example is
cherry farming. Cherry cultivation is gaining popularity in
higher altitudes of Shimla, Kullu and Mandi districts of
Himachal Pradesh, as farmers who have traditionally been
growing apples, are finding it a profitable alternative cash
crop. During field surveys and interaction with horticulture
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officers, we found out that at least 5000 farmers grew

cherries on over 250 hectares as an alternative crop in the
above districts during 2010. Horticulture department
officials in Himachal Pradesh say the total cherry
production is set to touch a record 1,000 MTs in 2010 if
Chamba, Kinnaur and Lahaul and Spiti districts are also
included. It was 419 MTs in 2008-09 and 698 MTs in 2007-
08. The cultivators say that cherries give them good returns
as the production cost involved is much lower than what
they would have incurred with the apple crop.
Moreover, the season for cherries falls much before when

apple blossoms, allowing even conventional farmers to
experiment with it as a supplementary crop without
compromising on their apple produce. When we
interviewed a trader at Azadpur Mandi in Delhi, he said
“ We are procuring 500 to 1,000 boxes of high quality
cherries daily from Narkanda. This year the prices are quite
comfortable.” Narkanda, some 65 km from Shimla, is the
hub of cherry production. Farmers in Narkanda said “We
are selling a box of ordinary red cherries in the wholesale
market in Chandigarh at Rs.125-150.” During the study, it
was also found that the best varieties of black cherry
picked from organic farms is selling at Rs.230 to Rs.270 a
kg in the Delhi wholesale market in 2010. Even the small
farmers are able to get around Rs 40,000 per season.
Farmers when interviewed said that with the initial
response being good, the government must now step in
with technological and marketing expertise to help them
tap the cherry crop commercially.
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6.2.19 Crop diversification II When we interviewed farmers in Mahunag (a small village

towards broccoli on the periphery of Mandi district), we found some
cultivation farmers came from Delhi in 2005 and started cultivation
of Broccoli in their own fields. Their neighbors too got
interested and started planting the exotic vegetable. Today
the village produces almost 150 tons of broccoli alone.
Each bigha (around 1/15 ha) of land gives approximately
five tons of broccoli. Some village representatives now
come to Delhi every year in April, buy seeds of vegetables,
cultivate them, pool all their produce and then make
another trip to Delhi in June/July to sell. In 2010, the going
rate for broccoli in Delhi ranged from Rs 80 to 100 per kg,
depending on the season. The farmers are paid between Rs
50 and Rs 60 per kg again, depending on the season,
produce and quality of the vegetables. A small farmer who
owned 5 bighas of land earned almost Rs 25,000 per bigha
after making an investment of Rs 5000–6000 per bigha.
The farmers said that it also reduced their dependence on
apple crop, which over the years has become increasingly
unpredictable due to vagaries of nature.
Fig=ure 6.3: A Broccoli Field in Himachal Pradesh
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6.2.20 Crop diversification III For years Himachal’s lower hills were content with
towards cultivation of supplying off-season vegetables like tomatoes, cabbage,
exotic vegetables: peas and capsicum to the plains. They still do but the
enterprise of a few smart and enterprising farmers has
pointed the way to an enhanced prosperity for its farmers.
If one frequents Mumbai and Delhi’s five-star hotels, one
can notice exotic vegetables like broccoli, iceberg lettuce,
snow peas, sweet pepper, celery, parsley, leek, basil and
asparagus being served. However, what may be unfamiliar
is the fact that these vegetables and herbs have their origin
in the humble hills of Himachal Pradesh, where they have
been grown since early 1990s.
Figure 6.4: A Himachal farmer holding Joichoi
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During the study, we found farmers toiling in their small

fields, tending terraces of zucchini and swathes of red
lettuce interspersed with fennel. They rattle off names of
exotic vegetables with a familiarity born of intimate
association. The laidback Himachali living in remote vales
and hamlets is finally waking up to the immense potential
which the state’s temperate climate and geography offers.
One of the places where we saw large number of farmers
cultivating exotic vegetables was Karsog valley in Mandi
district. These farmers are able to get a good price for their
produce in Delhi’s markets and growing ‘videshi’ vegetables
has become an in-thing in this remote valley. As on 2010,
almost 500 farmers spread across dozens of villages in
Karsog valley grow gourmet vegetables like asparagus,
pakchoi, joichoi, snow peas, leeks, cherry tomatoes, fennel,
celery, colored bell peppers, zucchini, broccoli, and a
variety of lettuces such as lollorosa, radicchio and romaine.
These are lapped up by five-star hotels, upmarket
restaurants and food stores in Delhi and Mumbai. Despite
an acute water shortage, Karsog valley produced 4 MTs of
exotic vegetables every day between May and August in
2010. The 40-year-old water scheme feeding the village
can barely fulfill the drinking needs, so the farmers rely on
rain water harvesting.
6.2.21 Crop diversification IV During the survey, it was found that farmers of Himachal
towards Strawberry Pradesh are earning good profits from strawberry
farming cultivation in the region, as the commercial demand of the
fruit has increased. The good yield of the region and low
investment needed is encouraging the farmers to shift to
strawberry farming. The farmers in Solan surveyed
explained that they need to invest about Rs 25,000 for
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cultivation per bigha of land and the resultant income

ranges from Rs 1.25 lakhs to 1.75 lakhs per season. Farmers
who grew strawberries on a small scale were found to start
with one ‘bigha’ of land whereas other large-scale farmers
grow strawberries on at least five to six ‘bigha’ of land.
Chandler, Tioga and Torrey are the main varieties of
strawberry grown in the region. Confutura, Silva, Brighten,
Douglas and Pajaro varieties are also being introduced to
increase production. Local cultivators say farmers from
neighboring states regularly come to Himachal Pradesh to
buy strawberry plants.
Haryana and Punjab are the main markets for strawberry

plants. Strawberry is mostly grown in Solan and Sirmaur
district but it is grown in various other regions of Himachal
Pradesh since many years. Now, the farmers are
concentrating on the commercial demand, exports, its
importance and the variety, so that they can earn more
from its cultivation. Under HTM (Horticulture Technology
Mission) scheme, Himachal government also provides
farmers with lot of benefits to promote horticultural
diversification. The State government is working towards
the usage of available facilities like tissue culture labs
effectively, and intends to introduce many other farmers
to further enhance the production.
6.2.22 Crop diversification V Most of India’s demand for kiwi (a fruit whose dull brown
towards Kiwi farming exterior conceals its brilliant green and juicy flesh) is
currently met by imports from New Zealand and Australia,
because Indian growers are unable to match the quality of
the imported variety. However, Kiwi is now grown in
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smaller orchards in Manali, Rajgarh and Kullu. Although,

the Indian kiwi is sweeter and has a better flavor, there is
little market for it. A third-generation apple farmer of
Manali, who is fast diversifying into kiwi when
interviewed said, “We’ve been growing kiwi for the last 10
years on around 10 acres, and plan to double the area in
the coming years,”. Khullars, third generation farmers from
Manali have worked hard to improve the quality of their
kiwi and produce around 20,000 kg annually, which they
sell under their own brand name ‘Baragarh Estate’, to
wholesalers at prices ranging from Rs 85 to Rs 120 a kg. As
with exotic vegetables, kiwi growers too face marketing
challenges, since consumption is mainly in far-off metros.
Another kiwi farmer on being interviewed said, “Since the

economy has opened up, farmers in Himachal Pradesh can
try their hands at growing exotic fruit and vegetables
because demand has shot up. People who tried growing
these things 10 years ago suffered losses.”
6.2.23 Organizational changes Farmers of Himachal Pradesh are quickly realizing the
post APMC reforms tremendous potential that their state offers because of its
unique agro-climatic situation and proximity to big markets
of Delhi, Shimla and Chandigarh. They also realize the need
to aggregate produce, organize themselves better and
increase their collective bargaining power. Nearly 400
farmers from 40 villages of Churag and Pangana in Karsog
valley of Mandi district, 100 km from Shimla have set up a
cooperative, the Karsog Valley Farmers Society. Comprising
growers and marketing people, the Karsog Valley Farmers
Society is now planning to hit the markets in big cities with
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its own distribution network and the ‘Northharvest’ brand.

The farmers have organized various camps in the last few
years to discuss marketing and infrastructure issues. The
society has also attracted help from Winrock International,
FTF-USAID, for training the farmers in scientific methods
of growing and cooperative marketing.
The society has also taken a consultancy from Winrock

International, a US agricultural NGO whose volunteers visit
Karsog regularly to share vegetable farming practices and
make quality seeds available to the farmers here. During
our meetings with various farmers in Karsog valley, they
said that they grow exotic vegetables after assessing
market demand, so that overproduction does not hit the
market price. Apart from exotic vegetables, around a dozen
farmers have also begun mushroom production this year
which the society plans to market in a big way in the
coming years.
6.2.24 Reduced financial In the middle of change in APMC Act, farmers of Himachal
dependence on Pradesh who have grown exotic vegetables since the 1990s
middlemen have now shown the door to middlemen by aggregating
their produce, tying up with private players directly and
in some instances forming a cooperative society. A couple
of years before, the supply of exotic vegetables was in
danger of drying up because the farmers, tired of their
profits being usurped by middlemen, were on the verge of
switching back to traditional crops. Said a farmer in Karsog
Valley, “About five to six years ago, when we first began
growing exotic vegetables on a commercial scale, we got
the best rates. But then middlemen from Delhi started
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fooling us. Sometimes they claimed a glut of some

vegetables due to poor planning and we barely got Rs 5 or
10 per kg.”
The farmers have now also organized themselves into a

group and market their produce under the brand of
‘Northharvest’. Another farmer said, “Our aim is to exist as
a pressure group in the market so that prices do not dip
beyond a level. We are also trying to link up directly with
wholesalers to avoid unfair practices which traders from
Delhi and Punjab subject us to. If bell peppers sell for Rs
250 a kg in a Delhi store, why should a poor farmer in
Kalashan (village in Himachal) be happy if he gets Rs 80 a
kg for it?”
6.2.25 Price transparency Some farmers in Himachal who sold vegetables directly to
retailers at local village shops got comparable rates for their
produce as that of APMC mandis. In fact, around 38% of
the farmers said they got better rates at APMC markets as
compared to selling directly at local shops of the town.
This clearly reflects how entry of private players has
introduced price transparency in the APMC system in
Himachal Pradesh. Moreover, as a result of APMC reforms,
commission agents at the mandi now know that farmers
are aware of Delhi prices and are as such forced to offer
competitive rates to stay in the business.
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Figure 6.5: Price Build up in Tomato and Exotic

Vegetable Chain in Himachal Pradesh
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6.2.26 Timely payments In almost 80% of the cases, the commission agents in
Himachal made payment to the farmers on the same day as
the vegetables kept coming to the APMC mandis in lots. For
rest of the farmers, the payment was made available
whenever they asked for it.
6.2.27 Availability of interest The bulk of vegetables from Himachal Pradesh are directly
free credit sold to commission agents (adhatiyas) in Azadpur market
of Delhi. After amendment in the APMC Act, these
commission agents have established direct marketing links
with farmers in Solan and Shimla and as such the channel
involves no local market intermediary. These agents visit
Solan and Shimla at the beginning of each crop season,
establish links with vegetable farmers and provide an
advance payment to finance production costs of farmers.
Similarly, apple, peaches and plums are also sold directly to
Delhi from these districts.
6.2.28 Development of efficient During the months of May-August, when vegetables are
logistics system harvested, farmers in Himachal pack their produce in
wooden boxes on farm itself and then carry them to the
road head where they are loaded onto a truck and taken to
Delhi. Trucks which are owned by local district unions
ply on Shimla-Solan- Delhi route on a daily basis. The truck
driver issues bills to farmers and also mentions the number
of boxes that are being dispatched by them to a particular
adhatiyas in Delhi. The truck reaches Delhi in about 10-
12 hours, going usually to the Azadpur mandi. Here the
adhatiyas auction the produce, still in wooden boxes, to
buyers from all over the country. From the price obtained
at auction, the agent deducts his commission (6%), the
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advance already paid and other transaction costs (transport,

labour, postage) and credits the balance due to the farmers.
He sends payment to farmers by draft, cheque, or in some
cases, farmers may come to collect the money themselves.
6.2.29 Promotion of Polyhouse Most of Himachal farmers have small landholdings on hill
cultivation in Himachal slopes and need to augment their incomes. It is difficult to
Pradesh grow anything outdoors in the harsh Himalayan winters.
Government authorities in Himachal Pradesh are
popularizing polyhouse cultivation among the farmers to
promote off-season farming. Polyhouses are based on the
greenhouse concept to let in heat and light, while preventing
the heat from getting out. But instead of the glass on a
greenhouse roof, polyhouses are made of cheaper
polythene or plastic. By reducing evaporation, they also
allow farmers to use sprinkler and drip irrigation systems,
thus saving water. When polyhouse farming was first
introduced in 2003-04, farmers were skeptical and
reluctant to take up this farming technique. Later while
some farmers took it through advertisements in
newspapers others adopted them after they saw
polyhouses in some other states. Polyhouse cultivation in
the lower hills of Himachal Pradesh has brought an end to
the cultivation woes of the farmers as here crop cultivation
drops drastically during the winter season. Around one-
fourth of the farmers surveyed practiced polyhouse
farming and claimed that it has increased their productivity
and said that they are reaping benefits almost six times
more than what they reap through conventional farming.
They also said that growing crops in greenhouses produces
better quality crops which fetches farmers more money.
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6.2.30 Establishment of State Himachal Pradesh Horticultural Produce Marketing and

Public Undertaking in Processing Corporation Ltd. (popularly known as HPMC)
marketing and was established in the year 1974 as State Public
processing of fresh fruits Undertaking with the objective of marketing of fresh fruits
and processing of all types of surplus fruits. Today, HPMC
has developed a modern system of marketing in the
country. HPMC has set up two modern Fruit Processing
Plants and has acquired them on lease basis from the
HIMPROCESS and has a vast range of processed products.
Between the years 1974-82, HPMC engaged itself in the
establishment of pre and post harvest activities,
comprising of a net work of mechanically operated
packing houses, cold storages, transshipment centers and
fruit processing plants, besides a net-work of sales offices
in terminal markets, railways stations and airports
throughout India. The entire infrastructure of grading/
packing houses, pre-cooling and cold storages has been
established in rural areas for providing pre and post
harvest facilities to the farmers right at their door step.
Today, HPMC has emerged as one of the leading and largest
organizations for the post-harvest handling of horticultural
produce in India.
HPMC has contributed substantially to mechanized grading

and scientific packing of fruits, substitution of
conventional wooden cases by tray-packed telescopic
cartons distribution network, introduction of juice
dispensing machines, making pure apple juice a common
man’s drink, manufacture of apple and pear juice
concentrate and development of a sound base for the
export of apple and other fruit products. Such an enterprise
of HPMC has not only ensured remunerative returns to
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the fruit growers but nutritive quality products at a

reasonable price to consumers also.
6.2.31 Contract farming Himalayan International, a Himachal based company, has

gone in for a Rs 3.24 crore contract farming vegetable
project in Poanta Sahib area of Sirmaur district with
financial back-up provided by NABARD. It is also
worthwhile to mention here that the company also did
contract farming in which more than 300 farmers of the
Paonta Sahib valley were associated with the company.
Himalaya international also purchases strawberry from
local farmers and thus supports them in getting connected
to the markets.
The commercial production of the vegetables is done on

260 hectares of land that has been selected for the project.
About 150 families were selected for the contract farming
project and factors like soil fertility, irrigation facilities
and road connectivity were taken into account for
contracting farm lands. The fresh vegetables grown are
marketed in big metropolitan cities and there are plans for
exports to the Gulf Countries. Himalayan International has
also entered into an agreement with Reliance Agri Fresh
and Wal-Mart to sell vegetables through their outlets in
metro cities whereas negotiations for tapping the
international markets are going on. Himalaya International
is also planning to install food carts in the Commonwealth
games 2010. Products like real fruit yogurts, breaded
mushroom and breaded cheese etc would be available in
these food carts.
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6.3 Fresh Produce Value The survey in Uttar Pradesh focused on bottle gourd,
chain Analysis-Uttar pumpkin, okra and brinjal, as these were the four main
Pradesh vegetables marketed in large amounts in Uttar Pradesh
during the survey period. The description of farmers and
retailers who were surveyed in Uttar Pradesh is as follows:
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6.3.1 There is not much of a difference between age,

education and household size between farmers and
retailers. Majority of the farmers owned cattle (for milk or
for ploughing the fields). Moreover, 17.33% of the farmers
owned a mobile phone whereas in case of retailers the
figure was slightly higher at 24.6 %.
6.3.2 Marketing channel for Farmers in UP bring their fresh produce to the APMC
fresh produce wholesale market and to the shop of the commission agent
with whom they share a working relationship. Buyers then
pick the produce up from there. Transactions take place
mostly by means of an open-outcry auction, managed by a
commission agent who does not take possession but rather
gets a commission for making the producer and seller meet.
As lots are auctioned, new prices are set.
Figure 6.6: Marketing channel for Traditional

Vegetables-Uttar Pradesh
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6.3.3 Importance of F & V in A large majority of farmers surveyed in Uttar Pradesh

overall income depend on other agriculture products for their livelihood.
Around 48.8% of the farmers produced other crops over
the year and 65.5 % of retailers sold another product over
the last month. These four products however constituted a
large degree of importance for both the farmers and
retailers. It made up 63.2 % of annual monetary income of
the farmers and represents 36.8 % of retailers over the last
two months.
6.3.4 Visiting habit- APMC Farmers and retailers have different visiting habits and
Mandis frequency of visiting the APMC wholesale markets. Farmers
visit the mandi whenever they have sufficient crop to
harvest whereas fresh produce retailers visit mandi almost
every day except when mandi is closed for its weekly off
day.
6.3.5 Agri-input purchases The area under vegetable cultivation of farmers in Uttar
Pradesh was around 18%. In rest of the area, the land was
used for cultivating fodder or cereals or pulses. The area
under High Yielding Varieties of Seeds was found to be low
at 7.08 % of area under vegetable cultivation. Farmers
generally bought seeds recommended by agri-input dealers
or the ones recommended by fellow farmers.
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142
6.3.6 Mandi Tax & Commission As per APMC rules, a trader has to pay a mandi tax of 2.5%
on every transaction. The commission agent is also allowed
to charge a commission of 3 % for facilitating sales of fruits
and vegetables. As per the law, farmers are not supposed
to pay both these charges. These taxes in principle have to
be paid by the commission agents but most of them do not
pay it for every transaction.
In some mandis, farmers do receive a slip when they enter

the market on which they have to indicate how much fresh
produce they bring in and with which commission agent
they will deal with. This reduces the room available to the
commission agent to maneuver.
6.3.7 Violation of Regulation The commission charged by the commission agent violates
the regulations in two ways:
First, the commission is charged from the farmer which is

not permitted under APMC Act.
Second, the combined rates of commission charged from

the farmers and the retailer is much higher than the
prescribed 3%.
6.3.8 Cost Components Labour cost (loading and unloading) represent 1.7% of the
total value of the transaction whereas phone and weighing
cost were negligible in some markets and 0.5% in some of
the markets of UP.
A number of farmers have to bear the sampling costs

representing around 0.4% of the total value of the
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transaction. The commission agent picks up some of the

vegetables at random, tear them up and show it further to
wholesalers/retailers as a proof of quality. The total costs
incurred by farmers (12.1%) and by the retailers (4.3%)
on the APMC wholesale market amount to (16.4%) of the
value of the fresh produce lot.
Figure 6.7 : Price Build up in Okra Chain in Uttar

Pradesh
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6.3.9 Conflicting role of The APMC market officials issue two different licenses at
commission agents and the wholesale mandi viz. Commission agents’ license and
wholesalers at APMC wholesaler license. While the license of commission agent
mandis entitles him to conduct auction and facilitate sellers and
buyers to locate each other and interact, a wholesaler on
the other hand takes ownership of the fresh produce and
can sell the produce further but not necessarily through
an auction. While almost all the farmers (96.6%) thought
they sold their fresh produce through a formal auction, in
reality the buyer in 23.3% of the cases was the commission
agent himself. Almost 52% of the retailers also opined that
the commission agent and not the farmer or wholesaler
was the seller.
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A clear conflict was observed when commission agent also

donned the role of a wholesaler. Since the commission agent
charges a percentage of the negotiated price, his interest
should ideally be to discover a buyer who pays farmer the
highest. However, the wholesaler thrives on profit
maximization which can only happen if he can squeeze his
procurement price from the farmer and then maximize his
selling price to the retailers. Therefore, if the same person
acts both as a commission agent as well as a wholesaler, he
maximizes his returns at the cost of other participants in
the supply chain. During the study, a lot of situations were
noticed wherein the commission agent cum wholesaler
showed an opportunistic behavior by telling the farmer a
price (especially in his absence) at which an auction never
happened in reality. Thus wholesalers benefit a lot by
buying farmer’s fresh produce at falsely claimed
discounted price and not maintaining price transparency
to the farmer.
6.3.10 MIS on quality and Majority of the fresh produce transactions at the APMC
quantity of fresh mandis in Uttar Pradesh happen through auctions and there
produce exists virtually no relationship between farmers and
retailers who finally sell to the consumers. Fresh produce
(both fruits and vegetables) exhibit marked variations
between different lots and buyers have to really stress hard
to make the correct valuation decisions especially when
no formal relationship exists between farmers and final
retailers. A large majority of the retailers (90 %) felt there
exist significant quality differences between fresh fruit and
vegetable lots that farmer bring to the mandis. Most of the
wholesalers and retailers checked quality themselves either
by visual inspection (most prominent method) or by
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touching, smell and even tasting it. Around one-fourth of

the retailers said they were aware of the harmful effect of
pesticides and other chemicals used by farmers but they
didn’t care much about it as organic food didn’t fetch any
premium nor was perceived as an USP by the consumers.
They felt customers in India rarely pay for such intangibles.
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6.3.10 Wastages in the Retailers felt that in absence of significant quality variations
horticultural between lots, they are not able to accurately predict the
marketing system level of wastages. They are therefore forced to charge a
premium to cover up this uncertain level of wastages which
are passed both to the farmers as well as the final
consumers.
Almost one-third of the retailers felt that they are delivered

a quality by the seller which is lower than what they were
promised and much lower than what they paid for.
6.3.11 Primitive weighing The weighing systems used at APMC mandis of Uttar
systems Pradesh were old-fashioned and only about a-third of the
weighing transactions were done on an electronic scale.
Both the farmers as well as wholesalers had complains
about ‘rounding off error” and they felt that the advantage
always went to the commission agent or the retailer.
While majority of the farmers as well as retailers felt they

had sufficient information and can make reliable
assessment of quality and quantity of the lot, they always
felt that other side had an unfair advantage in the present
non-trustworthy system of weight measurement through
mechanical scales.
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6.3.12 Opportunity cost of travel The auction at most of the APMC mandis of Uttar Pradesh
time to APMC mandis happens in the early morning hours starting from 5 AM
and usually gets over by 9 AM. This is the most productive
time for farmers, especially small and marginal farmers
when they can work in their fields. On an average a farmer
spends 4.72 hours in the wholesale market and has to wait
for hours to wait for his turn at the auction. This is an
absolute wastage of the most productive time of a farmer
when we compare it with just 9.10 minutes that are needed
to complete an auction. Fresh produce transactions at
APMC mandis are spot transactions where 22 % of the
farmers and 18 % of the retailers have no prior information
or contact with the commission agent before actually
reaching the APMC mandi. Even if some of them had
established contact, they had no information on likely
arrivals on the day as well as likely prices for the day.
6.3.13 Payment terms The payments are made to the farmers immediately and
this is facilitated by the commission agents. In fact, 80 %
of the farmers said, they were paid within three hours of
completion of the transaction. The majority of the retailers
75 % also make immediate payment on completion of the
transaction. However, 16 % of the retailers said they are
allowed two to three days of credit by the wholesalers.
However, in general, trading of fresh produce was found
to be a cash transaction and involved virtually no payment
through banks.
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151
6.3.14 Collusion amongst the Farmers and retailers were asked about various choices
commission agents that they have to sell and buy their fresh produce. Farmers
felt that while the APMC mandi offered them large choices
(over 75 commission agents) but they knew only a few
which deal with their kind of produce or those with whom
they are comfortable dealing with. More often than not,
farmers go to a limited number of commission agents with
which they deal throughout the year as they have built
relationship with them over the years. Farmers also
mention that there are only a few options beyond the
APMC mandi and they were not sure whether their entire
fresh produce would be sold outside the APMC system.
Farmers also felt that one commission agent at the APMC
mandi is as good or as bad as the other and it is impossible
to get out of their clutches. They felt commission agents
operate in consultation with each other like a unionized
group of businessmen. Retailers usually considered a larger
number of commission agents and had a wider network of
relationship which is obvious as they have to procure an
assortment of different kinds of fresh produce from
different wholesalers.
6.3.15 Lack of alternative The study found out that the margins between farmers
marketing system and retailers are high, market regulations are not adhered
to and blatantly violated, role of commission agent and
wholesaler is all but mixed up, MIS is absent and incomplete,
transaction time is long and outside competition to APMC
commission agent is almost non-existent. Commission
agents at the wholesale markets appeared extremely pleased
with the APMC system as it exists today and felt entry of
private retailers is not required. Reliance Retail which
planned to invest around Rs 80-100 billion in Uttar Pradesh
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for its retail operation, including about 200 ‘Reliance Fresh’

stores in back-end logistic chain had to close shop in 2006.
They had to face strong vandalized protest largely
supported by APMC commission agents and retail vendors
who had a keen interest in maintaining the status quo.
Despite this the farmers and retailers have no option but
to deal with these APMC markets.
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6.3.16 Reasons for selecting a The farmers were asked questions on various marketing
commission agent channels available to them, other channels that they have
used during last few years (local markets at nearby towns
or direct sale to retailers) and how often and why they
opted for a particular commission agent at the APMC
mandi. The reasons that farmers offered for choosing a
specific commission agent ranged from better prices being
offered, large quantities that they can sell, fast transactions
and expeditious payments.
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One in four farmers also offered availability of timely and

hassle free credit as one of the reasons. They felt that
commission agent would help them with money should an
emergency arise with them or their family. A large
proportion of farmers also selected commission agents
based on long duration that they have worked together
and developed a comfort zone. They felt that such a
convenient working relationship reduces their search cost
and time spent at the wholesale market. However, almost
every farmer checked up the rates which other
commission agents and wholesalers offered to the farmers.
6.3.17 Credit and insurance A fairly large number of farmers and a few retailers take
services provided by the help of commission agents for providing them sundry
commission agents credit for various reasons: agricultural and non-agricultural
(like illness, marriage in family etc.). The poor farmers of
Uttar Pradesh with their small land holdings do not have
easy access to formal credit system like banks and also
lack other reliable sources of credit. They as such, find
commission agents a great help in times of need. The average
value of loan received by farmer was 12,243 which was
seven to ten times the value of last transaction. It was
found that those farmers who had larger land holdings, lived
closer to the whole sale market, had longer duration of
working relationship with commission agent and visited
APMC market more frequently had a greater likelihood of
receiving both a loan and bigger size of loan from the
commission agent. Although farmers seldom rely on
commission agent for credit and do explore others sources
of credit but taking a loan, in some manner, binds them to a
particular commission agent and morally obliges them to
deal with him in future business transactions.
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6.3.18 Agri-inputs offered by Some of the farmers, especially the marginal and small
commission agents farmers, surveyed were offered advances in kind (mostly
seeds, rarely pesticides and never fertilizers) by the
commission agents. Two-third of the farmers surveyed felt
that the quality of seeds offered was good and almost half
of the farmers felt that they would not be able to get these
kinds of seeds on their own in the market and that too at
the price offered by the commission agents. Very few of
the commission agents actually monitored the use of these
seeds. Those farmers who received loans in cash from
commission agents said they have to repay it within a year
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and would get the loan next year only if they had a good
repayment track record. Most of the farmers felt that if
they default on repayments, the commission agent will not
work with him any more, will tell other commission agents,
agri-input dealers and will also put social pressure on him
at the village level which will spoil the farmer’s reputation
and credit worthiness.
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6.3.19 Constraints/Risk Cultivation of fruits and vegetables by small and marginal

Perception of farmers in farmers of Uttar Pradesh takes place in an overall business
F & V cultivation environment where risk perceptions play a major role in
production and investment behavior of farmers. During the
survey, we put great emphasis on understanding the mindset
of farmers, socio-economic, environment, production and
marketing factors that they face which impedes cultivation
of fruits and vegetables by them.
These risks that in the opinion of farmers affect crop

diversification towards horticultural crops have further
been divided into five categories as follows:
1. Market Risks
2. Production Risks
3. Environmental risks
4. Socio-economic risks
5. Investment risks
The survey revealed that the most important risks perceived

by farmers of Uttar Pradesh in adopting cultivation of fruits
and vegetables wholeheartedly are poor farm to market
linkages, exploitation by large number of middleman, low
price realization for fresh produce, lack of transparent price
discovery, lack of information on cultivation practices, high
cost of agri-inputs, lack of adequate irrigation facilities,
capital and cold chain storage facilities, high cost of fuels
and unsure/erratic electric supply.
158
159
160
6.4 Conclusion The horticulture sector of Uttar Pradesh is constrained by

low productivity, high cost of production, huge post-harvest
losses, inefficient supply chain and poor market
intelligence. The study clearly revealed that marketing
regulations are ineffective and rarely adhered to. In APMC
mandis, there exists a confusion between the role of
commission agent and wholesaler and when both roles are
donned by the same person there is a clear conflict of
interest which adversely affects the farmer. The
information transmission between farmers, commission
agents, wholesalers and retailers on quantity and quality in
incomplete and the existing APMC system works towards
reducing returns to farmers and increasing price for
retailers and consumers.
Despite these problems, the APMC system has existed for

decades because of lack of choices available to both farmers
and retailers outside the system. The ability of APMC system
to interlink credit and insurance markets for marginal and
small farmers to horticultural output markets has ensured
a permanent and prominent role for commission agents.
The farmers and retailers, in absence of a viable alternative
fresh produce marketing system, also appeared satisfied
with the APMC wholesale marketing system as it reduced
their search cost and time. It also allowed them access to
a market with lots of buyers and sellers. It is however
debatable, how commission agents facilitate the sale
between farmers, wholesalers and retailers as all of these
stakeholders have no option but to come to the APMC
wholesale market till such time alternative marketing
channels are allowed as per the law.
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Production of most of the high value fresh produce is

capital and knowledge/information intensive as well as
riskier. Small holder farmers of Uttar Pradesh lack access
to capital, improved technologies, quality inputs and
extension services that are needed to enter high value
segment. Integration of these small holders in the fresh
produce supply chain is therefore a major challenge. Their
exclusion from the supply chain is politically unacceptable
and socially undesirable. Their integration requires
collectivization into cooperatives and self help groups or
intermediary contracts which reduce transaction costs of
both firm and farmers. It is therefore essential to
strengthen mechanisms that improve small holders access
to credit, insurance, pre and post harvest technology and
extension services.
To emerge as a major producer of fresh produce, generate

large scale employment opportunities and significantly
upgrade the income of its small and marginal farmers, the
State of Uttar Pradesh needs urgent critical inputs in
management of its supply chain, development of
collaborative rather than competitive approach among
various stake-holders. The government must intervene to
create a policy environment, induct professionally
qualified personnel, invest in pre and post harvest
infrastructure and ICT based extension initiatives that help
in development of horizontal and vertical linkages for a
mutually beneficial relationship between farmers,
organized retailers and consumers.
162
163
7.1 State of Uttar Pradesh: From To link the small and marginal horticultural farmers of Uttar
a Regulator to a Facilitator Pradesh efficiently to the market and to ensure they do not
remain mute spectators to the emerging retail, processing
and export opportunities offered in the market place, it is
extremely important that the state of Uttar Pradesh dons a
new role: from a regulator and tax-collector to that of a
facilitator. The state of Uttar Pradesh must facilitate
smallholder producers to shift from traditional farming to
high value horticultural farming to augment farm incomes.
This approach, to be effective, calls for priority attention
to issues on access to post harvest and marketing
infrastructure, technology and information, institutional
arrangements and support services, fresh produce
marketing policies, capacity building of producers,
identification and development of markets among others.
7.2 Increasing Role of Private Unlike the revolutions in the past where public sector
Sector played a major role both in terms of providing subsidies,
direct market interventions, as observed in the cases of
green and yellow revolutions and a somewhat indirect role
in facilitating the use of foreign grants like in operation
flood, the future revolution in fruit and vegetables segment
will be increasingly driven by the private sector. The State
of Uttar Pradesh should therefore focus on generating
investments through Public Private Partnership (PPP)
mode to improve and scale up forward and backward
linkages with the farmers. The government will have to
play a pivotal role in facilitating the big changes. Marketing
of horticulture produce is presently being done by a few
private players in an uncertain policy environment and the
trend is somewhat mixed. While these models are quite
164
competitive, given the large capital base, but issues related

to their sustainability and scalability remain a concern.
7.3 Offering Options The small and marginal farmers in Uttar Pradesh are
certainly going to stay for a long time though they are going
to face a number of challenges. The viability of these
farmers is an extremely important issue while promoting
agricultural diversification towards horticultural crops. To
achieve this, an efficient marketing-supply chain system
is the crying need of the hour. “Options” is the operating
word here. The present agriculture marketing system in
Uttar Pradesh is based on its denial: to farmers, to
consumers and to business. The state must offer “Options’’
i.e. possibility of choices to farmers as well as consumers
with an ultimate objective of creating a private-market
driven agribusiness environment in Uttar Pradesh.
The aim of the state should be to move from weak market

orientation to highly diversified agribusiness system
where consumer demand patterns and real time market
information is the sole deciding factor for farmers’
enterprise. It is important to develop farm-to-fork models
which disintermediate the supply chain, bring efficiency
in the agricultural marketing process by making farmers
partners in progress. It is extremely important to realize
that what happens to small and marginal farmers of Uttar
Pradesh has implications for the entire economy and
people’s livelihoods. These farmers need an efficient
marketing system for handling their small surpluses
otherwise they will only be losers in the process of
globalization and liberalization.
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Improvement in the horticulture sector of Uttar Pradesh

needs improvement and strengthening at all the levels of
the supply chain-inputs delivery, credit, irrigation facility,
market oriented crop diversification, improved
procurement, transparent price discovery mechanism,
minimized post harvest loses, cold storage chains, better
and efficient processing and marketing techniques,
efficient storage, ware houses and also efficient and
competitive retailing. The state of Uttar Pradesh must focus
on creating major conditions which will lead to successful,
sustainable and profitable relationships between fresh
produce retail firms and small producers. These include
increased competition among fresh produce retailers and
processors for procurement instead of monopsony,
guaranteed market for farmer produce, effective
repayment mechanism, market information for farmers
to effectively bargain with companies, large volumes of
transactions through groups of farmers for lowering
transaction costs and co-operation among genuine
agribusiness firms in the area.
7.4 Steps for inclusive growth In Uttar Pradesh, given the large base of smallholders, the
objective of growth with inclusiveness should remain very
high on the State agenda and hence the issue of firm-farm
linkages must be a key decision variable behind any
agricultural policy decision. If Uttar Pradesh has to take
advantage of the fast emerging fresh produce retail
markets, certain distinct policy choices have to be made in
terms of increasing investments, bringing about
institutional reforms, and adjusting the existing incentive
structure.
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To promote inclusive horticultural growth, the state of

Uttar Pradesh should undertake the following steps in a
sequential manner:
Figure 7.1: Steps recommended for

‘Inclusive horticultural growth’
167
7.5 Step 1: Changes in Market At present marketing of fresh fruits and vegetables in Uttar
Legislation Pradesh is regulated by APMC Act wherein a Marketing
Committee enforces the Act, controls and regulates flow of
goods, charges market fees, rentals and licensing fees. The
APMC Act, in its present form has resulted in creation of
marketing monopolies, detrimental to the growth of fresh
produce retailing and farmers. Farmers have no incentives
to upgrade due to completely restricted options to sell
which in turn inhibits private and foreign investment.
Perhaps, when originally conceived, the various rules and
regulations were meant to help consumers but today, they
are both outdated and harmful. There’s plenty to do in
reforming agricultural laws. A good time to start would be
now.
7.5.1 Implementation of Model The model APMC Act is quite comprehensive and provides
APMC Act for establishment of Private markets/ yards, Direct
Purchase Centres, Consumer/Farmers Markets for direct
sale and promotion of Public Private Partnership/Contract
farming in the management and development of agricultural
markets in India. It prohibits commission agents in any
transaction of agricultural commodities with the producers
and redefines the role of present Agricultural Produce
Market Committee to promote alternative marketing
system. Provision has also been made in the Model Act for
Pledge financing, E-trading, direct purchasing, exports,
forward/future trading and introduction of negotiable
warehousing receipt system in respect of agricultural
commodities.
Uttar Pradesh must implement the Model Act like Himachal

Pradesh to develop a horticulture system which is market
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oriented, to encourage much needed capital through

private sector investment and to augment income of its
small and marginal farmers. Implementation of the Model
Act will provide farmers with the freedom to sell their
produce where it’s more profitable to them rather than in
remaining confined to the existing market administered
by the APMCs.
7.5.2 Dissemination of The state of Uttar Pradesh must notify the reform measures
information on Model and publicize them among all stakeholders. Various
APMC Act stakeholders like farmers, SHGs, farmers’ organizations,
processors, fresh food retailers, logistics providers must
be informed by various means of mass media available
about the changes in the APMC Act, as and when they
happen.
7.5.3 Unified licensing At present, agri-entrepreneurs have to apply for a number

of licenses for buying different agricultural commodities
from the various mandis of Uttar Pradesh. Fruit/ vegetable
retailers and processors feel agitated over the government
policy on not adopting a unified licensing procedure which
will allow them to procure all types of agricultural
commodities from all the state mandis. Licensing
procedures need to be urgently simplified. The State of Uttar
Pradesh should create a mechanism whereby an
entrepreneur is able to apply for a single unified license at
the state level and can procure fresh F&V in any district or
market without hindrance or requirement of additional
paper work. In other words, single unified license for
buying, procuring, selling of inputs, storage, and processing
of all agriculture commodities for the State as whole should
be introduced immediately to attract private players and
169
to offer options of alternative marketing channels to

farmers. Moreover, the licensing of traders, commission
agents and other market functionaries should be liberalized
by de-linking the licenses with ownership of shops in the
yards/sub-yards.
7.5.4 ECA The Essential Commodities Act (ECA) imposes restrictions

on storage and movement of farm commodities. Essential
Commodities (Amendment) Act should be modified to
provide for imposition of trade and marketing restrictions
only during exceptional situations of demand-supply
dislocation, market aberration and price volatility. At
present, there are dozens of ‘control orders’ passed by the
states under ECA that should be scrapped before free
trading could begin.
7.5.5 Food Safety and Standards The rules and regulations under the Food Safety and
Act 2006 Standards Act 2006, which has been passed by the
Parliament, should be expeditiously formulated and
notified. A variety of local laws and levies in states has made
India a confederation of agricultural markets divided along
state boundaries instead of being a single market. Despite
being composed of several countries, the European Union
is a single agricultural market. India, on the other hand, is a
fragmented market even though it’s a close federation of
states.
7.5.6 Foreign Direct Investment FDI in multi-brand retail though much debated has
remained a political hot potato and a consensus needs to
be evolved on policy. Opening up, structural and
technological reforms recommend themselves in a country
170
like India where organized retail forms a measly 5 per cent

of the retail industry. It is a shocking fact that over Rs 1
lakh crore worth of India’s fruits, vegetables and other farm
produce are lost year after year for want of proper,
integrated storage, cold chain infrastructure and farm to
fork supply network. We simply can’t remain blind to the
benefits of capital inflows in multi-brand retail. The
government must take the plunge. What it mustn’t do is
engage in competitive populism. The government should
refrain from pitching stipulations like job reservations and
stringent local sourcing as conditions for entry. Such
caveats would make for half-baked reforms that’ll put off
rather than attract investors.
7.6 Step 2: Improving Supply Building shiny new fresh produce stores to meet the
Chain Environment demand for fresh F&V is relatively easy. The hard part is
supplying them with fresh, clean and safe vegetables and
fruits through a well-oiled supply chain that links farms
and consumers, country and cities which seems so difficult
given the fact that Uttar Pradesh has an extremely
fragmented fresh produce-supply chain.
As fresh produce retailing is growing fast, the need to

establish strong backward linkage is increasingly
important. There is a vacuum of quality input services in
the rural areas and this is a sector that many of the retailers,
processors, and also third party service providers are keen
to venture into. The rural market for services such as
supply of quality seed, pesticides, technological knowhow
and extension services is ever expanding and this provides
a large business opportunity for the private players. Also, a
strong backward linkage can motivate farmers to enter
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into buyback arrangements with the retailers and

processors. It has a potential to create a win-win situation
wherein the farmers benefit from assured markets and the
firm can monitor the supply chain. Primary Agricultural
Cooperative Societies should be roped in for primary value
addition at the local level and marketing of members’ farm
products. For checking the infiltration of traders and
middlemen as sellers in farmers markets, the participating
farmers should be organized into management.
7.6.1 Direct Marketing – Farmers’ markets are beneficial to consumers also as they
Farmers’ Markets eliminate the middlemen and arrange facilities for the
farmers to sell their produce directly to organized retail,
processors and consumers at reasonable rates fixed every
day. It also involves farmers cultivating specific produce to
meet the demands of buyers. The study clearly indicates that
if farmers directly sell their fresh fruits and vegetables to
the consumers, it not only saves losses but the farmer’s
share in consumer rupee is also higher as compared to other
marketing channels. As such, it is extremely important that
the government promotes direct marketing of perishable
commodities like fruits and vegetables by farmers to
consumers.
In Uttar Pradesh, the proportion of marketed surplus that

farmers sell directly to consumers continues to be small
(a meager two per cent). Moreover, such direct marketing
is seen to have a declining trend due to the increase in
marketed surplus, shifting of processing activities from
consumer to the processors and increase in the demand
for processed, packed and branded products.
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Government should monitor the process of price discovery

in farmers’ market through a committee of farmers and
should take adequate care to fix the prices realistically. If
the prices in farmers’ market are higher than the local
market rate, there is no incentive to consumers. And if the
prices fixed are lower than the wholesale market rates,
there is no incentive to farmers. So a judicious balance has
to be struck.
A common problem faced in the farmers markets or the

direct market systems is the infiltration of the traders or
middlemen in the guise of farmers. Such a problem can be
minimized by issuing ‘Identity cards’ to genuine farmers,
regular monitoring and imposing strict penalties. The
participating farmers groups can be given this
responsibility as they have the highest stakes in curbing
this practice.
7.6.2 Setting up Terminal Terminal Markets, owned by a consortium of

Markets entrepreneurs, corporate houses or cooperative societies
or in Public-Private Partnership mode can be setup by the
State of Uttar Pradesh. Terminal markets can integrate farm
production with buyers by offering multiple choices to
farmers for sale of produce such as electronic auction,
direct sale to exporters, processor and retailers all under
the same roof. Terminal Markets can seamlessly link
farmers directly to the markets and provide more
alternatives to sell their produce and reduce the number
of intermediaries.
The key feature of these terminal markets in Uttar Pradesh

can be that they provide one stop solution including
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logistics (cleaning, sorting, grading, packaging facilities,

storage infrastructure, cold storage, ripening chambers)
and will operate under a Hub and Spoke model. The terminal
market (hub) can be located at a central site and can then
be linked to number of collection centers (spokes) which
are strategically located in key production areas. These
collection centers can also provide both farmers and buyers
state-of-the-art facilities for grading, transportation,
storage, domestic marketing and exports. The enterprise
owning the terminal market can collect user charges from
farmers and market participants for providing
infrastructural services provided that it’s within reasonable
limit (say 2%).
The State of Uttar Pradesh can provide land as its equity

contribution, rework its regulatory and legal framework
and above all provide a level playing field to private
enterprise for successful implementation of Terminal
markets. With reasonable and transparent service charges,
fewer intermediaries, less handling of fresh produce,
modern infrastructure for handling and processing of fresh
F & V, Terminal markets will ensure better produce quality,
storability, better price realization for farmers, significant
reduction in spoilage and higher processing rates. In
addition, Terminal markets will act as a healthy competition
to APMC markets forcing the latter to improve their service
and efficiency too.
7.6.3Promoting farmer’s The State of Uttar Pradesh should promote producers or

organization and NGOs farmers organizations by providing them financial support
for professional managerial services and for creation of
post-harvest handling/processing infrastructure. Producers’
174
organizations amplify the political voice of smallholder

producers, reduce the costs of marketing of inputs and
outputs, and provide a forum for members to share
information, coordinate activities and make collective
decisions. Producers’ organizations create opportunities
for producers to get more involved in value adding
activities such as input supply, credit, processing,
marketing and distribution. There is a need to strengthen
small farmer organizations, provide them with technical
assistance to increase productivity for the cost competitive
market, provide help in improving quality of produce, and
to encourage them to participate more actively in the
marketing of their produce in order to capture value added
in the supply chain.
The State of Uttar Pradesh should encourage companies to

proactively involve NGOs into their operations and even
organize farmer cooperatives or groups for more
sustainable horticultural business programs. The groups
or farmers’ organizations like cooperatives not only lower
transaction costs of the firms but also lower input costs for
the farmers and give them better bargaining power. With
the growth of organized retailing (like supermarkets),
farmers organizations should be provided support in the
form of necessary infrastructure of grading, sorting and
packaging that will help develop efficient farmer to fork
linkages.
7.6.4 Promoting Cooperative Shrinking farm sizes in Uttar Pradesh cannot be wished
marketing away and hence prudence lies in being able to innovate
and link this pool of farmers with the markets. India has
the legacy of mobilizing farmers in groups, be it as co-
175
operatives or farmers’ organizations as observed in the

dairy, poultry, and now in the horticulture sector. The
challenge lies in replicating the best practices (with some
innovation) and also learning from the failures. The dairy
sector in India is a classic example of how clustering of
small milk producers through co-operatives brought about
a revolution “Operation Flood”. There are several smaller
success stories in the horticulture sector, both in increasing
production as well as capturing even the most difficult
export markets in Europe and elsewhere. They range from
individual farmers, farmers’ companies, and corporate
houses, and in myriad commodities ranging from exotic
vegetables to grapes to apples, from baby corns to gherkins,
and so on. The State of Uttar Pradesh would do well to
emulate these.
7.6.5 Rural Business Hubs Rural Business Hub is a unique concept which can be
developed by the State of Uttar Pradesh under Public-
Private-Panchayat Partnership to address the problem of
poor market linkages, weak infrastructure, fragmented
farms, many layers of intermediaries and lack of
standardization / grading. The key objective of the RBH
can be to involve industry to improve / refine the locally
available resources and produce goods of quality and
standards that are nationally and internationally
acceptable. Although, the key features of RBH will be to
provide a mechanism for industry to procure agri produce
directly from the farmers, it should be conceptualized as a
model for overall development of the rural sector. The
industry can provide technology and know-how, good
farming practices, agriculture inputs, standardization and
quality enhancement measures, value addition, branding
176
and marketing, training and skill development and

elimination of non value adding activities and in return can
saves procurement costs and most importantly obtain
standardized and quality produce. Farmers, on the other
hand, will gain tremendous mileage in terms of higher
incomes through increased yields, improved quality,
transfer of know-how, entrepreneurship development and
reduced transaction cost. RBH can leverage on and dovetail
with on-going developmental schemes of the State
Governments at the local level. Since it will be based on the
Public-Private Partnership, the RBH can draw lot of
strength from the government schemes to ensure an overall
development of the rural sector, including setting up of
required infrastructure, accessing soft loans and
procurement of needed technology inputs.
7.7 Step 3: Rationalizing Fiscal The State of Uttar Pradesh should take into account the past
Structure development experience, harmonize the reform process
with socio-economic imperatives and at the same time,
create a institutional and financial architecture necessary
for sustaining a market-based economy governed by
principles of stability, predictability and transparency.
7.7.1 Harmonizing reform Fast pace of reforms is an essential but not the sole pre-
process with socio- requisite for achieving real, visible, equity-based,
economic imperatives sustainable development and balanced growth covering all
the sections of the population. While banking on the trickle-
down effect of economic growth to foster equitable
development, adequate safety nets for those likely to be
affected by the reform process have also to be put in place.
The State’s future growth and prosperity cannot be based
on the fortunes of the services sector alone. Such a growth
177
pattern has damaging repercussions in the long run because

a large majority of the population earns its livelihood from
the primary and secondary sectors. Revival of the
agricultural and manufacturing sector, therefore, holds the
key to achieving the target of 9 per cent GDP growth rate
as per the XIth Plan. Acceleration in growth calls for higher
levels of investments in critical socio-economic areas. The
resources will have to be found from within, through a
conscious process of fiscal recovery and consolidation.
The fiscal imbalance has to be brought under control by
reducing governmental non-productive/revenue
expenditure in proportion to GDP.
Reforms in the agricultural sector are vital because they

fulfill three main objectives of economic development —
output growth, price stability and poverty alleviation. The
reform program in the primary sector should include:
a. Creating an enabling environment for greater corporate

sector participation;
b. Integrating wasteland reclamation with watershed

development, rainwater harvesting and expansion of
irrigation facilities;
c. Improving production and productivity from land by

scientific adoption crop patterns and elimination of
subsidies which distort cultivation process; and,
d. Ensuring remunerative returns to the farm and non-

farm workforce with the objective of ending the
recession in demand from rural areas.
178
e. Redesigning incentive structures: In agriculture, the

incentive structure is highly skewed in favor of rice and
wheat through subsidized input provisions as also a
support price mechanism and a guaranteed
procurement network. This discourages farmers from
switching away from the traditional grain sector despite
prospects of higher gains from horticulture.
f. The open-ended subsidy regime (explicit and implicit)
will have to be replaced with one where the benefits
are restricted to intended beneficiaries.
7.7.2 Encouraging SMEs to The State of Uttar Pradesh should provide fiscal incentives
invest and encourage its Small and Medium Enterprises (SMEs)
to set up agro-processing units and add value to its fresh
produce. The State of Uttar Pradesh can coordinate with
World Bank and affiliate its SMEs to invest in the ‘’Agri-
marts’’ under World Bank’s MACP (Multi-Stage Agricultural
Competitiveness Project). The State can also get its APMC
modernized under this MACP project, eliminate middlemen
and ensure remunerative prices mainly to its small,
marginal and tenant farmers for their fresh produce by
increasing efficiency and reducing costs in the marketing
chain.
7.8 Step 4: Creating a Conducive The State of Uttar Pradesh must make public investments
Investment Climate in infrastructural development as it will stimulate private
investments and create an enabling environment that will
help attract both domestic and foreign investment. Of late
the issue of foreign direct investment in organized multi-
brand retailing is stuck in a policy debate, opening up of
which will be a boon for fresh produce sector and serve as
a major driver of agricultural growth. To invite investments
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into farm-to-fork retail and horticultural processing

ventures the state of Uttar Pradesh can waive select duties,
fees and registration charges.
7.8.1 Single window application The procedures for implementation of schemes related to
system horticultural marketing, including those intended to attract
private investment should be simplified. Single window
application system must be put in place with an integrated
ICT interface among all implementing agencies. There
should be a coordination mechanism for dovetailing similar
schemes implemented by different Departments within the
same Ministry and by different Ministries. A coordination
committee may be constituted that should meet every
quarter with all the heads/nodal officers of each Ministry/
department. The approval process for the projects must be
in a seamless ICT interface to prevent harassment of
entrepreneurs.
7.8.2 Key Areas for investment Core areas where the State of Uttar Pradesh should ask
private sector to come forward and invest is:
1. Small pre-cooling units and/or evaporatively cooled

chambers in the production areas where the field heat
of the produce is to be removed at a fast rate. The
purpose is to bring down the temperature of the fresh
produce to the desired level before it is put in cold
storage. The refrigerated transport units from the farm
to cold storage can also be utilized as mobile pre-cooling
units for this purpose.
2. Collection centre near the farms itself so the farmers’

time is not eaten up for unproductive work of
transportation and waiting in long queues.
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8.1 Single window application The procedures for implementation of schemes related to
system horticultural marketing, including those intended to attract
private investment should be simplified. Single window
application system must be put in place with an integrated
ICT interface among all implementing agencies. There
should be a coordination mechanism for dovetailing similar
schemes implemented by different Departments within the
same Ministry and by different Ministries. A coordination
committee may be constituted that should meet every
quarter with all the heads/nodal officers of each Ministry/
department. The approval process for the projects must be
in a seamless ICT interface to prevent harassment of
entrepreneurs.
7.8.2 Key Areas for investment Core areas where the State of Uttar Pradesh should ask
private sector to come forward and invest is:
1. Small pre-cooling units and/or evaporatively cooled

chambers in the production areas where field heat of
the produce is to be removed at a fast rate. The purpose
is to bring down the temperature of the fresh produce
to the desired level before it is put in cold storage. The
refrigerated transport units from the farm to cold
storage can also be utilized as mobile pre-cooling units.
2. Collection centre near the farms itself so the farmers’

time is not eaten up for unproductive work of
transportation and waiting in long queues.
3. Medium to small cold storage having multi-product,

multi chamber facilities where horticulture produce
can be stored in-transit
181
4. Specialized cold storage with facility of built-in pre-

cooling, high humidity and controlled/modified
atmosphere for the storage of fresh produce for a longer
period. These specialized storages are essential for
extending shelf life of the produce and without these
facilities proper storage of the produce to meet the
demand in the off-season would not be feasible.
5. Other components like ripening chambers close to the

markets.
6. Linkages for processing of fresh produce in various

marketable forms. The weak processing infrastructure,
as it exists today in Uttar Pradesh, has been one of the
major factors for ineffective utilization of raw materials
resulting in huge post harvest losses. During the study
period, it was observed that in Malihabad (Lucknow)
due to a glut situation in last fortnight of June 2010,
farmers were not getting even Rs 5/kg for their ripe
and good quality Dussheri brand mangoes. Moreover,
since small and marginal farmers dominate the
production sector, individual processing facilities are
not existent both due to skill as well as investment
capability.
7.8.3 Creating Horticultural The State of Uttar Pradesh should promote the concept of
Export Zones Agri Export Zones (AEZs) to ensure farmers get
remunerative returns in a sustained manner. Corporate
sector with proven credentials should be encouraged to
sponsor new zone or to takeover already notified AEZs or
part of such zones for boosting agri-exports. AEZ should
focus on the cluster approach of identifying the potential
182
products, the geographical region in which these products

are grown and adopt an end-to-end approach of integrating
the entire process right from the stage of production till it
reaches the market.
AEZs can yield benefits like strengthening of backward

linkages with a market oriented approach; improve
product acceptability and its competitiveness in domestic
as well as export markets; add value to the basic agricultural
produce; bring down cost of production through increased
economies of scale; improve price realization for
horticultural produce; improve product quality &
packaging; promote trade-related research and
development; and increase employment opportunities.
Services at AEZs can be managed and coordinated by State
Government/APEDA/Corporate sector and should include
provision for pre/post harvest treatment and operations,
plant protection, processing, packaging, storage and related
research & development etc.
To enable the Agri Export Zone achieve the objectives of

its concept and to make the projects viable, it is necessary
that the Governments at the Centre and Uttar Pradesh work
closely with each other. This would imply certain pro-
active steps to be taken by Uttar Pradesh with regard to
identification of a State Government institution/agency
which will be responsible for implementation and
coordination of the entire activity. The State of Uttar
Pradesh should set up single window problem solving desks
to promote zonal approach to horticulture exports; to
ensure availability of infrastructure, inputs, electricity, etc.
The state should redeploy its extension officers in the
183
Export Zones so that they interact regularly with APEDA

and organize training/activity on a regular basis with a
definite action program.
7.8.4 Mega Food Parks The State of Uttar Pradesh can support creation of Mega
food parks having a well-defined agri/horticulture
processing zone, containing state of the art processing
facilities with support infrastructure and well-established
supply chain. The primary objective of these food parks
can be to facilitate the establishment of an integrated value
chain, with processing at the core. Such an effort should be
supported by development of requisite forward and
backward linkages.
7.9 Step 5: Strengthening ICT At present, the small and marginal farmers of Uttar Pradesh
enabled Horticultural are unorganized and lack group action and bargaining
Information Network power. No wonder they get exploited by unscrupulous
commission agents who sit on a gold mine of information.
These commission agents have all the information on
demand as well as supply side by virtue of their unique
position in the fresh produce value chain.
Information regarding demand, supply, prevailing price,

demand forecasting, knowledge of consumer preferences,
marketing channels are extremely important for
augmenting income of farmers and to help them make
informed choices. The market information must help the
farmer to decide when to sell, where to sell and whom to
sell his fresh produce.
184
7.9.1 Enhanced role of ICT The advancements in ICT can be utilized for providing
accurate, timely, relevant information and services to the
farmers, thereby facilitating an environment for more
remunerative horticulture. It is important to realize that
given the disparities between different regions of Uttar
Pradesh in the level and quality of telecommunications,
information and the effort of individuals, public and
private organizations, and differentiated nature of demand
of the farmers in different areas, ICT initiatives need not
be uniform throughout Uttar Pradesh. The common
problems in adoption of ICT in rural segments are ICT
illiteracy, lack of availability of relevant and localized
contents in languages that farmer can understand, easy and
affordable accessibility, awareness and willingness to adopt
new technologies. One critical aspect in the usage of ICT’s
for farmers and their groups, as seen in some of the ICT
driven initiatives, is the involvement of human interface
at the last mile indicating the need for human intervention
in transmission of information/knowledge to farmers.
There is a need to research and understand as to how far
and the kind of ICT initiatives which can address the
farmers’ need so that better solutions can be developed to
address those unmet needs.
To start with, the State of Uttar Pradesh, should take

following steps on priority:
1. Integrate website for all agencies of both State and

Central Government involved in Agricultural marketing
services like APEDA, APMCs, CWC, SWCs, CACP, CCI,
DMI, FCI, JCI, KVKs, MPEDA, NAFED, TRIFED, NCDC,
NDDB,NHB, SAMBs, and STC.
185
2. Organize dissemination of market information through

electronic media, ICT media, telecommunication media
and print media.
3. E-link rural business hubs or rural primary markets

with exporters, supermarkets and retailers.
4. Strengthen the portal of AGMARKNET in PPP mode. The

portal should facilitate as virtual market with a window
for the farmers to inform about their produce and
practices and buyers to seek production/supply of their
choice. Such virtual market will benefit the Farmers
Groups to announce their production profile and solicit
buyers.
7.9.2 Electronic Auction for fair In order to maintain transparency and keep the farmers
price discovery well informed about his product prices, Agricultural
Marketing Department of Uttar Pradesh should install
electronic auction system at its APMC mandis. Azadpur
Mandi in Delhi has already installed this system. The system
should also keep a record of producer, quality, bid date and
time, number of boxes, exchange price and detail of
purchasers.
7.10 Step 6: Upgrading A marketing system backed by strong infrastructure is at

Infrastructure & the core of perishable, fresh produce marketing. Market
Extension Services infrastructure is important not only for the performance
of various marketing functions and expansion of the size
of the market but also for transfer of appropriate price
signals leading to improved marketing efficiency.
According to government data, under the Rural Godown
Scheme, UP, till March 2010 the state had a total of 917
186
rural godowns with a total storage capacity of 25.94 lakh

MTs. Of these, 174 new rural godowns, with consolidated
storage capacity of 10.68 lakh MTs were added in the past
two years. If we compare this with the total arrival of
agriculture produce in UP during 2008-09, pegged at a
whopping 397.44 lakh MTs, the resultant gap comes out to
be a over 10 times the storage capacity. Rough estimates
reveal that over 70% of total godown capacity of Uttar
Pradesh is used for storing potatoes and the remaining
produce is left to rot.
If food grains face the brunt of government apathy, fruits

and vegetables are worse off, with fewer cold storages and
warehouses. The quality of the harvested fruits and
vegetables depend on the condition of growth as well as
physiological and biochemical changes they undergo after
harvest. Fruits and vegetable cells are still alive after
harvest and continue their physiological activity. Cold
storages that exist in Uttar Pradesh are used largely for
storing potatoes and have little meaning for horticulture
produce other than potato. These cold stores lack separate
chambers that are needed for different fresh produce to
maintain different temperature zones. If all varieties of
fresh produce are kept in the same chamber, it would not
serve any useful purpose. During a focus group discussion
with mango farmers at Malihabad in Lucknow, a farmer
said, “Even in a leading producing area like Malihabad, there
is only one pack house for the fruit that is exported. Where
nearly 2500 MTs of mangoes are traded every day during
peak season, the pack house can only store 20 MT a day.
There is a huge spoilage which is either dumped on roads,
in farms or gets spoiled during transit.” Similarly, vegetables
187
also perish during transit as also after their arrival at APMC

mandis. In Lucknow’s Dubagga area, which houses the
largest F & V mandi of the city, tonnes of fresh produce
gets wasted due to lack of proper storage facilities. There
is filth all around and it stinks badly, a general lack of
hygiene is so evident there. The scene is no different in
other APMC mandis that we surveyed. During an interview
conducted in July 2010 at Varanasi mandi, a commission
agent said “During rains like these, the situation worsens.
Authorities never come to clean the mandis or see the
sanitary conditions here. Let there be few more days of
rains. The vegetable then come in contact with water and
rot. The extent of wastage is phenomenal. The authorities
promised us an air-conditioned market in which to sell
but that seems like a distant dream”.
If Uttar Pradesh has to usher a new paradigm in rural areas,

its horti-business vision must be to build infrastructure for
efficiency, value addition, logistics and market access. This
would improve farm incomes, create an efficient market
place for true price discovery of farm produce, drive major
initiatives to bring the best technology and thereby bring
about drastic improvements in farm practices. This in turn
would require improvements in physical infrastructure
such as roads (both highways and secondary feeder roads),
organized marketplaces with transparent information
systems, sufficient warehousing and cold-storage capacity
to minimize crop losses.
7.10.1 Preventing distress sale Marginal and small farmers of Uttar Pradesh neither have
the economic strength not infrastructure to retain fresh
produce with them till such time the market prices become
188
favorable. There is strong need in Uttar Pradesh to provide

the farming community with facilities for scientific storage
so that wastage and produce deterioration is avoided. Such
an action will also enable farmers to meet their credit
requirement without being compelled to sell the produce
at a time when prices are low. At present, due to shortage
of cold storage facilities and refrigerated transport
equipment, famers of Uttar Pradesh are not able to manage
their perishable fresh produce most of which happen to be
seasonal. Since most companies engaged in food processing
are in the small-scale sector (as per the Government
policy), it is difficult for them to achieve economies of
scale in storage and transportation. Capital investment and
investment subsidy proposals must therefore be
formulated to modernize storage, post harvest
infrastructure, existing agricultural markets, wholesale,
rural and periodic markets in tribal areas.
7.10.2 Public Private Partnership The APMC mandis in Uttar Pradesh collect significant
revenues from market fees but provide little service in areas
such as price discovery, grading or inspection. Most APMC
mandis lack adequate provisions for water, covered area,
drainage and waste disposal. The State must plough back
the market fee it earns for development of marketing
facilities and invest it in creating/upgrading infrastructure
in market yards/sub-yards. High investment and
entrepreneurial skills required for creation and
management of modern markets in Uttar Pradesh has to
come from private sector. This will facilitate greater
participation of the private sector, particularly for massive
investments required for the development of marketing
189
infrastructure and supporting services. The private sector

can bring the investment, management expertise and
efficiency, and thus complement the role of the public
sector. Wholesale markets in the state may be set up in the
private sector, with the state government of Uttar Pradesh
playing the role of a facilitator/promoter and regulator.
Various PPP models that can be explored include:
a. Joint Ventures,
b. Build-Operate-Transfer (BOT),
c. Build-Own-Operate- Transfer (BOOT).
7.10.3 Leasing out the existing The State of Uttar Pradesh can explore the possibility of
APMC markets leasing out existing APMC markets on long term contracts.
The possibility of upgrading and managing them through
Public–Private partnership can also be thought of. There
is also a need to encourage markets to be set up by the
private sector and farmers’ cooperatives. This will attract
private investment in creation of much needed marketing
infrastructure, create competition and ensure better
service to the farmers.
7.10.4 Promoting Contract The entire agricultural landscape of Uttar Pradesh is

Farming dominated by small and marginal farmers. In fact, 9 out of
10 farmers in Uttar Pradesh are either marginal or small
farmers. It is not practically feasible for these farmers to
cultivate and diversify into high-value horticultural crops
unless they know they can sell their crop. Similarly, traders
and processors will not invest in horti-ventures unless they
are sure that they can consistently procure the required
quality of fresh produce from farmers. In such a scenario,
190
contract farming offers a viable option wherein the industry

and farmers can join hands, form a symbiotic relationship
for mutual gains. In contract farming, the industry or the
prospective buyer enters into a contract with the farmer
and promises to buy the farmer’s produce wherein price
and other terms and conditions are pre-negotiated.
Sponsors (fresh produce retailers, processors or exporters)

usually provide free training to ensure that proper crop
husbandry practices are followed in order to achieve
projected yields and required quality. Contract farming
usually allows farmers access to some form of credit to
finance production inputs of farmers. The process of
technology/ latest scientific agri-practices’ adoption by
farmers gets catalyzed as they can now rely on external
resources for material and technological inputs. Contract
farming will also enable small and marginal farmers of Uttar
Pradesh to network and form a cluster thus improving their
viability in a dynamic agribusiness environment. Contract
farming that helps infusion of new technology, capital in
farm business and improves the bargaining power of small
farmers who lack a voice should be popularized and
encouraged by the State of Uttar Pradesh. Alternative
institutional arrangements should be explored across
different social and cultural settings prevailing in different
regions of Uttar Pradesh and farmers should be encouraged
to adopt such endeavors.
191
Figure 7.2: Contract Farming Model
192
Any relationship between small farmers and agribusiness

firms will be sustainable and successful only if there is an
increased competition among contractors for
procurement, guaranteed market for farmers produce,
effective repayment mechanism and updated market
information for farmers.
The government should rarely intervene or be a party to

contract farming arrangements but it should monitor and
motivate contractors for innovative pricing mechanisms
like bonus, share in company equity, and quality based
pricing. NGOs can play a useful role in promoting the
linkages of small farmers with fresh food retail and
processing companies, which should be encouraged as a
state policy.
While encouraging contract farming arrangements widely,

the policy makers in Uttar Pradesh need to protect the
interest of both the farmers as well as the industry equally.
This would require arrangement for registration of
sponsoring companies and recording of contract farming
agreements, in order to check unreliable and spurious
companies. A dispute resolution mechanism needs to be
set up at an approachable location for farmers which can
quickly settle issues, if any, arising between the farmers
and the company under a quasi-judicial procedure. The
farmers, while raising the contracted crops, run the risk of
incurring debt and consequent displacement from land in
the event of crop failure. Farmers need to be indemnified
from such a situation.
193
7.11 Step 8: Ensuring access to Transition from traditional foodgrain production to high
credit value horticulture leads to increase in cost of production
and risk involved. At present, farmers allocate their land
among alternative crops in order to maximize their
expected return. Small farmers practice multi-diversified
farming and grow a number of crops even on fragmented
plots, including allocation of area under seasonal fruits and
vegetables for maximizing their household income and
employment in almost all regions of Uttar Pradesh.
7.11.1 Adequate, timely and The State of Uttar Pradesh should organize timely and
hassle-free credit and hassle-free credit and insurance facilities for those small
insurance and marginal farmers who opt for diversification. An
initiative like this will motivate these farmers to diversify
with affordable risk and will also allow them to explore
different marketing channels rather than remaining
confined to a few commission agents with whom they feel
financially and morally bound once they receive
agricultural and non-agricultural credit.
In case of fruit orchards especially mango orchards in

Lucknow and Saharanpur, guava orchards in Allahabad,
rejuvenation of existing old unproductive plantations is a
crying need of the hour. This requires high capital outlay
which becomes a serious constraint in productivity
increase/area expansion under these crops.
Added to this is the long gestation period that the perennial

horticultural crops like mango, guava, banana, jackfruit or
litchi take to reach fruit bearing age. This calls for
liberalized credit facilities in easy installments which a
194
small farmer can repay to ensure that the benefits of

horticulture industry are gainfully exploited.
7.11.2 Negotiable Warehouse The State of Uttar Pradesh should explore the possibility of
Receipt System introducing ‘Negotiable Warehouse Receipts’ for the
following reasons:
a. To make it more attractive for banks to lend to the

farmers,
b. To reduce the cost of public support for agricultural
marketing,
c. To reduce transaction costs and
d. To improve price-risk management.
Warehouse receipts would make horticulture more

responsive to market opportunities and more competitive
vis-a-vis the world markets. Such a system will not only
help farmers avail better credit facilities and avoid distress
sale but will also safeguard financial institutions by
mitigating risks inherent in extending credit to farmers .
The pledging/collaterization of agricultural produce with
a legal backing in the form of negotiable warehouse receipts
will lead to increase in flow of credit to rural areas, reduce
cost of credit and will spur related activities like
standardization, grading, packaging and insurance and in
development of chain of quality warehouses.
7.12 Human Resource The State of Uttar Pradesh should periodically review the
Development level of professional competence of personnel in its
Agricultural Marketing System and accordingly
recommend areas for skill upgradation. The State
Agriculture Marketing Department should identify
195
consultants who can train farmers as well as extension

functionaries in latest cultivation techniques, cost
effective post harvest management, marketing and supply
chain management of fresh produce. It is important that
only those professionals who have a judicious mix of
theoretical as well as practical field level experience are
hired as trainers.
7.12.1 Producing trained The State of Uttar Pradesh, in consultation with private
managers sector, should explore possibilities of starting degree and
diploma courses in agri-marketing, food retail and supply
chain management with an eye towards increasing the
talent pool of skilled Agribusiness mangers. There is a need
for greater synergy between extension services and market,
State Marketing Departments and Boards, APMCs, Krishi
Vigyan Kendras (KVKs), Marketing Cooperatives and NGOs
to train marginal and small farmers in marketing related
skills like quality standards, terms of contract under
contract farming, provisions of various insurance schemes,
washing, sorting, grading, packaging of fresh produce,
primary value addition and to motivate them to organize
themselves in to marketing groups, which could take the
form of cooperatives, self help groups or even producers’
companies.
7.12.2 Professional management The State should organize APMC markets on the principle of
of APMC/ Wholesale a service industry as it is run in the private sector. In the
markets context of market regulation and development, the State
Government should:
196
a. Hold regular elections of agricultural produce market

committees and bring professionalism in the functioning
of existing regulated markets.
b. Plough back the market fee for development of marketing

facilities and investments for creation and/or
upgradation of infrastructure in market yards/sub-yards.
c. Priority should be given to cleaning, sorting, grading and

packaging facilities in villages, yards and sub-yards.
d. Extend greater flexibility to stakeholders, sellers as well

as buyers to interact in the markets. For this, the market
needs to be conceptualized in a wider context.
e. Ensure transparency in auction system, penalize traders

for arbitrary deductions from the farmers’ realization,
make prompt payments to farmers, disseminate market
intelligence and ensure speedier and hassle free
transactions in the market.
f. Improve weighing systems by installing bulk weighing

system and handling, in a time bound manner.
There is also a need to encourage markets to be set up by

the private sector and farmers’ cooperatives. This will
attract private investment in creation of much needed
marketing infrastructure, create competition and ensure
better service to the farmers. The State should prepare a
panel of professional consulting agencies and project the
investment opportunities. All the Ministries/Departments
can make use of them from time to time.
197
7.13 Recommended F & V It is evident that the modern value chains developed by the
Supply Chain for Small retail sector are a welcome change from the traditional
Farmers marketing approach. The changes brought about by the
fresh produce retail revolution are likely to have far
reaching implications for the stakeholders in this sector
including farmers, wholesalers and traders in the traditional
market, as well as small retailers. The extent of the impact
will depend on the share of organized retail in F & V
marketing and the involvement of small and marginal
farmers in these modern value chains.
Instead of leaving the important work of evolve sourcing

models to the retail companies, the State of Uttar Pradesh
should proactively facilitate the farmer groups to interact
and establish linkage with retailers through formation of
Fruit and Vegetable Cooperative Societies/Self Help
Groups/Farmer Interest Groups. It can take the help of
donor groups and non-governmental organizations in this
work. The infrastructure for primary handling needs to be
created in every village or group of villages in the form of
primary value addition and multi-purpose service centers
directly in the public domain or through Public Private
Partnership. These centers could be managed by
cooperatives, SHGs, farmers’ clubs and producer groups
and can then be linked to wholesale or retail markets. It is
important to initiate projects with Public-Private
partnerships that encourage the involvement of small
farmers in modern value chains by providing them training
in post-harvest management and by collaborating on input
supply and credit. This will help small and marginal
farmers get remunerative price for their fresh produce
198
despite their small marketable surplus and high

perishability of fresh produce.
In India, supermarkets are at a stage where they are setting

up farmer linkages which are likely to continue in the long
run. Initiating such projects will ensure the participation
of small farmers in modern value chains. Well coordinated
supply chain with clearly communicated relationships
among producers, traders, processors and consumers will
lead to a win-win situation for all stakeholders.
A fresh F&V value chain which emphasizes high levels of

performance and high levels of inter-organizational trust
can be used for promotion of enterprise development,
enhancement of food quality and safety, quantitative
measurement of value addition and promotion of
coordinated linkages among producers, processors and
retailers. A fresh food retailer which emphasizes shared
values and vision, transparent information sharing, shared
decision-making among its strategic partners, commitment
to the welfare of all strategic partners in the chain, fair
profit margins, business agreements of appropriate
extended length will be able to create capacity, combine
scale with product differentiation, cooperation with
competition and will be able to achieve collaborative
advantages in the marketplace.
The model of fresh F & V marketing under socio-economic

conditions of Uttar Pradesh should consist of the following:
1. Direct sourcing from the farmers and limiting the

intermediaries to bare minimum.
199
2. Value added activities such as cleaning, grading, packing,

primary processing, and storage should take place near
the farm or production center.
3. Organization of the farmers into growers’ groups/

commodity groups/cooperatives/self help groups/
producer companies to ensure the participation of
diversely located small and marginal farmers and their
linkage with the markets.
4. Continuous modernization of existing marketing

channels/systems so as to enhance the marketing
efficiency and efficiency of handling fresh produce.
5. State should introduce professional managerial

practices in running the markets and bring efficiency
into the system, even if it means outsourcing managerial
talent.
6. State should aim at bringing some of the existing markets

under professional management through Public Private
Partnership.
7. State should include quality consciousness among the

farmers in handling the fresh produce.
8. Capacity building of farmers for appropriate grading,

adoption of scientific horticultural cultivation and post
harvest management practices and food safety
standards should be an important area of focus.
9. State should promote consumer demand for safe and

healthy foods. Such a demand will drive the
implementation of food safety measures, which will
200
ultimately enable Uttar Pradesh to capture global

markets. Price incentives can also be thought of to
provide demand-pull for quality and safe food.
Within the above underlying principles, the following F&V

supply chain is recommended for Uttar Pradesh to ensure
that the smallholder producers are able to face the challenges
of a rapidly changing market environment and take
advantage of the opportunities offered by globalization.
Figure 7.3: Recommended F & V Supply Chain for

Small Farmers
201
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The ROAD MAP : Linking Small Farmers to Markets

The Road Map

Data Collection Team

1 . Gaurav Joshi, PhD (Agribusiness Management)

Gates Foundation Bill & Melinda Gates Foundation (www.gatesfoundation.org)

ASI /ACDI-VOCA Agribusiness Systems International (ASI), the funding

SEEDS A SEED (Socio Economic Entrepreneur Development Society),

Preface The aim of this research work is to come out

The idea is to study the effect of APMC act

A . Holistic impact of development process that

B . Potential impact of APMC amendment in Uttar

C . Impact on small and marginal rural farmers

We offer our sincere gratitude to officials of National

Chapter 1 Can India Fly.................................................................................................................................................................................................. 13

1.1 India: A Dominant World Economy

Chapter 2 Horticulture in Himachal Pradesh .................................................................................................. 31

2.1 Geography of Himachal Pradesh

Chapter 3 Horticulture in Uttar Pradesh .......................................................................................................... 51

3.1 Geography of Uttar Pradesh

Chapter 4 F & V Consumption and Retailing ........................................................................................................ 72

4.1 Indian Food Consumption Behavior

Chapter 5 F & V Supply Chain in India ...................................................................................................................... 86

5.1 Fresh Fruits: India versus the World

Chapter 6 Value Chain Analysis ................................................................................................................................. 104

6.1 Research Methodology

Chapter 7 Horticulture Road Map of Uttar Pradesh ....................................................................................... 163

7.1 State of Uttar Pradesh: From a Regulator to a Facilitator

References ........................................................................................................................................................................ 202

1.1 Global giants: Painting BRIC by numbers

3.1 Size of Holdings in Uttar Pradesh ( in thousand hectares)

5.1 Major Fruits Producing Countries in the World

6.11 Search Cost

1.1 Population trend of various countries

1.2 Percent Population 20-60 years

1.3 India-Horticulture Production Trends

1.5 Share of population in each income bracket

1.6 Share of average household consumption in India

1.7 Dynamics of modern Indian food value chain

2.1 Map of Himachal Pradesh

2.2 Increase in vegetable production-Himachal Pradesh (1950-51 to 2009-10)

2.3 Production Share of Different Vegetables in Himachal Pradesh (2008-2009)

2.4 Fruit Production in Himachal Pradesh

3.1 Location of Uttar Pradesh

3.2 Map of Uttar Pradesh

3.3 Sectoral Contribution to UP’s GDP

3.4 Different crop growing areas of Uttar Pradesh

3.6 Increase in Vegetable Production in Uttar Pradesh 1990-91 to 2008-09

3.7 Proportion of various major vegetables grown in Uttar Pradesh

4.1 Evolving food supply chains

4.2 Stages of building supply chain in India

5.2 Lending vegetable producing

5.3 Indian fresh F & V supply chain

5.5 A closer view of APMC wholesale markets

6.1 Marketing channel for Fruits Traditional vegetables-Himachal Pradesh

6.2 Marketing channel for exotic vegetables

6.3 A Broccoli Filed in of Himachal Pradesh

6.4 A Himachal farmer holding Joichoi

6.6 Marketing channel for Traditional vegetables-Uttar Pradesh

6.7 Price Build up in Okra chain in Uttarakhand

7.1 Steps Recommended for inclusive horticultural growth

7.2 Contract Farming Model

7.3 Recommended F & V Supply Chain for Small Farmers

Figure 1.1: Population trend of various countries

Figure 1.2: Percent Population 20-60 years