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The concept ‘Rural’ and ‘Marketing’, though used very frequently in various forums,
have eluded any precise and non- controversial definitions. When we join them, the
resulting concept ‘Rural Marketing’ means different things to different persons. This
confusion leads to distorted understanding of the problems of rural marketing poor
diagnosis and, more often than not, poor prescriptions.
The Indian rural market with its vast size and demand base offers great opportunities to
marketers. Two – thirds of countries consumers live in rural areas and almost half of the
national income is generated here. It is only natural that rural markets form an important
part of the total market of India. Our nation is classified in around 450 districts, and
approximately 630000 villages, which can be sorted in different parameters such as
literacy levels, accessibility, income levels, penetration, distances from nearest towns,
etc.
Rural marketing and urban marketing are identical as regards basic marketing structure.
However, rural markets and rural marketing have special features and dilemmas as
compared to urban markets. The rural markets offer a great scope for a concentrated
marketing effort because of the recent increase in the rural incomes and the likelihood
that such incomes will increase faster because of better production and higher prices for
agricultural commodities.
The rural markets dominate Indian marketing scene and need special attention for the
expansion of marketing activities and also for providing better life and welfare to the
rural people.
Given the development, which has taken place in the rural areas under the five- year
plans and other special programmes, today the rural market offers a vast untapped
potential. Development programs in the field of agriculture and allied activities, health
education, communication, rural electrification, etc have improved the lifestyles of poor
and the illiterate and some market agencies forecast the rural demand will supercede the
urban demand in the near future.
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Profile of Rural Marketing
During the last decade the rural consumers were in need for low end products
which would meet their basic demands and necesities. But of lately due to change
in technology rather advancement in technology the demand for people have also
changed and the buying pattern which initially comprised of basic products have
now shifted to luxiorous products.
In the 1st place, in terms of number of consumers, the rural market of India is a
very large market ; it consists of more the 600 million consumers. The second
aspect is that geographically, it is a vast market. Practically the role of India,
barring the metropolitan cities and towns constitute the market. It is also highly
scattered market: the consumers are scattered over 5,70,000 villages spread
through the length and breath of the country. In terms of business generated too,
it is a big market; 22000 crore rupees worth of non-food consumer goods are
being sold per year in the market at present.
3. Heterogeneous market
It is not as if the whole of rural India can be taken as one homogenous entity.
There is a great deal of difference among the various states in this regard. A study
conducted by IMRB provides some clue to the relative status of the rural areas of
different states. The study provides development index points for each state in the
country collected village level data on various parameters such as availability of
health and education facilities, the nature of facilities, availability of public
transport, electricity transmission, banks, post offices, water supply and so on. A
weight was decided upon for each facility, by type, based on the relative
importance of that facility in industry to the extent of development reached by that
village. The study has demonstrated that while the average village in India has 33
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development index points, Keralas average 88; Bihars is just 22; MP, Rajasthan
and UP are close to Bihar; and states like Maharashtra, Haryana, Karnataka range
between 40 and 50.
Regarding the nature of demand for various products, it can be seen that the
demand is heavily dependent on agriculture. And as a natural corollary, it is
seasonal in character. It is irregular as well, since agriculture in many parts of
India still depends on the vagaries of the monsoon. Rural demand is not only
harvest linked but also festival linked – the festivals often coinciding with the
harvest.
The rural consumer of India are also vastly diverse in terms of religious social,
cultural and linguistic factors.
Despite several inhibiting factors, the rural market of India has grown steadily
through the years. This is evident from the data presented earlier. Not only has
the market grown in quantitative terms, but qualitatively too, it has undergone a
significant change. Many new products have made their entry in to their rural
market basket. The upper segment in particular have started buying and using a
variety consumer products which were till recently unknown in the rural. In fact
the impression that the rural market is confined to certain traditional consumer
product and agri-inputs has totally lost its validity in today’s context.
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The size of India’s rural consumer group can be understood from the details provided in
the following table:
The table shows that now 76% of India’s total population is rural. If we consider the state
level picture, in several states like Uttar Pradesh, Madhya Pradesh, Rajasthan and Kerela,
the rural population constitutes more than 80% of the total population. And there are also
states like Bihar and Orissa where as much as 90% of the total population is rural.
Coming to consumer characteristics, it can be seen that in general sense, low purchasing
power, low standard of living, low per capita income, low literacy level and overall low
economic and social position are the traits of the rural consumers. By and large, the rural
consumers of India are a tradition bound community; religion, culture and even
superstition strongly influence their consumption habits.
Colgate Herbal’s priced at Rs.12 for a 50 gm, Rs.22 for a 100gm and Rs.41 for a 200gms
tube is an attempt to sell value added toothpaste at the lower end, where the Indian brands
are hoping to shut the multinationals. This is a variant for the boring white Colgate
cream, which is used over the years by the rural people. Also, since the literacy level is
low it’s advertising campaign never gave emphasis to the same old calcium content rather
this time more over giving importance to the latest technology and the natural qualities
that are well defined by the character “Billoo” in the advertisement.
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3. Location Pattern of Rural Consumers
Whereas the urban population of India is concentrated in 3,200 cities and towns, the rural
population is scattered over 5,70,000 villages. Statistics show that out of 5, 70,000
villages only 6,300 have a population of more than 5,000 people each. More than 3 lakh
villages or more than 55% of the total number of villages are in the category of 500
people or less and more than 1.5 lakh villages or 25% of the total are in the category of
200 people or less. The inference is clear; rural demand is scattered over a large area,
unlike the urban demand, which is highly concentrated.
Take the case of Colgate again. Why is it the leader in the dental care products? It did not
even leave the rural area with minimal of 200 people per village as compared to the
heavily populated area with an average population of 5000 people per village. Now, it has
established itself in such a way that people accept Colgate as the tube with red and white
box. Hence, they haven’t changed the color of the box for say a decade and a half.
4. Literacy level
It is estimated that rural India has a 23% literacy rate compared with 36% of the total
country. The adult literacy program launched by the government in the rural areas are
bound to enhance the rural literacy rate in the years to come. Two aspects need to be
specially emphasized: (1) In absolute numbers, there are 11.5 crore of literate people in
rural India compared with 12 crore in urban India, and (2). Every year 60 lakh is getting
added to the literate population of Rural India.
Looking at the second point there’s something for the company for the taking. Coco Care
had a brilliant strategy to market itself in different Indian villages, depending on the most
spoken language over there. Say in Maharashtra it had flyer distribution done in Marathi
as a medium of communication.
5. Rural Income
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An analysis of the rural income pattern reveals that nearly 60% of the rural income is
from agriculture. Evidently, rural prosperity and the discretionary income with the rural
consumer is directly tied up with agricultural prosperity. Anything that contributes to
agricultural prosperity will directly result in increase income for the rural population and
the consequent increase in their spending capacity. The pre dominance of agriculture in
the income pattern has one more significance ie- rural demand is more seasonal.
6. Rural Savings
Statistics reveal that in recent years, rural consumers have been drawn into the saving
habit in a big way. The commercial banks and the co-operative have been marketing the
saving habits in rural areas for quite some years. Today, as much as 70% of the rural
house hold are saving a part of their income. The habit is particularly widespread among
salary owners and self employed non-farmers.
Since the major income in the rural areas is from agriculture the demands turns out to be
seasonal. Take the example of Hero Honda Splendor; it had a major promotion done in
the crop-cutting season, as this being that golden season for the farmers.
Products where rural consumption growth rates are higher as compared to urban
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markets are as follows:
1. Packed Tea
2. Alcoholic Beverages
3. Tobacco Products
4. Medicines
5. Detergent Powder
6. Soap Cake/Bar
7. Detergent Cake/Bar
Literacy has brought about a change with respect to the rural outlook.
Green Revolution and after the Indian farmer has become prosperous.
The savings pattern of rural India has resulted in better buying power for
the rural consumer.
While the rural market of India certainly offers a big attraction to marketers, it would be
totally naive to think that any firm can easily enter the market and walk away with a
sizeable share of it. A firm seeking a share of this market has to work for it, as the market
bristles away with a variety of problems. The enterprise has to grapple with these
problems and find innovative solutions to them. In fact, only because a few pioneering
firms correctly understand these problems and came up with innovative solutions to
them, that we now see a wonderful trend of growth in rural markets.
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What are these problems? How are they peculiar to the rural market? And how does a
firm solve them?
a. Physical Distance
b. Language/Culture
c. Accessibility
d. Money/Expensive
e. Lack of Human Resource
f. Competition
g. Technology
h. Rules & Regulation
i. Lack of Information
j. Size of the Market
k. Buying Power
l. Image
Major Problems in Tapping the Rural Markets and the possible solutions are as
follows:
1. Managing Physical Distribution In Rural Markets
2. Channel Management In Rural Markets
3. Sales Force Management In Rural Markets
4. Marketing Communication In Rural Markets
The main problems in physical distribution in the rural context relate to:
a. Transportation:
Inadequate railways
Bad or no roads
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Immediate carriers or cargo operators
Eg. Accidents in India 1per day and 1 in 4 days complete loss to property and some life
b. Warehousing Problems
Unavailability of godowns
Marketing purposes
c. Communication Problems
Transportation problems
Transportation infrastructure is quite poor in rural India. Though India has the 4th largest
railway system in the world, many parts of the rural India remain outside the rail
network. As regards road transport, nearly 50% of the 576000 villages in the country are
not connected by roads at all. Many parts in rural India have only kacha roads and many
parts of the rural interiors are totally unconnected by roads with any mandi level town. As
regards carriers, the most common mode is the animal drawn cart. Because of these
problems in accessibility, delivery of products and services continues to be difficult in
rural areas.
Warehousing problems
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In warehousing too, there are special problems in the rural context. Business firms find it
quite difficult to get suitable godowns in many parts of rural India. And there is no public
warehousing agency in the interiors of rural India. The central warehousing corporation
(CWC) and the state warehousing corporation (SWC’s) which constitute the top tier in
public warehousing in India, do not extend their network of warehouses to the rural parts.
They go only upto the nodal points or major market centers. The warehouses at the mundi
level which constitute the second tier in the warehousing chain are mostly owned by
cooperatives. And the same is the case with rural godwons, which form the third tier.
None of these tiers function as public warehousing agencies ; they provide the
warehousing service only to their members. As such, a business firm has to manage with
the CWC/SWC network which stops with the nodal points, or it has to establish its own
depots or stock points run by its stockists / distributors. Of course, in such cases, the
commercial advantages of operating through a public warehousing agency like
CWC/SWC are lost to the firm.
Communication problems
The effect of these problems on the physical distribution front is certainly felt by any
business firm venturing into the rural market. They adversely affect the service aspect as
well as the cost aspect. Maintaining the required service level in the delivery of the
products at the retail level becomes very difficult. At the same time, physical distribution
costs get escalated with 80 per cent Of the total rural consumers living in the 'less than
1,000 people' category of villages. The scattered nature of the market and its distance
from the urban based production points, compound the difficulty arising from the
constraints in transportation, warehousing and communication. Larger pipeline stocks
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and bigger inventories in warehouses are the natural outcomes of these constraints. It
means higher costs of transportation, higher inventory carrying costs and transit and
storage losses. And as we will see in detail in the next section, costs of distribution
channels too are much higher in the rural context. Consequently, the total distribution
cost per unit is higher by as much as 50 per cent on an average in the rural market, as
compared to the urban market. In fact, the experiences of some companies operating in
the 2rural market show that the cost of distribution in rural areas is two and a half times
that of urban areas.
The marketers have to find solutions to the distribution problems. While deriving
solutions, the marketers have to keep in mind cost and the service to the consumers.
Some of the solutions are as follows:
The Firm can Share Physical Distribution Responsibility with Its Stockists or C & F
Agents
With a view to keeping the costs low, some firms try out remote control marketing. But
experience shows that firms with major aspirations in rural marketing cannot depend on
such remote control operations; they cannot take the route of ‘simply consigning the
goods’ and retiring the bills through banks.' For them, effective presence in the market is
a must. While it may not be necessary to have a netw6rk of own stock points throughout
the marketing territory, the firm should have a network of stockists or clearing cum
forwarding agents(C&F agents) at strategic locations for facilitating physical distribution
can be shared by the firm and the stockists.
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rural market of the country have to appreciate that the bullock carts play a major role in
secondary transport. They are available in plenty and they are ideal for the rural roads.
Companies like Hindustan Lever, Tomco Brooke bond – Lipton and ITC who are the
pioneers in rural marketing in India, have successfully experimented with company
delivery vans, for resolving the distribution problems in the rural market. The delivery
van takes the products to the retail shops in every nook and corner of the rural market.
Besides resolving the problem of product delivery, the van also serves certain vital
secondary purposes – it enables the firm to establish direct sales contact with thousands
of rural consumers; it also helps the firm in sales promotion. But the cost of operating
such vans is quite high. And the proposition can work only if the market/ area assures
business potential enough to cover such costs. In the case of HLL, ITC, etc; they knew
that such a level of business would accrue only out of a sustained and long term
marketing effort and market presence. These firms had the resources, as well as the will
to stay in the market. Through the system of operating the vans, they were not just
solving a transportation problem, they were developing the market. And they were
viewing the costs as a long term investment.
Syndicated distribution
While the company delivery vans are very useful in rural distribution, the idea cannot be
easily implemented by firms with relatively less resources. Syndicated distribution may
be of help in such cases, the firms can come together and encourage an independent
agency to operate such delivery vans with a view to hiring its services. The delivery van
here becomes a syndicated service.
The Company can also get assistance from stockiest. The stockiest can own or hire vans
or trucks and accordingly distribute the goods to the retailers and the dealers. The
company should help finance such kind of plant and projects.
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Central Warehousing Facility
The Central Warehousing Corporations (CWC) and The State Warehousing Corporations
(SWC) should also pay attention in providing suitable warehousing in rural areas. At
present the CWC and the SWC concentrate their warehousing activities only at major
markets. The smaller markets are handled by cash starved gram panchayat’s or Satellite
municipalities. There is an urgent need to have good warehousing facilities at local
market to. These have to be provided either by the government or the companies
operating in particular areas. A system can be devised where in a group of companies can
come together and have common warehousing facilities. Here the cooperative rule can
also help provide good warehousing facilities in rural areas.
The communication problems in the villages can be sorted out (mostly) by the
government alone. The marketer must make the government must make the government
realize the importance of rural markets and the corresponding network of post, telegraph
and telephones. Locally there are examples of private telephone exchanges that have
worked wonders for specific areas. However small exchanges have limited scope.
Recently the government has alone sent corporate partnership in printing and
disembursing postal and telegraphic material. However the experiment doesn’t seem to
have caught on.
Organizing an effective distribution channel is the second major task in rural marketing.
This task too is beset with many unique problems.
In the first place, the distribution chain in the rural context require large no. of tiers,
compared with the urban context. The long distances to be covered from the product
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points and the scattered locations of the consuming households cause this situation. At
the minimum, the distribution chain in the rural context needs the village level
shopkeeper, the mandi level distributor and the wholesaler/ stockists in the wholesalers /
stockists in the town. And on top of them, it involves the manufacturer own warehouses/
branches office operations at selected centers in the marketing territory. Such multiple
tiers and scattered outfits push up costs and make channel management a major problem
area.
The scope for manufacturers direct outlets such as showrooms or depots is quite limited
in the rural market unlike in the urban context. It becomes expensive as well as
unmanageable. Dependence of the firm on the intermediaries is very much enhanced in
the rural context as direct outlets are often ruled out. But controlling such a vast network
of intermediaries is a difficult task. Control is almost indirect. And because of these
factors the firm has to be more careful while selecting the channel members in the rural
context.
In addition, there is the problem of availability of dealers. Many firms find that
availability of suitable dealers is limited. Even if the firm is willing to start from scratch
and try out rank newcomers, the choice of candidates is really limited.
Moreover, sales outlets in the rural market at the retail level suffer from poor viability. A
familiar paradox in rural distribution is that the manufacturers incurs additional expenses
on distribution and still the retail outlets find that the business is not remunerative to
them. The scattered nature of the market and the multiplicity of the tiers in the chain use
up the additional funds the manufacturer is prepared to part with. And no additional
remuneration accrues to any of the groups. Moreover, the business volume is not
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adequate enough to sustain the profitability of all the groups and the retail tier is the worst
sufferer.
Distribution in rural markets is also handicapped due to lack of adequate banking and
credit facilities. Rural outlets need banking support for the three important purposes:
As banking facilities are inadequate in the rural areas, the rural dealers are handicapped
in all these aspects. It is estimated that there is only one bank branch for every fifty
villages.
Analysis shows that many companies hesitate to venture into rural markets largely
because of the problems on the distribution front. They find it uneconomic to operate
outlets in rural areas as in their perception, cost of selling, cost of transportation, cost of
sub – distribution and cost of servicing the outlets are all very high in the rural market.
Taking due note of the difficulties, let us see how a firm can go about these tasks.
It has been estimated that the Indian rural market is composed of 22,000 primary rural
markets and 20 lakh retail sales outlets of which nearly one lakh are fair price shops of
the Public Distribution System (PDS). One retail shop serves on an average 60 to 70
families in the rural areas. The structure involves stock points in feeder towns to service
these retail outlets at the village level. The stock points belong to either the manufacturer
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or the marketer / distributor for the area. In either case, the stock point in the feeder town
is the key to rural distribution.
Today, the channel types that are available in the rural markets are as follows:
The Fair Price Shops (FPS), (co operatives or private), of the PDS
Out of the above, the cooperative societies are mainly concerned with the distribution of
agricultural inputs and the FPS with the distribution of essential commodities consumed
by the common man. The 'village shandy' is a widely used channel of the rural market.
But its role in marketing branded products is somewhat limited.
For a large variety of consumer products, the private shops are the main channel in the
rural markets; they are also the cheapest and the most convenient channel to align with.
As such, we shall examine in some detail how the private village shops are utilised by the
business firms in their rural distribution effort.
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enlarges the inventory holding further. And as his sales are not uniform throughout the
year, he has to carry the inventory over a longer period of time. All these factors lead to
the blocking up of his capital. The scope of compensating for the higher costs through
increased mark up is rather limited. He cannot add a higher mark up on many of the
products he is handling simply because the consumer he is catering to cannot afford to
pay a higher price. Nor is he able to make up by increased turnover. The average daily
turnover of a rural shop is often less than Rs200. Even this level of turnover is generated
only when he extends credit to his customers. And he incurs additional expenses for the
frequent trips he has to make to the supply points in the towns/market centres. But in
spite of all these handicaps of low turnover, high inventory costs and inadequate
marketing support from the principals, the village shopkeeper operates quite efficiently.
He achieves this feat largely through his inborn ability for astute management of money
and other inputs. He also puts in hard work. He keeps his shop open for 14 hours a day
compared to the 8 hours service provided by the urban shops. And he keeps his shop
open for 365 days in the year with the support of his wife and children and ensures that
he does not miss a single possible sale. In fact, it is mainly this human labour, the cost of
which neither, gets accounted or paid for that makes the traditional private village shops
of India one of the cheapest distribution channels in the world.
It is quite natural that firms seeking an effective presence in the rural market willingly
embrace the private village shops as the major component of their distribution outfit.
And on their part, the village shops function as an effective bridge between the scattered
rural consumers and the urban-based producers.
Organising one’s channel out of these private shops, however, requires assiduous efforts
on the part of the firm. It has to select its outlets from out of existing shopkeepers or
select a few freshers and appoint them as the outlets. The choices are usually confined to
the following categories:-
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Land owners willing to branch off to trade
The firm has to select personnel from among the above groups depending on the product
line and other relevant factors and then train them and develop them into competent
dealers.
Satellite Distribution
A concept that has come to be known as satellite distribution can be tried in developing a
distribution channel in the rural market. Under this system, to start with, the firm appoints
stockists in feeder towns. They take care of financing goods, warehousing of goods and
sub- distribution of goods in the area covered by the feeder town. The firm also appoints
a number of retailers in and around the feeder towns and attaches them to the stockists.
The firm supplies the goods to the stockists either on cash or on credit or on consignment
basis. The stockists take care of the sub-distribution job on the terms and conditions
determined by the firm.
The sales volume of the retailers will vary depending on the potential of the area covered
and the capacity of the dealer concerned. Over a period of time, some retailers grow in
terms of business turnover. If such retail points also happen to be transportation centres
within the feeder town area, the firm elevates them as stockists. The area of operation of
the original stockist shrinks in this process, but care is taken to see that his, volume of
business does not shrink. This is achieved, in practice, on account of the growth in
demand and deeper market penetration. If twenty retailers operate in the network of an
original stockist, five or six of them get elevated over a period of time as stockists. Out of
the retailers some remain attached to the original stockist and others are attached to the
new stockists, depending on location, service convenience and other relevant factors. The
process continues as long as the market keeps expanding just like the second-generation
stockists, a set of third generation stockists get established in course of time. And at any
point of time, enough retail points invariably hover around a particular stockist. Hence
the name satellite distribution. The main advantage of this system is that it facilitates
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market penetration in the interiors of the rural market. However, the firm must ensure that
in the process, the motivation of the earlier generation stockists is not destroyed due to
overzealous and premature elevation of the retailers into stockists.
From the factories, the products move to about 40 C & F agents. From there, the
products reach 3,500 stockists located in towns with population of upto 20,000. From
these stock points, the stocks reach the remotest rural markets going through the semi-
wholesalers; some stocks move directly to village shops. The company's salesmen spend
30 per cent of their time visiting the rural dealers and consumers. Special distribution
methods are used to suit specific regions, specific climatic zones and villages with
specific conditions of accessibility. The products are sold at a uniform price in 3,500
towns and 70,000 rural locations.
Lipton India, now Brooke Bond-Lipton India Ltd, also has an extensive rural marketing
outfit. In fact, today, their distribution network is the largest rural market network.
Lipton's network alone is composed of 660,000 selling outlets consisting of 430,000
dealers and 230,000 catering points serviced through a network of 3,000 redistribution
stockists. The network is indeed mammoth in width and depth of distribution and market
coverage. Many of the 230,000 catering points are serviced each and every day and
others serviced every week by a large sales force comprising 1,260 salesmen. And this
mammoth distribution outfit endows Lipton with a unique 'bazaar power' in the rural
market. While the major part of sales turnover of most big business firms comes frorn 12
big towns in the Country With a population of more than one million, more than 70% of
Lipton’s sales comes from semi- urban and rural areas and only 11% of it sales comes
from the 12 big towns.
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Promoting the Viability of the Village Level Outlets
Promoting the viability of the retail outlets is an important part of channel management in
the rural context. In the first place, the firm -must appreciate that maintaining a network
of retail outlets in the rural market becomes a viable proposition only over a period of
time. The firm must be willing to view rural marketing as a long-term venture. Secondly,
the firms must help improve the viability of the retail outlets by encouraging and helping
them deal in a number of product lines. Quite often, the retail dealer is not in a position
to organise such activity by him. The firm can assist him in this regard. In fact the firm
can go a step further - it may collaborate with other firms and make a joint retailing offer,
promoting thereby viability of the retailer’s operations.
The firms and the government should launch a drive to develop retail outlets and
arrange for loans for the retailers who are willing to take up ownership. The companies
can provide financial assistance in terms of credit and initial write off. Assistance as far
as handling and training in areas alien to the rural retailer should be provided free of cost.
Other necessary infrastructural facilities like construction material, know how, etc
should be provided by the manufactures and the government in a joint venture type basis.
Loans to this effect may be provided on a low interest basis.
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Let us now turn to personal selling and sales force management in the rural context. As a
general rule rural marketing involves more intensive personal selling effort compared to
urban marketing.
Rural Marketing Calls for Some Unique Traits on the Part of Salesmen
While the basic traits of personal selling such as empathy, enthusiasm, communication
skill and knowledge of selling techniques are required in equal measure by urban and
rural salesmen, the latter require certain additional traits and capabilities in order to match
the peculiar conditions of the rural market.
First of all, only those who are genuinely happy in living and working in the villages can
become good rural salesmen. It is common knowledge that the rural areas lack modem
amenities compared with the urban areas, Because of this factor, salesmen are generally
reluctant to work in rural centres. To circumvent this problem, some firms locate their
salesmen in towns and allow them to cover the rural areas assigned to them from these
towns. Experience has shown that such an arrangement does not produce optimum
results. Experience has also shown that successful rural marketing firms locate their rural
salesmen right in the midst of the rural market to be covered. Lipton India for example,
has located one of its salesmen in Khategaon, an interior place in Deva district in Madhya
Pradesh. It takes three hours by bus to reach the location from Indore Similarly, it has
located a salesman at Anthiyoor in Tamil Nadu, which can be reached (only after a 2 1/2
hours journey by bus from Coimbatore followed by half an hours walk through paddy
fields. The company proudly cites this practice as one main source of its bazaar power.
Cultural Congruence
Location is just the starting point. The salesmen must have proper acquaintance wi6 the
cultural pattern of rural life in the given rural territory. Since the cultural pattern of rural
communities differs from one another, a cultural background that is in consonance with
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the culture of the given rural community is a specific requisite of success for the rural
salesmen. Urban markets in contrast, present a cultural convergence.
Rural salesmen must also be able to guide the choice of products. They should not hook
the customers into buying all the products in the catalogues. On the contrary, they must
help them eliminate items that are outside their specific requirements and those that are
beyond their financial reach.
Attitude Factors
Attitude factors are of particular significance in the rural context. For example, the rural
salesmen must have a great deal of patience, as their customer is traditional and cautious
person. Perseverance is another essential trait. It will not be possible for the rural
salesman to clinch the sale quickly. He may have to spend a lot of time with the customer
and make several visits to him to gain a favourable response from him.
Another special requirement is that the rural salesman should be well versed with the
local language. Whereas his urban counterpart can successfully manage with English and
a working knowledge of the local language, the rural salesman needs a strong background
of the local language. In fact, he has to go one step further; he must be well versed in the
specific lingo and idiom of the local area/community, for, in rural India, within each
major language group, the colloquial expressions and speaking manners vary
considerably from locality to locality.
The rural salesmen are often required to handle a much larger number of product lines
compared with their urban counterparts. In urban marketing the salesmen are able to
generate economic size of business through a limited number of product lines. As such,
their employers do not have to load them with too many items. The rural salesmen on the
contrary, usually do not generate economic volume of business if they handle just a few
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products. They are compelled to handle a large variety of items. Quite often, the items
differ widely from one another. In other words, the rural salesmen are required to become
a jack of all trades. The rural salesmen are also required to travel more compared with
their urban counterparts. Whereas the urban salesmen move in highly concentrated and
compact market segments, the rural salesmen have to cover larger territories and
scattered customers. Their workload and strain could therefore be more.
Greater Creativity
Rural selling also involves greater creativity. Often, the products concerned may be very
new in the rural context. The rural salesmen cannot sit back and say that it will take,
several years for a particular product to penetrate the rural market. On the other hand, he
must endeavour to introduce them in the rural areas through creative selling, using the
consumption pioneers and opinion leaders. Rural marketing also presupposes the delivery
of a new standard of living to the rural masses. It is essentially developmental marketing.
The rural salesman has to be a carrier of a developmental message to the less privileged
rural community.
In tune with the special requirements which the rural sales force has to meet, the task of
sales force management too carries certain added dimensions in the rural context. In
selecting the salesmen, in giving them orientation, in motivating them and in developing
them the sales manager has to adapt to the unique requirements of rural selling. For
example, while providing orientation to the newly recruited rural salesmen, the sales
manager may have to devote a longer time. And mere classroom training will not meet
the requirements of orientation of rural salesmen. The salesmen need comprehensive on
the job coaching in selected village markets. And they need to be educated about the
rural marketing environment in addition to being trained in salesmanship and selling
techniques. The rural sales manager must also support his salesmen with non-
23
conventional means of market promotion suitable to the rural consumers. Rural salesmen
also need more intensive sales training & as they have to handle a variety of products.
In short, sales force management in the rural context becomes an exacting job, especially
when the firm has big stakes in rural marketing and when it operates on a nation wide
basis. For example, Hindustan Lever's rural salesmen have to cover 70,000 rural
locations. Administering such a large and scattered sales force, supervising them,
supporting them in sales calls, coaching them on the job, attending to their official and
personal problems and above all, motivating them for better results in an exacting task for
the sales manger.
The literacy rate among the rural consumers being low, the printed word has
limited use in the rural context. In addition to the low level of literacy, the
tradition bound nature of the rural people, their cultural barriers and taboos and
there overall economic backwardness adds to the difficulty of the
communication task. The situation is further compounded by the linguistic
diversity. Rural communication has to necessarily be in the local language and
idiom. The constraints of media further compound the difficulty. It has been
estimated that all organised media put together can reach only 30 per cent of the
rural population of India TV is an ideal medium for communicating with the
rural masses. But its reach in the rural areas is limited even today. As regards
the print media, the various publications reach only 18 per cent of the rural
population. Even in areas reached, the circulation is limited. And as already
24
mentioned, the low literacy level of the rural population acts as a further
inhibitor in the use of the print media in rural communication. Cinema is
relatively more accessible. It has been estimated that 33 per cent of the total
cinema earnings in the country come from rural India. Rural communication has
also become quite expensive. For rural communication to be effective, repeat
exposures is a must; and if the gap between exposures is long the message loses
its edge during period. These factors make rural communication more
expensive. Rural communication has to go through all the time consuming
stages of creating awareness, altering attitudes and changing behaviour. In
addition, it also has to work against deep-rooted behaviour patterns.
1. The literacy rate is low. Therefore usage of print media or for that matter
any print material is redundant. Moreover even the segment that can be serviced
by printed material is multi-lingual in nature.
2. There is social backwardness in rural areas. This implies that in most of
the consumer durable segment the user is seldom the buyer or the decision
maker.
3. There is an indifferent attitude towards the purchase of certain goods
such as packed food, high price premium soaps, hair oils, toothpaste etc. because
they are used to the traditional way of consumption.
1. About 30% of the rural masses can be reached through organized media
25
such as TV, radio, newspapers etc. Theoretically TV covers 25% of the rural
population, radio about 90% and the press around 20%. But in reality the %’s
can be still lower.
Media Mix: Apart from the organized media like TV, Radio, Newspaper
and the press, the rural marketer or the advertiser is expected to make correct
use of the following:
26
manner:
ii. Information centers or service centers where rural consumers can sort
information and advice regarding the use of certain products such as
agricultural inputs and machinery.
What works in the urban market may not in the rural areas that are with respect to
marketing. Pesticide used by the farmers are same or similar to what are used in urban
households but have to be packed or packaged and distributed differently due to the
differentiation in usage. Also pricing becomes a factor here. Similarly water is the
universal commodity i.e. either piped or bottled for the urban consumer and canalled or
irrigated for the rural farmer. Therefore the marketer must bring the right product to suit
the needs of the rural consumer. In this connection the following can be considered
motivating.
1. Packaging: Unlike the Eg., given earlier the rural consumer prefers smaller
packages this is because
The rural consumer buys in low quantity due to low purchasing power.
27
Secondly the rural consumer may be trying out the product and doesn’t like to be
saddled by the larger quantities.
While designing the packages, the color, design and quality of the pack is of great
importance. The rural consumer may prefer a pack with either dark or bright or both
dark and bright colors in a contrasting combination. He may also prefer packs that
have fancied designs. As far as the quality of the pack is concerned he may not mind
medicour packaging and even no packaging if this results in lower prices.
2. Product Quality: It is of utmost importance. The dimensions of the quality that are
to be considered are durability, features and serviceability in that order. In no way,
the marketer must ever even think of sacrificing quality or manipulating its winning
combination dimensions. This is because the fragile rural consumer may loose faith in
the product and may either resort to alternative brands or traditional products. The
new product should not only excite him but also satisfy him.
3. Pricing: The product pricing must be reasonable and must depend upon the quality of
the product. Distributing to various rural areas is very expensive. However the cost of
this should not be transferred under any circumstances on to the rural buyer. It should
be noted here that the rural consumer is highly price sensitive and competition is not
between competitors but with the fact of “no-use”.
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Agricultural Marketing
The study of agricultural marketing comprises all the operations, and the agencies
conducting them, involved in the movement of farm-produced foods, raw materials and
their derivatives, such as textiles, from the farms to the final consumers, and the effects of
such operations on farmers, middlemen and consumers. Agricultural marketing is the
study of all the activities, agencies and policies involved in the procurement of farm
inputs by the farmers and the movement of agricultural products from the farms to the
consumers. The agricultural marketing system is a link between the farm and the non-
farm sectors. It involves all the aspects of market structure or system, both functional and
institutional, based on technical and economics considerations, and includes pre and post-
harvest operations, assembling, grading, storage, transportation and distribution. A
dynamic and growing, agricultural sector requires fertilizers, pesticides, farm equipments,
machinery, diesel, electricity and repair services which are produced and supplied by the
industry and non-farm enterprises. The expansion in the size of farm output stimulates
forward linkages by providing surpluses or food and natural fibers which require
transportation, storage, milling or processing, packaging and retailing to the consumers.
Importance
Agricultural marketing plays an important role not only in stimulating production and
consumption, but in accelerating the pace of economic development. The agriculture
marketing system plays a dual role in economic development in countries whose
resources are primarily agricultural. Increasing demands for money with which to
purchase other goods leads to increasing sensitivity to relative prices on the part of the
producers, and specialization in the cultivation of those crops on which the returns are the
greatest, subject to socio-cultural, ecological and economic constraints. It is the
marketing system that transmits the crucial price signals.
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1. Agricultural Marketing is one of the manifold problems, which have direct
bearing upon the prosperity of the cultivators, as India is an agricultural country
and about 70% of its population depends on agriculture.
2. Most of the total cultivated area (about 76%) is to under food grains and pulses.
Approximately 33% of the output of food grains, pulses and nearly all of the
productions of cash crops like cotton; sugarcane, oilseeds etc. are marketed, as
they remain surplus after meeting the consumption needs of the farmers.
Development of technology, quick means of communication and transportation
has introduced specialization in agriculture.
3. Agriculture supplies raw materials to various industries and therefore, marketing
of such commercial crops like cotton, sugarcane, oilseeds etc. assumes greater
importance.
4. With the introduction of green revolution agricultural production in general and
food grains in particularly has substantially increased. Agriculture once looked as
a subsistence sector is slowly changing to a surplus and business proposition.
5. The interaction among producers, market functionaries, consumers and
government that determine the cost of marketing and sharing of this cost among
the various participants.
6. The producer, middleman and consumer look upon the marketing process from
their own individual point of view. The producer is primarily concerned with
selling his products.
7. Any increase in the efficiency of the marketing process, which results in lower
costs of distribution at lower prices to consumers, really brings about an increase
in the national income.
8. A reduction in the cost of marketing is a direct benefit to the society.
9. Marketing process brings a new varieties, qualities and beneficial goods to
consumers and therefore, marketing acts as a line between production and
consumption.
10. Scientific, systematic marketing stabilizes the price level.
11. An improved marketing system will stimulate the growth of number of agrobased
industries mainly in the field of processing.
30
12. A marketing system can become a direct source of new technical knowledge and
induce farmers to adopt upto date scientific methods of cultivation.
Most Indian farmers are small cultivators, they produce crops that are seasonal in nature,
vulnerable to failure, differ from area to area (region to region) and are certainly
perishable. Economically agricultural produce is inelastic because it is difficult to vary
the output in response to the price. Agricultural produce is bulky in nature hence difficult
to transport and very much vulnerable to the forces of nature.
Next, these small cultivators are unorganized and scattered all over the country. They
have little time or inclination for gaining knowledge about the marketing side of their
operations. These farmers cannot organize themselves so as to bargain on equal terms
with buyers to operate on a large scale and have powerful organizations behind them.
Further most of the Indian farmers have loans for sowing and are heavily in debt. Thus
they are forced to sell their produce immediately after the harvest and that too in their
own villages.
The 2 basic elements of agricultural system are production and marketing. Marketing of
agricultural produce is as important as production itself. As a link between producers and
consumers marketing plays an important role not only in stimulating production and
consumption but also in increasing the pace of economic development. Its dynamic
functions are thus of primary importance in promoting economic development activities
and for this reason it has been described as the most important multiplier of agricultural
development.
31
without providing efficient marketing machinery, which can ensure fare, returns to the
producer-seller. Carries no conviction with the farmer. The United Nations conference on
food and agriculture held in October’ 95 at Quepec says, “Marketing is the crux of the
whole food and agricultural problems”. It would be useless to increase the output of food
and would be equally futile to setup optimum standards of nutrition unless means could
be found to move food from the produce to the consumer at a price, which is
remunerative to the producer and within the consumer’s ability to pay.
The cost of marketing agricultural produce forms a substantial percentage of the price the
consumer pays for it. This cost includes expenses borne by the cultivators till the
assembly stage and those borne by wholesellers, distributors and retailers. The total
marketing cost cannot be considered independently without relating it to the ultimate
price realized by the producer. The marketing sector, infact, plays an active role under
certain circumstances by changing the demand and cost functions in agriculture in such a
way so as to encourage its expansion.
Fundamentally there are 3 entities involved in the marketing system they are as follows:
1. Producer
2. Consumer
3. The Middlemen
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Each of these entities has its own objectives, which often conflict with the others interest.
The producers after making a lot of investment and putting in lot of hard work would
naturally look forward to get the largest/best possible returns for his produce. The
consumer on the other hand would like to get his required quantities of goods of pure
quality at the least possible price. The middlemen would aim at realizing the largest
possible net profits from the deal. An efficient marketing system should, therefore, aim at
balancing this conflicting interest in such a way that each entity gets a fare deal.
Firstly, If the additional produce does not move to the market to bring additional
revenue to the farmers, it may work as a disincentive to increase production.
Secondly, If the system does not support supply food-grains and other agricultural
commodities at reasonable prices to the consumer at the time and place needed by them,
increased production has no meaning and plays no role in the welfare of society.
Thus the farmer in general sell his produce at an unfavorable place at an unfavorable time
and usually gets very unfavorable terms. It could be observed that inadequate credit
facility to the farmer is the root cause of all defects in the agricultural marketing system
in India where the poor peasants are under the firm grip of the moneylenders.
The market structure in India is saddled in the long chain of middlemen between the
cultivators and the ultimate consumer. These middlemen take away the Lion’s share of
the price paid by the consumer and consequently the farmer-seller gets a poor price in his
share.
Markets for agricultural commodities may be broadly classified into 3 categories viz.
33
There are various dimensions of markets which can be classified on the basis of the
following dimensions:
1. Wholesale Market
Primary
Secondary
Terminal
Primary wholesale markets, where the bulk of arrivals is from village or village hats.
These market are periodically held, either once or twice a week or at longer intervals or
on special occasions. Agricultural produce, or livestock or both are sold in these markets.
There are about 22000 such markets located mostly in the interior of the country. The
area served by a hat or a shandy varies considerably. In some cases it is only one village
but in others it may have a radius of 6 or 7 miles.
34
These markets deal in sale of Fruits and vegetables, food grains, cloth; earthen wares, lac
and glass bangles and articles of daily use and transactions take place either for cash or
exchange in household requisites.
Such markets are organised by village panchayats and every shopkeeper has to pay some
rent for the space he occupies. Here haggling and bargaining is a common feature. The
village bania acts as a middleman in return for a small commission.
Such markets are known as Painths or hats in U. P., Bihar, Orissa and West Bengal, and
Shandies in south India.
For the up keep of such markets superficially 3 types of taxes are collected viz.
a. Sales Tax
b. Service Tax
c. Place Tax
However in practice a large number of ritualistic deductions and local taxes are applied to
the produce sold here.
Secondary wholesale markets, also known as mandis and Gunjs, stretch over a wide area
covering from 10 to 20 miles. There are about 1,700 such markets in the, country. In
these markets, the bulk of the arrivals is from other markets. These are usually situated in
the district and taluka headquarters, important trade centres or near railway stations.
Here transactions are generally between wholesalers or between wholesalers and
retailers.
Secondary Markets functions are usually in urban and semi-urban areas. Here facilities of
storage and banking are available. Mostly wholesale as well as retail trade both take place
in the same complex simultaneously. A large number of intermediaries exist in these
35
markets. The traders who purchase from the primary markets in wholesale trade, they buy
in these markets. The manufacturers who use agricultural produce as a primary input
purchase raw material in wholesale in these markets. The wholeseller performs the
marketing function of assembly and distribution. It may be noted that the actual producer
the “Farmer is completely absent in wholesale markets”.
Terminal Markets
Terminal Markets are those in which the produce is either finally disposed of directly to
consumers or processors or assembled for shipment to foreign destinations or for
redistribution to surrounding areas. Such markets are usually the ports, which possess
sufficient warehousing and storage facilities and cover a very wide area extending over
even a State or two.
It may be observed that a particular market may function as a Primary wholesale market
for some agricultural commodities, which are produced locally and as a secondary market
for other commodities. Again, even for the same commodity a market may function as
primary wholesale market for certain parts of the year and as a secondary wholesale
market for the rest of the year.
2. Retail Markets
These markets are found scattered all over the town or a city or concentrated in particular
localities. They are owned by the retailers subject to municipal control. They usually
deal in all types of produce and serve the needs, of the city people as well as the
surrounding villages. Cloth market, sharafa market, grain mandi, vegetable market, shoe
market, hardware market, sweetmeat market and grocery market are usually found
located in different parts of the city.
Retail (Primary) Markets are basically assembly markets that are not regulated. They
serve as convenient points fro assembling, distribution and exchange of goods moving
from villages to bigger cities, for consumer goods also these primary assembly markets
become convenient points for reverse movement from industrial sectors (big cities) to the
36
villages. The trader being both buyers (of agricultural produce) and sellers (of consumer
goods) ignore the interest of the farmers.
3. Fairs
These are held, on religious occasion, at pilgrim centres and number over 1,700.
Of the total 50% deal in live-stock only; 10% deal both in live stock and
produce and 40% deal in agriculture products only. Produce fairs are all found in
Bihar and Orissa only, While live stock fairs are held in U. P., M. P., Gujarat,
Maharashtra, Punjab, Haryana and West Rajasthan. These fairs are held
annually specially between the months of October and May and the duration of
livestock fairs varies from one day to 3 months. Camels, horses, bulls, donkeys,
cows, bullocks, sheep and goats are usually sold at these fairs. Such fairs are
organised by District Officers, Local bodies or private agencies.
Dimensions
a. Perfect market: A market said to be perfect, when all potential sellers and
buyers are promptly aware of the prices at which transaction takes place, any
buyers can purchase from any sellers. The principle underlying a perfect market
expects that there must be a uniform price for any one standardized commodity at a
particular time at any place, there should not be restriction on the movement of a
commodity, there must be a good number of buyers and sellers.
37
Imperfect markets are:
c. Oligopoly market: There are more than two but a still a few sellers of
commodity
a. Very short period markets: These are for few hours and are mostly for highly
perishable commodities like fruits, vegetables, fish, milk, etc.
b. Short period market: In these markets commodities are perishable and can be
traded for some time. These commodities are like foodgrains and oilseeds.
c. Long period markets: Time span available is long to adjust supply to meet
demand even by managing production. These markets can be for machinery and
manufactured goods
3. On the basis of nature of commodities (Type of goods transacted):
a. Commodity markets
Precious stones: These are highly specialized and well organized markets of
world for e.g. bullion market of Mumbai
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Capital markets:
1. Village Markets: Buying and selling activities are confined among buyers and
sellers of the village or nearby villages mostly for perishable a commodities.
2. Regional markets: (District/ Sate) Buyers and sellers for among commodity
are drawn large area than the local markets in India there generally exist for food
grains.
3. National Markets: Buyers and sellers are at National level e,g. Durable goods
such as Jute, Tea.
4. World Markets: Buyers and sellers drawn from the world biggest markets
form area point of view and exist for commodities having world wide demand e.g.,
Coffee, Gold, silver.
5. On the basis of location or importance:
a. Primary Wholesale markets: These are located in big towns near the centres
of production of agriculture commodities, transaction mostly take place
between farmers and traders.
39
handled in large quantity.
Sea board markets: These are located near seashore and are mainly meant for
import and export of goods.
a. Spot or cash markets: Here goods are exchanged for money immediately after sale
of within reasonable short period of time.
a. Wholesale markets: Here commodities are brought by and sold in large lots or in
bulks. Transaction takes place generally between traders.
b. Retail markets: Her commodities are brought by and sold to the consumers as per
their requirement.
40
For every group of commodities, separate markets exist e.g. Food grain markets,
Cotton markets etc.
9. On the basis of stage of marketing:
a. Regulated markets: Here business is done as per the rules and regulated by
statutory market organization. Market charges are standardized and fixed and practices
regulated by Agril Produce Market committee.
b. Unregulated markets: Here business is conducted without ant set of rules and
regulations. Traders frame rules and conduct business. These markets suffer from various
defects in functioning.
Methods of Sale
41
Ways and means in which transactions takes place in the Indian agricultural
market
1. Forward Sale
Under this system the producer-seller sells his anticipated future produce in advance to
the trader directly at a price fixed at the time of striking the deal either in the village or at
the business place of the trader depending upon the willingness of the party that initiates
negotiations. This is only an oral contract and is not enforceable in any court of law. The
trader usually enters into a contract with a speculative motive and when the price declines
subsequently he may force the seller to reduce the price by refusing to lift the produce.
2. Jalap Sale
Under this method the trader’s purchase the standing crop of the producer well in
advance of the harvest at a price fixed on the date of the bargain. The price is usually
42
coated in lump sum for the entire crop and the seller may receive 50% of the value of the
sale transaction in advance. Usually the Jalap Sale goes against the agriculturalist seller
as the price is fixed and determined by the buyer on the basis of the urgency to sell and
not on the basis of the prevailing market rates. Such price quotations are in most cases
abnormally low, further if the crop fails to give the expected return the buyer may force
the producer to reduce the price further.
Under this the seller is bound to deliver the produce to the buyer on a set date
within a period prescribed by a verbal understanding between the 2. In return the
buyer is supposed to pay the price ruling on the delivery day. This method is
usually adopted in interior areas where price fluctuations get communicated
within a conventional time lag. It is usually beneficial to the farmer as he dictates
the price and the buyer should pay on a future date of his choice. This method is
followed when cultivators borrow from traders or where their residence is far
away from the market.
4. Sale by Sample
It is the most convenient method of sale where the produce is systematically graded. It
saves the cost of transportation and inspection. However utmost honesty in the dealing is
to be followed. The produce or the commission agent shows the sample to the trader and
finalizes the price.
43
called quoting on samples. Disputes may arise when the samples prove to be
unrepresentative.
Popularly known as undercover or secret sale. The sale under this system is open to a
variety of malpractices as the seller remains in the dark all the time and it is only the
commission agent and the ultimate buyer who really knows the negotiated price. Under
this system the commission agent covers his hand with a kerchief and invites offering
individually from each buyer. The buyers make these offers in a secret language, which is
mostly understood only by the commission agents and the buyers. Most of this secret
language is a sign language that involves pressing fingers and finger joints. The highest
offer made is intimated to the seller and if he agrees, the bid is closed. Thus a sale gets
confirmed. However there is no guarantee that the benefit of this higher price always
goes to the producer, as he is unaware of the price offered. Thus the Hatta system of sale
operates to the disadvantage of the producer.
Whenever the grower or the farmer deals with the buyer to enter into a sale/transaction
with him, a sale with an open agreement is said to have been made. There are no
middlemen and it is the seller who moves from one buyer to another in search of a
remunerative price or offer. The Tobacco and Cotton are the two important
commodities sold by an open agreement. In such kind of a sale, ignorance of market
conditions may prove to be damaging. Also the buyer may exploit him through over
weighing, manipulation of accounts deductions of unauthorized allowances and
delays in making payments. Further, oligopsony may result in depressing the prices.
Oligopsony means the state of a market controlled by a few buyers in relation to
many sellers.
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7. Sale by Open Auction
Under this method the produce is sold through an open auction by the general
commission agent or the brokers or some other auctioneer in the presence of the seller or
his agent and the competing traders. The offer of the highest bidder is accepted with the
consent of the seller. There the seller has the discretion to refuse the offer of the bidder if
he considers the bid too low. The objective of the system is to create conditions of perfect
competition by eliminating undercover practices and providing for the interaction of the
forces of supply and demand in relation to the quantity and quality variations. This is
possible as a pre-auction inspection of the graded lots is allowed and disputes regarding
the quality are eliminated. The farmer who views the open auction process gets a kind of
a physiological satisfaction. He feels he cannot be cheated due to the open method of
price fixation (bidding). The buyers too have the opportunity of putting forward repeat
bids to reach a maximum paying capacity for striking a deal.
1. The process is very time consuming and requisites an extensively developed system
of commercial grading.
2. The auction has to be done by lots and this results in a large number of traders in
the beginning but the number thins out as the day progresses.
Higher bids are few and far between as the buyers are relevant to pay a high price for the
produce. They feel that if a product has come up for auction, it is somewhat inferior
Under this system the produce (preferably a graded one) is arranged lot wise and
is open for inspection by the intending buyers. The time is stipulated (fixed) for
submission of tenders. The intending buyer after examining the lost records the
bids in their tender slip supplied by the market committee. These tender slips are
then deposited in a sealed box. While depositing the bid-slip, the buyer also
45
signs a priority register. The objective of using a priority register is that incase
of tie-bid, the slip deposited first, as indicated by the register is deemed as the
highest. Usually the tender box is opened and the market superintendent or
secretary compares the slips. The highest quotation for the lot is recorded in the
bid-declaration slip. The maximum price quoted is announced on the public
address system for the benefit of the sellers and buyers. If the seller is not
willing to sell at the quoted price, he has to inform the market secretary within a
predecided and stipulated time limit. In this system the physical system involved
is the least for all parties concerned. And there is a certainty of completing the
sale of all the lots by the stipulated hour irrespective of the numbers involved. It
is further observed that the differences in price offered by the highest bidder and
the nearest competitor in many cases is just a few rupees. This clearly indicates
that the prices quoted are based more on individual calculations of profit
margins rather than by simply working out the parity price based on terminal
prices. The tender system of sale has one definite advantage over the open
auction system, as it is time saving.
9. Dara Sales
In this system, the heaps of grain of different quantities are sold at a flat price.
The advantage claimed by the system is that within a short time a large number
of sales can be affected
46
Marketing Agencies
The Next important aspect relates to the functionaries operating in the Indian agricultural
markets. A very large number of intermediaries have come to exist between producer and
consumers of these the major ones are:
1. Village Beopari is by far the most usual purchaser of the produce, who deals in his
individual capacity. He usually collects the produce from the villages and hats and
brings it to the wholesale markets and from there it reaches the consumers. Beoparies
generally purchase when prices are low and sell it when they are high.
2. Itinerant Beopari wanders from village to village, collects the produce and takes it
to the nearest market. He purchases at cheaper rates owing to the lack of competition
from other beoparies.
4. Local landlords and cultivators, especially the medium size holders also sell the
produce directly to the village beoparies or town dealers visiting the village markets.
5. Arhatiyas or Brokers: They usually occupy a very important position among all the
intermediaries. They are of 2 types:
b. Pucca arhatiya on the other hand arranges for the sale and distribution of the
produce.
47
Both work together in tandem as master and apprentice. They also advance loans to
the village merchants and traders on the condition that the produce will be sold to
them or through them.
Although the seller is free to sell his produce in the market directly to the buyer, he in
actual practice does it through a commission agent. The intricacies involved in the market
transactions have compelled him to adopt this costly agency. Broadly speaking, 70% of
the produce is handled by the producers themselves and the balance is handled by trade
comprising commission agents, wholesalers, retailers, co-operatives and the
governments.
1. Indian consumers are more in number hence they do not leave any surplus
and
Unlike the case of manufactured products where the entire produce is set aside
for the market, in agriculture all produce is not sold. The actual amount of crop
sold is dependant on a large number of factors. One of the major factors in this
case is “Marketable Surplus” the other factors being need for cash, price trends,
availability of storage facilities etc. The marketable surplus, in turn depends upon
the production on one hand and the growers household and farm requirements on
the other.
48
through a definite channel. The surplus may be marketable surplus and
marketed surplus. The former indicates the residential quantity left with the
producer after meeting his requirements for family consumption, farm needs, and
payments-in-kind to casual and permanent labour, the landlord, artisans and seed
and stock to cover the future exigencies including wastage. The latter term refers
to the quantity of produce that is actually sold in the market by the producer
irrespective of his home consumption and other requirements.
A farmer's marketed surplus can be either more, less or equal to his marketable
surplus. If the farmer retains less of the produce than is needed for the
consumption at home, the surplus is more. This usually happens when cash is
needed immediately after the harvest to meet certain urgent needs. It is less,
when a farmer holds some of his surplus produce on the farm or consumes more
than normal amounts of it. It is worth noting that marketed surplus of small
subsistence farmer’s increases with a price fall because more quantity has to be
sold to meet the minimum cash needs. Large farmers market little when prices
are low and hold stocks in anticipation or future higher prices. The size of the
marketed surplus thus depends upon the relative share of small and large
cultivators in the marketing, and may thus vary considerably from one year to
another.
Marketable surplus will always be less than the actual production. But it can be
higher or lower than the level of marketed surplus during a period depending on
the extent of hoarding from the current production or dehoarding of the
accumulated stock by the producers. This means the “theoretical surplus
available for disposal with the producer, left after his genuine requirements of
family consumption, payment of wages in kind, feed, seed and wastage have
been met.” Objectively it is the arrivals, direct from the producing areas, out, of
the new crop.
49
production year varies from crop to crop. Old crops cannot be easily demarcated
from the new crop. There is always the fear of double counting, farmers and
traders have always the tendency to under-estimate the quantity of the crop sold
or stored. Further, the quantity retained for use in each farm depends on a variety
of factors, such as the size of the farm and the family, the proportion of food
grains in the total farm production and the amount of hired labour. Nor is the
absolute quantity retained for home use constant from one year to another. Even
if one takes into account population changes, which affect rural food
requirements, year-to-year changes in the crop size affect marketed surplus in a
complex manner.
2. Forced Sale
3. Superfluous Middlemen
5. Malpractices of Middlemen
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7. Inadequate storage facilities
12. Adulteration
A SPICY TALE
Lack of organization among producers is one of the basic and fundamental problems in
the Indian Agricultural Marketing scenario. The farmers of India are small and scattered
all across the country. The producers have little or no place to store. The produced
moreover is small per farmer. Also almost all small farmers are neck deep in debt and
need cash reasonable fast due to the unusual structure of agriculturism in India. An
organizational attempt at the grass root level usually fails. Cooperative movement in
India seems to have failed and thus the small farmers lack organization
2. Forced Sale:
In a scenario wherein the farmer producer is disorganized, requires cash at double speed
and has no storage facilities at the local level, he is forced to sell at a lower price. Many a
times the endrocities of the moneylenders are almost hedging on the farmers to sell their
produce at lower than reasonable rates. The forced sale phenomenon is one of the major
reasons responsible for the pathetic condition of the rural farmer.
The following are chief causes leading to heavy sales in the villages: -
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The most important cause for the high percentage of produce sold in the village is
without doubt the indebtedness of' the producer.
The second important factor, which is responsible for the high percentage of village
sales, is the unsatisfactory, nature of communication with the nearest market.
The element of time is an important factor and this for double reason. The marketing
possibilities of perishable commodities depend very largely on the rapidity with which
they can be transported to the marketplace.
Most of the cultivators are hard-pressed for cash to meet the claims of their creditors
and to pay off rent and other charges. Even when they know fully well that by holding
up the crop for a few months they would be able to secure a better net return, they have
usually no other alternative but to market the produce immediately in order to meet their
urgent liabilities.
3. Superfluous Middlemen:
Traders are the main functionaries in a market. They dominate every activity in the
markets. They ignore the interest of the farmer-producers who are the sellers. Due to this
the Indian farmer is not getting good returns. The Middlemen intervention is uncalled for,
as they are the reason behind the malpractices in agricultural marketing in India. Due to
the sales methods adopted by the middlemen the farmer seldom know what price they are
to receive for their sale. Infact due to inadequate new facilities most of the time farmers
don’t even know the prevailing prices/rates in the market.
Due to the various barriers in taking the produce to the urban market, many farmers
prefer to sell these in the local village market, as these village markets are small and
distant, there are very few buyers for agricultural produce. Sometimes there is only one
buyer. This buyer resorts to monsoly and buys at a very low rate. Moreover he further
exploits (resorts to monopoly) by selling consumer goods and agricultural inputs to the
farmers at a very high price.
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It will thus be noted that there exist as many as 10 to 12 intermediaries comprising of the
village bania, itinerant merchant or beopari, dalai, kutcha and pucca arhatiya, co-
operative commission agents and wholesale merchants and the retailers. They function at
various stages in the process of assembling and distribution of the produce. The
existence of a long chain of middlemen reduces the, share of the consumer's price
received by the actual cultivator. According to the findings of the Marketing Surveys, the
share of producers in a rupee paid by the consumers ranges from 52Paise in the case of
rice to 57Paise in case of wheat, in case of linseed it is 62Paise, in case potato 50Paise
and in case of groundnuts 45Paise.
Market charges are “Those charges that are incurred by the seller or the buyer or
both from the time a commodity enters the market for sale till the time the title of
ownership of the goods is transferred from the seller to the buyer”. In the course of
transacting sale, or a purchase a number of operations involved which cannot be
attended to by sellers or the buyers. These necessarily have to be done by the
respective functionaries. In order to pay these functionaries, market charges are
collected from growers or buyers at prescribed rates.
One of the main problems is “The multiplicity of market charges and their heavy
incidence on the producer-seller.” In the absence of statutory regulations these
charges are neither defined, nor are based on any service consideration and are
recovered either in cash or in kind, and often both. These charges have no
sanctions except usage or customs prevailing. They are always introduced in favor
of the traders and the functionaries.
In the market the cultivator has to arrange with a kachcha arhatiya for the sale of
his produce and in the larger markets he has to employ a broker or Dalal to get into
contact with the kachcha arhatiya. For their services he has to pay some
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commission. In addition to the arhat paid to the arhatiya and the dalal, a number
of other charges have to be incurred. Tulai has to be paid for the weighing of the
produce, palledari to cover the cost of the labourers who help in unloading the cart,
preparing the produce, filling the scale-pans, holding the bag open where the
produce is being measured, etc. the seller has also to submit to deduction known as
garda for impurities in the produce, and dalta for possible loss of weight and dana
given to sweepers, watermen, and even beggars. During the measurement and in
almost all the markets deductions are made from the amount due to the seller for
dharmada or charity, dispensary, gaushalas, pathshalas.
The objectionable feature about the market charges is that they are not only high
but are also not clearly defined and specified. The charges vary from market to
market and there is also no uniform practice as to charges that are borne by the
seller and those that are borne by the buyer. Even within the same market the
kachcha arhatiyas may charge lower rates to the village beoparis who visit the
market often and have regular trade connections than to the farmer who visits
market only occasionally and has, therefore, only small volume of business to offer
to the arhatiya. To make things worse many of the market charges are taken in
kind and in taking their shares the persons concerned are liable to be generous to
themselves. As the Report on the Marketing of Wheat in India points out, “not
only the arhatiya and dalal, but the munim (arhatiya's clerk), the chaukidar, the
sweeper, the waterman, the arhatiya's cook and a horde of beggars of every
description all regard themselves as entitled to a share of his produce.”
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7. Dhanak (charges for pushing the grain in the gunny bag on to a scale pan)
8. Charity
9. Karad (Deductions in kind for the quality difference)
10. Dhalta/Jhukta (leaving the balance in favor of the buyer)
11. Namuna (sample)(is shared by the commission agent and the buyers)
12. Baisari (charges for supervision of weighment to be paid in kind)
13. Munim (clerks allowance)
14. Valta/Wata (refraction allowance)
15. Patti (cost of sale slip)
16. Bardana (rent for gunny bags supplied)
17. Rent for cart park
18. Rent for storage in godowns
Charities
Muthi (to be paid in kind for temples in the market yard)
Darwada (cowsheds or Balaji’s fund)
Pathshala (funds for schools in the area)
Doodh Khawa (fund to pay for milk for the buyers children)
Some of these charges are highly outlandish like the farmer has to pay for various
charities, which he would be otherwise not inclined to pay for. Also charges such
as ‘Shagirdi’ where the seller is supposed to pay fro the Arhatiya’s sweepers and
water carriers are uncalled for. Only some of these charges are justifiable. Among
these are
Arhat or Commission
Hamali
Tulai
Charges for sewing
Any deductions in the name of charity in any kind are unwarranted. Similarly
payments to the muneem or the apprentice of the Arhatya are uncalled for.
55
Especially when the principle arhatya gets full commission for the services
performed by him. Again there is no case for claming allowances for quality and
weight where the produce is subject to thorough examination by the buyer before it
is offered for sale. Hence in the light of numerous unwanted deduction and high
market charges, it is suggested that markets be regulated.
5. Malpractices of Middlemen
Due to improper market structure traders or middlemen have become all powerful.
They have bent the rules in such a way that it is possible for them to cheat and get
away. Moreover the unorganized producers and the market machinery are no
match to the powerful trader legally. Even in regulated government markets
middlemen resort to malpractices. Some of the malpractices commonly resorted to
by middlemen are as follows:
a. Scales and weights are manipulated against the seller. This practice is
rendered easier by the fact that there are no standardised weights and measures
nor any provision for regular inspection.
b. There are all kinds of arbitrary deductions for religious and charitable
purposes and for other objects. The burden falls entirely on the seller and he
has no effective means of protest against such practice.
c. Large quantities are taken away from the produce of the cultivator as bangi
or sample.
d. Bargains between the agent who acts for the seller and the one who
negotiates on behalf of the buyers are made secretly under a cloth so that the
seller remains ignorant of what actually takes place.
e. The broker whom the cultivator employs is more likely to favour the
purchaser with whom he comes into contact almost daily than the seller whom
he only sees very occasionally. This tendency becomes all the more
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pronounced when, as it frequently happens, the same works for both parties.
f. When disputes arise the cultivator has no means of safeguarding his interest.
Some of the practices obtaining in the market amount to nothing less than common
theft
Although the agricultural produce (grading and marketing) act was passed in 1937 even
today in most unregulated markets the practice of grading is unheard of. Whatever
limited grading is accomplished is technical in character i.e., commercial grading, which
can be understood by the lay farmer, is almost completely absent. If sales of agricultural
produce at a higher price are to be augmented without personal physical inspection of
every lot by open auction in the regulated markets, commercial standardization and
grading are essential. Also if lots are to bulked through cheap and efficient warehousing
and transport, standardization and grading becomes imperative.
There are no standard grades commonly accepted throughout India even for such
important commodities as rice and wheat. In the absence of certain standard grades
accepted by the whole trade as the basis for commercial transaction, attempt of individual
producers merely secures the ordinary market rate. In fact the present practice of dara
sales, wherein heaps of both good and bad produce are sold together as one lot common
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in most markets, gives a premium to the inefficient producer as the good produce is made
to carry along with it the poor stuff also. The practice of selling un-graded products of
mixed quality has naturally reduced the reputation of Indian agricultural produce in the
world markets.
In most of the villages ryots store their produce in pits or receptacles variously
known as kudurus, kallis or thekkas. In the upcountry markets produce is stored
in kothis or kuthalas (earthen cylinders) and khattis (pits in ground lined with
mud and straw) and in a few centres in pakka khattis made of concrete. But that
there is a general inadequacy of good storage facilities both in rural and urban
areas can hardly be denied. The indigenous methods of storage adopted in the
villages as well as in most of the upcountry markets do not adequately protect
the produce from dampness, weevils and other vermin’s.
The losses due to inadequate storage have been estimated to range from 1.5%
(Food grains Investigation Committee) to 2% to 2.5% (The Prices Sub-
Committee) to 5% (as estimated by Dr. Baljeet Singh). A recent estimate puts
the loss at from 5 to 15% by weight of the production and it is due to defective
stage. This in turn is due to moisture absorption, excessive heat, insects, mites,
rodents and birds. Even at 5% the loss of cereals, millets, spices, oilseeds, jute,
cotton, tobacco would come to over Rs. 4,000 million every year in India.
With the change of temperature, grains loose weight. When wheat is harvested,
it contains some moisture, which evaporates in summer and is regained during
the monsoon month. Dampness raises the moisture content of the grain thereby
making it soft and therefore susceptible to insects. The damage is greater when
the grain is stored in kachacha underground pits where the sub-soil water table
ranges from 8 to 10 feet below the surface.
It is quite obvious that the food grains stocks held by co-operative societies,
grain merchants and even by farmers are not kept in proper conditions.
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Therefore, the losses are substantially larger. In addition there are crops like
jawar, pulses and maize, which are infested by stored grain pests even before
harvest. The insects form inside the kernel and are visible until the threshed
grains are put in storage. By the time the infection is detected, internal damage
to grain becomes very great.
Losses due to rodents are also very great. The rats start damaging the grain right
from the field to the time it is consumed. According to Dr. P. J. Deoras, there
are approximately 2400 million rats in India. He has estimated that about 20
rats could consume the quantity of food sufficient for one person. On a gross
estimate this would mean that rats are spoiling at least one fifth of the grain
produced. Calculating on this basis of a tonne of grain being consumed by 100
rats per year, the total consumption by the rat population of 2,400 rnillions
would amount to about 24 in. tons. In terms of money this would come to about
Rs. 18,000 million when calculated at the rate of Rs. 750 per tonne.
(i) It has been noticed that apart from damaging crops and food grains in
storage, rats carry food grains to their nests in burrows. As much as 15 kgs. of
grain have been recovered while digging out nests from about 30 rats burrows.
(ii) The rats damage 10 times the quantity of food material they eat. They would
execrate about 86 faecal pellets in 24 hours, which would get mixed up with
foodgrains.
(iii) They void 1½ gallons of urine during the year, and further contaminate
grain by shedding thousands of hair from their bodies.
(iv) In Bombay as many as 9,000 bags of foodgrains are auctioned as they are
unfit for human consumption because they are damaged by rats in yards and
godowns.
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(v) The small mice in the paddy fields have been found to climb up to the paddy
plant and eat every grain while the big field rat usually cuts the whole plant.
Besides rats, “Insects, beetles and moths are prolific and each couple lay
anywhere between 100 to 400 eggs and their lifecycle is completed in 4 to 6
months. It has been estimated that weevilled grain in the case of wheat varies
from 1 to 2% or more, peas one to 5% or more and arhar upto 2%.”
Transport plays a very important role in the marketing of the agricultural produce. A
smooth and efficient system of transport from the farmer’s village to the consumer door
goes a long way in not only helping the agriculturalist to bring his produce to the market
without much difficulty but also helping the consumer in securing his needs with a
reasonable time and cost.
In India with her vast distances, the existing means of transport are woefully inadequate.
“Communications from the field to the village and from village to the mandi are often
extremely poor and defective. Bad roads, lanes and tracts connecting villages with the
markets not only add to the loss of transportation and aggravate the strain on bullocks and
other pack animals, but also lead to the multiplication of small dealers and intermediaries.
They also restrict market by hindering cheap and rapid movement of agricultural
produce.” Thus the rural transport network is very bad. The railways established by the
British have not been developed further and hence are inadequate by today’s standards.
Bad roads lead to delay in supply and also due to the time lag the produce may be
damaged.
The bullock carts do most of the transport in rural areas. Some of the agricultural produce
needs special storage systems even while being transported. Carts both pulled by bullocks
or tractors cannot provide these kinds of facilities. Hence it is very much needed that an
initiative be taken to improve transportation facilities.
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The importance of an efficient marketing new service particularly for the producer-seller
in regulated markets hardly needs any emphasis. This news service acquaints him with
the ruling price and thereby strengthens his bargaining power and position. The price
information if available grade wise helps him to know the approximate returns he is
likely to get for his produce. It also induces him to produce better quality crops and thus
raise the standard of farming. Generally the producer-sellers have to depend upon oral
information about market conditions, market arrivals, demand conditions, ruling prices
and market trends etc. that reach them through village sahukar or commission agent or
their own neighbors.
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warehouses and the lack of facilities for making advances against the security of
warehouse receipts there cannot be any system of cheap finance against security
of goods. There is at present no proper link between indigenous bankers or
commercial bankers and The Reserve Bank of India. The various marketing
agents borrow funds at a high rate of interest. This naturally leads to a rise in
the cost of marketing with the ultimate result that the share of the price received
by the producer is correspondingly reduced.
The case for borrowing private finance and the flexibility in the repayment make
it attractive despite many malpractices. Through various surveys it has been
proved that though government has taken active measures to provide cheap
institutional finance a large majority of farmers are dependent on private
moneylenders and commission agents in obtaining credit. It may be noted here
that the activities of traders and commission agents through money lending
curtail the freedom of the grower-seller to dispose off their produce profitability
in market yards and make them permanently indebted. The official machinery
has to realize the gravity of the situation and take effective steps to realize the
poor and innocent agriculturist from the clutches of the oneylenders cum
commission agents.
Till recently, there had been an absurd multiplicity of weights and measures in India. The
chaotic state of weights and measures in India has been more clearly brought out in all
the reports published by the Central marketing staff. Weights made of sticks, stones and
bits of old iron are common feature in the markets and villages.
This multiplicity of weights and measures employed in India has deplorable effects in
several ways.
Firstly, it affords greater opportunities for cheating the ignorant cultivator and
unscrupulous dealers readily avail themselves of such opportunities.
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Secondly, it gives rise to needless complications in practice as between one market and
another, which is by no means conducive to the interests of trade and commerce.
Thirdly, for the collection of data on price movements the relative level of prices in
different regions, the volume of agricultural production, etc. lack of standard weights and
measures is bound to be a great handicap and seriously affects the accuracy of statistical
calculation.
The multiplicity of weights and measures make supervision difficult and afford greater
opportunities for cheating the producers, creates an element of uncertainty in trade and
renders fraud on the part of retailers as easy as it is profitable.
The report of the Marketing Sub-Committee has rightly observed that, “Deliberate
malpractices, ignorance and carelessness have all combined to make the consumer in
India pay an unnecessarily high price for many goods of different quality.”
12 Adulteration
Adulteration is often resorted to while marketing crops and one of the most
important reasons for such deliberate adulteration of agricultural produce is the
high amount of refraction (khad) allowed in most markets and the non-mutual
terms. In most of the wholesale markets in the producing areas a fixed deduction
is made for impurities (say 5%) and the terms are non-mutual, i.e., a producer
offering, cleaner produce which has only 1 % of impurities receives the same
price as the producer offering produce containing 5% impurities. Naturally when
this is the case the seller whether he be the middlemen or the farmer takes care to
see that the produce is adulterated to the maximum limit allowed in the market.
Damping of cotton is done by the middlemen on the contention that the kapas
comes in so very hot that if one puts one's hands into it they would grass while
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curry powder in several cases has been found to be heavily adulterated with horse
dung.
Lines of Improvement
Due to various defects in the agriculture market of India the traders (middlemen) occupy
a unique position and due to such a unique position, the traders succeed in manipulating
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the market scenario and to take home a major proportion of the price paid by the
consumer. In some cases like rice nearly 48% of the prices charged to the final consumer
is siphoned away by the middlemen. A very small proportion of the consumers paid up
price actually goes to the producer-seller.
Any program of getting the farmer-producer out of this situation necessarily envolves the
breaking up of the monopolistic powers of the trader. Measures to make the producers
directly connected with the marketing of the produce are the need of the hour. This may
be done by creating a situation where the cultivation has greater confidence in being able
to sell his produce in the market. For this it is important to protect the producer’s interest.
Further maximum share of the consumer’s routine can be had by the producer if the
conditions of orderly marketing are created. Thus a need is felt to tackle the emerging
problems of agricultural marketing more resolutely and efficiently than ever before by
regulating the markets.
It has been observed that well regulated markets create in the minds of cultivators a
feeling of confidence. The producers believe that they get a fare deal in these regulated
markets. Such a scenario provide for a mood where the farmer is willing to accept new
ideas and strives to increase his agricultural produce. The value of such regulated markets
thus can be exaggerated but it is yet to catch on in India.
If the agriculturalist in India is to receive a higher price for his produce, if the needs and
preferences of the consumer are to be conveyed to the producer with a minimum amount
of delay and friction, and if the large scale industries are to secure a steady and reliable
supply of raw material of uniform quality, obviously the defects in machinery for
marketing of agricultured produce should be remedied as quickly as possible.
It would be useless to increase the output of food, it would be equally futile to setup
optimum standards of nutrition, unless means could be found to move food from the
producer to the consumer at a price, which represents a fair remuneration to the producer
and is within the consumer’s ability to pay. Similar considerations also apply to other
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agricultural products and to fish and forest products. It is therefore necessary to remove
the defects in the machinery for marketing of agricultural produce.
An improved system of agricultural marketing, which will secure for the cultivator a
larger proportion of consumer’s price is a ‘sin qua non’ for agricultural improvement in
India.
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28% to 69% in various markets. There has also been an increase in the number of sellers
bringing their produce to these markets. Until 1944 less than 40% of the produce was
taken to the markets by the producers themselves. The average percentage has now gone
to 70%.
Markets that have rules and regulations with respect to the price of the product sold, the
method and the produce in which the transactions take place are other similar market
operations are said to be regulated markets. These regulated markets ensure a fair and
level playing field for all viz. the producer, middlemen and buyer. This is done by
eliminating the malpractices at the grass root level.
The most effective and direct measures to improve the conditions of the markets as taken
by the government through regulating the markets and the market practices by legislation.
The common objective of the various acts for straight agricultural produce markets is to
bring all the parties that is the producer, the commission agent and the buyer to the same
level of advantage by eliminating malpractices and rationalizing market charges. The
regulated markets provide a unique system of marketing that is only beneficial to
developing countries like India. In developed countries besides government legislation
semi-independent commodities, commissions or corporations or producer-controlled
boards are set up under various acts. These boards, commissions, corporations function to
regulate and develop marketing. Added to this cooperative marketing has also made good
progress in some developed countries.
In India the situation is however different. Indian producers find it most convenient and
least troublesome to sell agricultural produce in the unregulated primary village market.
Nearly 2/3rd of the marketable surplus of all agricultural commodities are disposed off
(sold) in such markets. If the farmer comes to the assembling center for sale, in non-
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regulated markets, he is liable to be deceived by the commission agents or broker or
traders.
Sale through the cooperative society has not been possible because of the failure of the
cooperative movement in India. At the same time the marketing methods followed in
advance countries like the establishment of producer controlled marketing boards are not
possible in our country as it is difficult to organize such boards on account of small and
scattered producers thus the only option left is the regulation market practices in existing
unregulated wholesale and retail markets.
The first attempt to regulate the Indian agricultural market was made as early as 1886.
Karanja was the 1st regulated market in India. It was situated in the then Hydrebad
residency. The process of regulation received wider acceptance in 1918 when the General
Cotton Committee appointed by the government of India recommended ‘regulation of
market’ as a solution to agricultural marketing problems. In pursuance of this
recommendation, the then government of Bombay was the first to enact the Bombay
Cotton markets act in 1927. Infact, it was the first law in the country which attempted the
regulations of markets with a view of evolving sound market practices which are fare to
the producer as well as the trader
Since then further act have extended the scope of agricultural legislation to the
commodities other than cotton. Today market legislation in India covers almost all
agricultural as well as horticultural produce, livestocks and these products and forest
produce. However since the regulation of markets is a state subject, these are some
variations in the state legislations.
Most of the regulated markets now functioning are, by and large, multi commodity
markets. There is however some markets, which deal in simple commodity, like tobacco,
vegetables or livestock.
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Although legislation provides for the regulation of all types of products in actual practice
only some important commodities have been so far brought within the preview of enact.
It would, however, be advantageous to the producer-seller if all the commodities are
grown in the market are brought within the orbit of regulation. This enables the producer-
seller to dispose off their entire marketable surplus in one and the same market. It is,
therefore highly desirable that all agricultural commodities, which are commonly grown
in notified areas and for which there is a fare marketable surplus, should be included
amongst the notified commodities for the markets. Several committees have also
recommended this from time to time.
The poor standard of primary and secondary commodity markets where producers
convert their produce into cash, the prevalence of various malpractices such as short
weights, excessive market charges, unauthorized deductions and allowances made by
commission agents, adulteration of produce and the absence of machinery to settle
disputes between the seller and buyers were recognized as the main hindrances in
agricultural marketing as early as 1928 by the Royal Commission on agriculture on a
national scale, which by observed that “these can only be removed by the establishment
of regulated markets”.
A regulated market is a market that has rules and regulations with respect to the price of
the product sold, the methods or the procedure in which the transactions take place and
other similar market operations are said to be regulated markets.
These regulated markets ensure a fair and level playing field for all viz. the producer,
middlemen and the buyer. This is done by eliminating the malpractices at the grass root
level.
Regulation of markets in India is today a state subject. The directorate of marketing and
inspection at the central level render advice in farming market legislation and its
69
enforcement. In 1938 a model bill was prepared by the central agricultural department
(now known as Directorate of marketing information). On the lines of this bill several
states drafted and passed their own bills. The progress of regulation was very slow due to
the 122 markets were regulated till the end of the war. After independence the planning
commission in its 1st and subsequent 5 years plan emphasis the vital role played by
regulated markets. Due to this the number of regulated markets grew rapidly after
independence. The number of the markets increased from 432 in 1950 to 3631 in 1976.
A number of steps have been taken in the last 50 years to regulate markets. These are
aimed at regulating marketing practices, standardizing weight and measures, developing
certain infrastructure facilities in assembling markets and introducing quality standards
AGMARK certificate.
Though the legal framework has been provided in those state the progress is uneven
hence it’s suggested time and again that:
a. A further expansion of the regulated market system in terms of both market and
commodities to be brought within the scope of regulation.
At the central level financial assistance is being provided to select regulated markets for
establishment of grading facility for some important items at the producers level. Some
schemes are also assisting the development of infrastructure facilities in selected
regulated markets both primary and wholesale levels. But despite this the progress is not
very satisfactory. Quite a sizeable size of markets remains unregulated even in this day
and time.
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Regulated markets have many advantages over unregulated ones. Economically the
producers gains by way of reduction of unwarranted multiple market charges and
unauthorized market deductions. Socially it profits the producer as he is now directly
involved in the management of the market communities. This provides him with a
platform where he can discuss matters concerning his interest and give bent to his
grievances. Psychologically the producer occupies a dominant position in the market
community and faces the trader with greater confidence.
Market the social and economic benefits accruing to the cultivators, as a result of the
regulation of markets may be briefly enumerated as below:
2. There has been an increase in the number of sellers bringing their produce to these
markets. Until 1944, the producers themselves took less than 40% of the produce to
the markets. The average percentage has now gone up to 70%.
3. Markets charges are clearly defined and specified. Excessive charges are reduced
and unwarranted ones are prohibited
4. Market practices are regulated and the undesirable activities of the market
functionaries are brought under control so that a fair dealing is assured
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6. A machinery for the settlement of disputes between traders and sellers is setup this
machinery provides suitable arrangements for the settlement of disputes regarding
quality, weighment and deduction prevent litigation, safeguard the interest of the
seller and smoothens business by creating good relation between sellers and buyers.
8. Proper market yards with full facilities like sheds for the sale of produce, cart
parking place, better grading and warehousing facilities for accommodation of
agricultural produce are duly provided by the market committees.
9. Open auction methods are strictly followed and unjustified trade deductions like
karda, dalta, batta namuna etc are eliminated.
10. In these markets suitable quality standards and standard terms for buying and selling
are conveniently enforced.
11. Besides reliable statistics of arrivals, stock and prices are easily available.
Thus regulation of markets has been a boon to the agriculturalists. It has not only
introduced a system of competitive buying, helped to eradicate undesirable malpractices,
rationalized market charges, standardized weights and measures, protected cultivators
from authorized deductions and unduly low quotations but has also developed a
machinery for serving impartial settlements of disputes between the practices. Taking the
overall picture, regulated markets have produced a wholesome effect on marketing
structure and have generally raised the efficiency of marketing at the primary level.
Steps have to be taken in the future not only to bring the remaining assembling and
terminal markets but also the primary markets under regulations.
A market yard is “A statutory declared area situated within the market proper
where all sellers of the notified commodities are supposed to bring them and
72
affect transaction with licensed traders directly through the other license
intermediaries under the supervision of the employees of the committee. The
market yard is the nerve center for the performance of the activities of a
regulated market.
A well laid out market yard includes the provisions of certain basic amenities
and facilities. Normally a market yard acquired amenities and facilities such as
auction halls or platforms, godowns, market office, space for parking carts,
drinking water, rest houses, sanitary arrangements, cattle shed, internal pucca
roads, canteen, lighting facilities, post offices, banking facilities, etc. However
no market yard can actually claim to have provided all amenities and facilities
laid in the standards for regulated markets formulated by the Indian Standard
Institute (ISI).
3. Use of Standard weights and measures:
The multiplicity of weights and measures has deplorable effect on the market
scenario. The traders take full advantage of the situation and cheat the ignorant
cultivator on every available or possible occasion. Further the multiplicity of
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weights and measures makes supervision difficult. It creates an element of
uncertainty in trade and renders scope for fraud.
Mostly it is done lot by lot by the same weighmen, sometimes if a seller has a
high amount of produce to be weighed he engages the service of more than one
weighmen. The system adopted however depends on the availability of
sufficient number of weighmen, the number of licensed weighmen, in turn it is
determined by the size of the market, the frequency, the scale of the commodity
arrivals and the possibility of earning sufficient daily income by way of charges
collected. It is however observed that in many regulated markets across the
country the number of licensed weighmen was small. Many times it so happens
that though the sale transaction are over in the morning the growers have to wait
for getting their produce weighed till late in the evening and may be even
overnight. This shortage of weighmen in all the markets is due to the fact that
the market committees are averse to issue more and more licenses to weighmen.
Their logic is that if more weighmen are given licenses the earning of the
existing set of weighmen would be adversely affected.
The use of standard weights and measures safeguards the interest of parties
against cheating by false or under-weight. It is even now more urgently needed
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in rural areas in regard to transactions in which the farmer is concerned. The
Planning Commission has recommended to adopt the metric weights and
measures throughout the country because it is simple, easier to learn and
remember; and its use would save time and labour in calculations. The
Standards of Weight and Measures Act has been passed in 1958 and enforced in
all the states with a view to check fraudulent views of weights and measures.
Besides the check from the authorities the grower can also do a lot to eliminate
weighing related malpractices. The grower should be diligent and meticulous
with respect to the procedure of the weighing laid down by the authorities. The
grower should also take the trouble of weighing the produce at their own end
before bringing it to the markets. It is observed that the grower seldom do this
and thus the loss on this account is sizeable.
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4. Increased Provision of Storage and Warehousing facilities:
It has been well said that the business of accumulating and storing perishable as
well as non-perishable products in times of flush production, preserving them
safely and then distributing them in times of scarcity is necessarily a part of
production and equal in importance and dignity. By holding back a part of the
surplus at harvest time the middlemen prevent a sharp fall in prices of
commodities so that the producer's share in the benefit is increased and by
letting out produce from the store in seasons when prices are normally likely to
rise sharply, they check the rise and bring about some stability in market prices
which benefits the consumer immensely." Storing is, therefore, a very important
part of marketing. This point was realised by the Royal Commission on
Agriculture and subsequently supported by the Central Banking Enquiry
Committee.
Storing goods, before they are sold is an important part of marketing. This point
was fully realised by the Royal Commission on Agriculture and subsequently
supported by the Central Banking Enquiry Committee and later on by the
Agricultural Finance Subcommittee, the Rural Banking Enquiry Committee and
by the Rural Credit Survey Committee. All these bodies recommended that
storage and warehousing facilities should be made available at all nuclear points
of trade in agricultural produce.
As mentioned in the previous section, losses in storage are due partly to the
change in temperature, dampness and partly to insects etc. These losses in
temperature can be reduced by making provision for efficient ventilation in the
godowns and by closing them during the monsoons and keeping them open
during the dry season. Grains in bags can also be protected by damage. It is
necessary that sufficient space be kept between the bags while preparing a stack-
plan.
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Storage of farm produce is one of the essential elements of orderly agricultural
marketing. It is necessary at various levels to varying degrees. The method of
storage at the primary market level depends upon the prevailing traditions, value
and the retaining capacity of the commodities to be store, the availability of
facilities for storage and the waiting capacity of the producer-seller.
Due to the lack of storage facilities that are adequately and efficient the losses
are great. Realising the need for good storage and warehousing facilities the
Indian parliament in acted the agricultural produce (development and
warehousing) Corporations act in June 1956 in order to accelerate the efforts of
building warehousing, the government subsequently passed the warehousing
corporations act in 1962.
In accordance with these suggestions, the food corporation of India and the
CWC created storage facilities at centers of all India importance. The state
government and the SWC made warehousing and provided for storage facilities
at centers of state or district level of importance. Over and above all this villages
/ Rural storage needs are been looked after by the co-operatives.
These efforts have had a mixed impact but definitely the storage capacity over
all has gone up considerably.
Further the government of various states has issued private operators licenses to
build and run scientifically designed warehousing and other storage facilities.
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The licensed warehousing offers other distinctive benefits. The private
warehousing storage receipts are transferable and thus the ownership of the
goods can be transferred without the actual movement of produce. The scientific
storage eliminates lose from spoilage. The private warehousing also provide for
insurance cover against fire, flood and theft. They also help the grading and
standardization of various commodities.
Right means of transport at the right time is essential for the smooth functioning
of any market. This kind of a facility at reasonable rates will influence
substantially the working of market mechanisms. It has been observed that the
cost of transport directly affects the price of the agricultural produce.
All involved in agricultural marketing i.e., the farmer, trader and the consumer
are affected by the shortage of transport facilities. The market committees are
under no statutory obligation to provide for transportation but the nature of the
problem is such that it is suggested that they step in.
It is the fact that most farmers due to regulated markets would like to sell their
product directly at secondary markets but not at village assemblies centers.
However due to bad transportation facilities the farmers are not willing to take
the risk of transportation. Here is where it is suggested that the market
committees take upon them some responsibility. They should organize some
trucks or lorries for the transport of the produce of small farmers from village
assembly centers to urban secondary markets. The fact is that the produce of just
one farmer may not be enough to fill in an entire truck. Hence the market
committees should help coordinate 2-3 farmers to pool their producer together
so that an entire truckload is completed. The cost of such facilities provided
could be recovered from the sale of the produce.
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The method suggested above can be executed as follows:
b. The committee after receiving such requisition pools them and contract
lorry supply offices, thus arranging for the transportation.
This would reduce substantially the transport bottlenecks thus benefiting both
the farmers as well as the traders. The markets will also function continuously
without the need for closure for want of transport.
The Agricultural Commission had recommended that steps should be taken for a
better dissemination of the marketing news. The marketing surveys conducted
under the direction of the Central marketing staff have shown that “there is at
present a surprising lack of co-ordination as between different markets. Prices
do not move in harmony even in markets, which are not far from each other.
We often find a market glutted with a produce which is scarce in another
perhaps only a few miles off.”
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activity.
In 1957, the integrated scheme for the improvement of market intelligence was
launched in Bombay. The main objective of this was to give upto–date
information to the producers with regards to the wholesale prices of agricultural
commodities ruling in various markets. This scheme covered two aspects viz.
b. Information dissemination
Since then the government has given a lot of importance to improving the
quality of agricultural marketing news services. All India radiobroadcasts daily,
the closing of agricultural commodities and gives information regarding prices.
The penetration level of the radio set is almost 90% hence the broadcasts are
very useful.
Thus the objective of an efficient market news service should be to aid towards
more intelligent production with the ultimate object of achieving effective
distribution and fair pricing of farm produce both for the producers and the
consumers.
Business practices worldwide show that the best time to sell ones produce is
when the prices are high. Hence the farmer world over stock their produce in
anticipation of a price rise. However in India the farmers are very poor and
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small. They have no waiting capacity to store the harvest produce for a
favourable selling time. When they bring the produce to the market their
immediate goal is to sell and obtain cash. The traders take advantage of this
situation.
The mode of actual payment of sales proceed differ from region to region,
market to market and within the same market from transaction to transaction.
Most of these modes are exploitative.
In cases where the moneylenders are the buyer it is seen that they make
direct adjustments in the debt accounts of the sellers who have earlier
borrowed funds from them. The farmers being uneducated, ignorant and
illiterate seldom understand such adjustments.
Most traders insist that all transactions should be on credit and make the
seller agree to this. If they cannot convince the seller for a credit transaction
they deduct exorbitant amount for cash payment.
With the setting up of regulated markets all such irregularities can be eliminated
to a large extend. The market legislations have clearly provided for insuring
prompt payments. But the problem is of implementation. If is recommended that
market committees play an active role in implementing such legislations. It is
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expected that at least this will make direct sales in the markets free and fair.
However in the case of indirect sale the system of payment by the buyer to the
commission agents is more governed by trade convictions. The commission
agent may not necessarily recover the amount from the buyer immediately on
delivery of goods. There may be a time lag between the delivery of goods and
the payment by the buyer, which generally varies. Further it is seen that the
commission agents in most of the markets follow the practice of calling on to get
their payments. This is particularly so in the case of certain commodities like
cotton and groundnuts. The buyers of these commodities are generally the
processing factories, which make payments at their own premises. It may be
noted that due to this practice of deferred payments the commission agents
demand a higher rate of commission from the producer-seller for prompt
payments or result to a system of deferred payments to the farmer.
Due to the cash crunch in Indian markets such deferred payments or forward
training cannot be avoided. In order to stop unhealthy speculation, forward
training of agricultural commodities is regulated under the forward contract
regulation act 1952 for enforcing the act the forward market commission was set
up in 1953. This commission identified forward markets in raw cotton,
groundnut oil, coconut oil, black pepper and other oil seeds. As a policy
measures the commission has sort to eradicate monopoly of any kind.
As far as the operations of moneylenders are concerned they are governed by the
Bombay Agricultural Produce Market Rules of 1941. The rules state that
licensed general commission agents or brokers could give advances either in
cash or in kind to the agriculturalist on the condition that
1. “If an agreement was entered into between the moneylender and the
borrower, the lender should supply a copy of the agreement to the borrower
and
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2. The lender should keep an account book, recording all advances made by
him to an agriculturalist and repayments affected in the manner specified by
the committee in its byelaws and should supply a copy of an account book,
under his signature, to the borrower, entering therein every load transaction
and its recovery”
However the committees have practically no direct control over the credit
activities of the traders, general commission agents and the brokers. As co-
ordination between the working of the market committees and the administration
of the moneylenders act should be attempted.
Firstly it protects the consumers and the producers through the establishment of
standards of quality.
Further trading on the basis of accepted quality standards makes pricing more precise and
equitable. Thereby making the price reporting mechanism more meaningful.
In India grades, standards and appropriate trademarks have been developed under the
agricultural produce (grading and marketing) act 1937. The agricultural produce is graded
under the trademark ‘AGMARK’. This is done in order to ensure good quality both for
export as well as the domestic market.
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The act provided for the fixation of grade designations, which indicate the quality of
scheduled commodities of agricultural produce. The grading for other commodities is
voluntary.
The grading practices of produce at the farmers level need to be emphasized and widely
canvassed. This will (it is hope) fetch a competitive price to the grower in the markets
compared to the ungraded produce.
It has been increasingly realised that mere increased production could be of little
avail so long as the excess production failed to reflect itself in the shape of some
extra income to the producer. How to ensure an economic and remunerative
return to the producer; how to establish a relationship between the price return
and the quality of a produce; how to provide a self-propelling incentive for the
maintenance of a standard which will bring the maximum return: how to prepare
the produce for the market, how to grade and differentiate – how to pack and
transport; what security and what facilities the producer should get in the
market; how to keep him informed of market trends and prices; how to keep him
abreast of consumer preferences – these have been some of the questions which
demanded close attention of those concerned with the agricultural marketing
10. Development of Co-operative Marketing:
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removed by organising the work through co-operative societies.
Conclusion
In a country like India where, agriculture contributes nearly 49% of the national
income and provides purchasing power for over 70% of the population engaged
in the production of crops, the marketing of farm produce, which involves all the
processes in the movement of goods from the farm to the consumer, has
obviously a significant influence on production activities and is patently as vital
as the latter. The conditions under which the farmers dispose of their
marketable surplus in the villages and nearby mandis will, therefore, have a
significant influence on the national production programme as low farm incomes
discourage the use of fertilizers and improved seeds and push marginal lands out
of cultivation and thus mar the very incentive to produce more. It is, therefore,
advocated that the primary consideration for the development of agricultural
marketing is to reorganise the existing system so as to secure for the farmer, his
due share of the price paid by the consumer to sub-serve the need of planned
development. This progress in the country as a whole has been rather slow and
it needs acceleration
INTRODUCTION
85
his own money is always inadequate and he needs outside finance or credit.
86
assessing the damage done by moneylenders who were essentially Indians
during two centuries proceeding independence.
AGRICULTURAL CREDIT
Finance had a very limited role in traditional settings as the transactions were
87
undertaken within the limits of village. Farmer’s dependence on others for input
requirement was marginal. Inputs such as cowdungs composts, etc. were
supplied by the households. Cash was only needed to pay land revenue or to
purchase consumption goods. The need for finance grew with modernisation.
Frequent crop failures were another reason for growth of cash transactions. Crop
failure forced farmers to borrow from moneylenders for meeting consumptions
requirements. Due to this the self-sufficient communities were exposed to credit
gap. A gap of over one year implies a perpetual time and over a time spreads to
the entire village community.
I. Production credit
The important form of short-term credit is the crop loan. Need for crop loan
comes from considerable increase in current cost of production.
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Capital intensity has increased the land productivity upto come extent. Crop
loans help the farmers to enable the productivity function with the use of
modern inputs. Crop loans have two components
Medium term loans are required mainly for creating capital assets. They may
also be used for purchasing livestock, agricultural machinery and equipment
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such as diesel engine, electric motors, etc. In the same way deepening and
repairing of wells for improving irrigation, development of activities like
dairy, poultry, piggery, etc. are the purposes for which medium term loans are
granted.
Certain loans are considered as medium term or long term loans. The term
structure is relative and is determined by the repaying capacity of the borrower.
Industrial credit is wholly meant for production but a part of it goes for meeting
consumption requirements of farm families. A farmer uses his marketed surplus
to pay off previous loans and very little to meet family consumption. Farmer
has to wait for next harvest for receipts because there is no continuous daily,
weekly or monthly receipts. Therefore he is forced to borrow both in cash and
kind for his consumption requirements. Festivals, religious, rites, marriages, etc.
als consume a lot of funds. Loan is also required due to crop failures.
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In India agriculture is dependent upon nature. Good rainfall leads to good crop
failure of monsoon damages the crop. Indian agriculture continues to be a
gamble in monsoon. Crop failures reduce the necessary goods for self-
consumption and also reduce the prospective returns. Farmers have to borrow
for survival. Consumption loan is basically for survival of farm families. They
could be considered as production loans. It is difficult to differentiate between
production and consumption loans. Both the loans have same importance. Local
moneylenders never made any distinction between production and consumption
loans therefore they were successful in their lending, activities during the first 2
decades after independence.
SECURITY:
Safe lending is widely accepted principle. Now lending has been made more
objective in priority areas. Security is now been replaced by purpose. Even
now for many reasons lending agencies insist on security. There is no dispute
about the need for security, but its, problem is regarding the size and nature of
security and whether small and marginal farmers have anything to do with it.
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There are different agencies in India extending short term credit such as primary
credit societies, regional rural banks, commercial banks, etc. Production
oriented credit is extended against anticipated crops (crop loans), consumption
credit is provided on personal security. Some times, third party guarantees or
gold ornaments, etc. are accepted as security.
Loans meant for purchasing equipments machinery are issued on the basis of
hypothecation of relevant machinery. However land mortgage is still insisted
upon medium and long term loans. Land mortgage conditions come in the way
of tenants who have no right on land. Lending agencies are responsible to the
depositors on one hand and being public institutions are expected to be
responsible to the society. Responsibility and accountability make them adopt
security minded approach. It is more important due to high risk and uncertainty
of agriculture in India. Similarly it is also a fact that a large variety of
small/marginal farmers are unable to furnish the necessary as security for loans.
In case of non-repayment the whole loss is borne by the local lending agency. It
is necessary to spread risk for liberalising security conditions by introducing
credit guarantee schemes and refinancing.
Co-operative credit consists of two parts. One engaged in short and medium
term.
(i) Primary co-operative credit: Primary co-operative credit cater to short term
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and land development banks cater to medium and long term credit. Primary
credit societies, which cater to short-term credit requirements lie at the bottom
of co-operative institutional structure. Primary societies are located in villages
and their activities are co-ordinated with central co-operative banks. It is seen
that primary societies dependence is extensive on central co-operative banks.
At the top of the co-operative credit stricture are state cooperative banks. They
provide short and medium term loans to farmers through central and primary
societies. Just as the central co-operative banks control the primary societies, the
state co-operative banks control the central co-operative banks. They also keep
and lend the funds to central co-operative banks.
(ii) Co-operative land development banks: Farmers also require medium term
and long term finance. For meeting such requirements, the government has
encouraged the growth of land development banks, on co-operative lines.
Farmers in reed of long term credit have to approach the primary land
development bank or the branches of central land development banks. All loans
are issued against mortgaging of land. Each loan is limited to 50% value of land
offered for mortgage. Usually land development banks do not accept farmers
valuation of land. They have their own values. The loans are granted to meet the
specified long term requirements for a period of 5 to 20years. Most crucial
problem faced by land development bank is the increasing rate of over dues,
which is about 55%. In other words, the fund flow is mostly one way and no
banking system can survive for long with over dues despite the best refinance
facilities.
Land development bank, obtain funds by the way of share capital reserves,
deposits and debentures and bonds issued and refinance now from NABARD.
LIMITATIONS:
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1. Limited geographic coverage: The spread of credit societies has been
limited only upto certain states like Himachal Pradesh, Andhra Pradesh,
Karnataka, Tamil Nadu, Punjab and Maharashtra. In other states like U.P,
Bihar, Madhya Pradesh, West Bengal, Gujarat have not made any head way.
2. Small and marginal farmers: Majority of farmers in India are small and
marginal. They need finance, for their needs but they are unable to obtain it
and even societies find it difficult to lend them. These farmers invariably
cultivate for self consumption leaving very little marketable surplus. In
absence of such surplus they cannot repay loans. Hence the societies go
around the large and medium farmers.
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training and professional attitude of staff; growth of commercial and regional
banks in rural areas are also responsible for the retarded growth of co-operative
credit in India.
RBI has taken initiative to appoint the all India rural credit survey committee to
solve the problem of rural credit by suggesting ways and means to improve the
existing structure.
The RBI has set up two funds on the recommendations of AIRCSC. They are:
RBI also keeps an eye on the policies and working of other financial institutions
providing agricultural finance, besides helping the co-operative sector and
taking lead in the establishment of financial institutions to help the agriculturist.
RBI has issued the following guidelines:
II. Credit norms finance: In ratio 30:70 the short term loans are
divided into cash and kind components. The bank has to check whether
the kind component is lifted by farmers.
III. Recovery and default: Banks should develop habits of punctual and
thrift payments on part of farmers. Schedule of recovery should coincide
with cash realisation i.e. after harvest time.
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As a solution to the Problems of cooperative finance in India the all India rural
credit survey committee recommended the integrated scheme of rural credit.
After the nationalisation of imperial bank of India, SBI came into existence in
1951. SBI has been providing financial assistance to marketing and processing
co-operative societies as well as for co-operative sugar factories, land
development banks, industrial cooperatives, etc. SBI has opened branches in
small towns and mandis to generate banking habits in farmers. The whole group
of SBI has a network of branches and sub offices. Nearly 19,400 villages come
under the "village adoption scheme". SBI provides credit to all potentially viable
farmers.
Special Activities:
Special and innovative schemes are adopted by SBI, which leads to rural
development. SBI has taken broader view through co-operatives in leading the
development of rural India.
For the development of trade and commerce in India banking system is been
developed. It caters to the needs of large scale organised industries and its
activities are concentrated on urban areas. Commercial banks are extending
support, to agriculture in direct as well as indirect way. Direct finance is granted
for agricultural operations for short and medium periods. Indirect finance is
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granted by providing advances for distribution of fertilisers and other inputs.
These banks also finance for the operation of Food Corporation of India, State
Government and their agencies for food procurement.
In the case of rural credit commercial banks have made achievements, but their
operations have got some criticisms. They are as follows:
4. Failure in filling the geographical gap: Availability of' credit is not covered
geographically by the co-operatives. In the absence of proper geographical
spread of bank branches it is found that more than on bank operates in same
area, which results in unhealthy competition between 2 or more commercial
banks.
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6. Lack of co-ordination: There is lack of co-ordination not only between two
commercial banks but also between banks and government departments.
There is lead bank in every district but in many cases number of branches
belonging to commercial banks.
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II. Mechanisation of seasonal operations and for laying out orchards or
for traditional plantation of crops.
99
PERFORMANCE OF CORPORATION:
It has also disbursed loans to IDA and IBRD for projects selected by them
for financial assistance.
100
because they have better understandings of local problems, local peoples needs
and their constraints.
FEATURES:
1. Rural based: Primarily the RRB's are rural based. They supplement the
co-operative credit societies. These banks are to be sponsored by any
national commercial bank.
2. Cater the need of backward areas: The areas where cooperative and
commercial banks have not been established, RRB's are established there.
They cater to the needs of tribal and backward areas. Their working
procedures are understood by the local people. They provide productive
credit and their interest rate changed is also low.
PROBLEMS OF RRB'S:
The process of recruitment and training of RRB staff does not received
adequate attention. There is unplanned and unwieldy growth of these banks
and branches are opened tinder the pressure of state government.
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increasing losses, which lead to non-viability. They are:
a. RRB's are confined only to lend to weaker sections where interest earned
on loans is very low in the banking system.
d. Opening branches of RRB's year after year has added to the overhead costs
without proportionate increase in income.
102
credit problems of rural sector. Half of NABARD's capital was contributed by
RBI and other half by the government. It has enough financial resources to
support agricultural and rural development programmes.
Function of NABARD:
g. It provides long term and medium term credit (not exceeding 25 years) for
investment in agriculture to state co-operative banks, RRB's and commercial
banks.
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Types of Refinance Facilities
Agency Credit facilities
Commerical Banks Long term credit for investment purposes
104
(RIDF) loans for infrastructure projects
Non-governmental Revolving Fund Assistance for various
Organisations (NGOs) – micro-credit delivery innovations and
Informal Credit Delivery promotional projects under Credit and
System Financial Service Fund (CFSF) and Rural
Promotion Corpus Fund (RPCF) respectively
Eligible Institutions:
Eligible Purposes:
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For RRBs at 5.5% per annum
Other Facilities:
The short term credit for 12 months can be converted to medium term
credit for 3 to 7 years subject to certain conditions when farm productions
are affected by natural calamities.
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and food grains in particulars became urgent. Therefore, grow more food
campaign and similar other schemes were undertaken. Besides, rehabilitation of
a large number of refugees from Pakistan was to be carried out on a war footing.
The Government had therefore to disburse large amount by way of loans and
advance to agriculturists.
CRITICAL EXAMINATION:
A critical examination of the working of the takkavi finance was made by Rural
Credit Survey Committee. It was observed that the average amount per
cultivator was very small in respect of small cultivators. Further the medium and
big farmers were able to secure a large share of the available takkavi finance.
The main reason was the condition laid down that land had to be provided as a
security. The small landholders and tenants could not avail of takkavi loans, as
they were unable to furnish the security as required under the rules. Thus the
system suffered from defects, which resulted in inadequacy of amount,
inequality of distribution and inappropriateness of the basis of security.
The Rural Credit Survey Committee characterised Takkavi, "To be little else
then the ill-performed disbursement of inadequate moneys by an ill-suited
agency", and recommended that the Government finance should be strictly
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limited.
CAUSES OF OVERDUES:
There are certain internal as well as external factors responsible in the growth of
overdues. Defective credit policies and procedures are responsible for the
creation of overdues. Internal
factors are those on which lending institutions have some control. But they have
no operational or administrative control over external factors.
1
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XI. Inability of financial institution to provide credit to defaulting units to
bail them out from old debts.
These were some of the factors on which the lending agencies have very little
control.
SUGGESTIONS:
All the committees and sub groups have made certain suggestions some of
which are listed below:
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VI. Stabilisation fund should be given importance.
XII. The mortgaged property should be sold to reveal the intentions of the bank.
XIII. Loans may be issued by way of non transferable cheques, drawn in the
favour of borrowers and payable at bank branches.
XIV. The lending agencies should set up their own recovery cells.
XVI. Publicity campaign may be undertaken to impress the need for recycling
of funds.
I. Money Lenders:
There are two types of money lenders in the rural areas. The agriculturist money
lenders and the village shopkeepers. Besides, there are professional
moneylenders whose only occupation is money lending. The agriculturist
money lenders combine farming with money lending. Primarily they may be
interested in farming but they carry on money lending as a side business.
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The cultivators depend upon the money lender for their requirements, of cash.
The importance of money lenders is declining but they are still preferred by
some of the farmers who do not have approach to institutional finance and
whose requirement of credit is urgent and mostly for meeting the consumption
need.
II. They obtain bonds and promissory notes on false pretences from their
debtors and enter in them amounts larger than actually lent.
B. They give no receipts for repayment and often they deny such repayments.
The money lenders have been responsible for many of the ills of Indian
agriculture because their main interest has been to exploit the farmers to their
benefits and grab their lands.
(3) Landlords:
Landlords are the important source of finance for farmers, specially the tenant
farmers. These loans from landlords are taken by farmers for consumption
111
purposes.
(4) Relatives:
For tiding over temporary difficulties farmers borrow from their relatives.
Relatives provide finance in smaller amounts. This amount is given to meet the
emergency needs of farmers. These conditions are also very soft.
II. Moneylenders do not press the borrowers for repayment of the principal if
they keep on paying the interest regularly.
III. Non-institutional agencies can provide fresh loans even when no security is
offered by the borrower.
VI. Non-institutional agencies can provide fresh loans even when no security is
offered by the borrowers.
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The various defects of non-institutional sources of agricultural marketing
finance are as under:
I. They combine banking with trading and commission business and thus have
introduced trade risks in the banking business.
II. They follow vernacular method of keeping accounts and do not give receipts
in most cases. Besides, the interest, which they charge is out of proportion
to the rates of interest charged by the other banking institutions in the
country.
III. They are unorganised and do not have any contact with that sections of the
banking world.
IV. They do not distinguish between short-term and long-term finance and also
between the purposes of finances.
The RBI has made several attempts to bring the indigenous banker under its
control. The government has tried to regulate the activities of non-institutional
agencies like money lenders and established more institutional agencies for
agricultural credit with a view to stop malpractices followed by them.
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Before the nationalisation, commercial banks just had a marginal role in the
process of rural development. But after nationalisation of 14 major commercial
banks in 1969 government took necessary steps to expand banking services in
the rural areas. After nationalisation many commercial banks were opened in the
rural areas. But this expansion was neither planned nor coordinated. Hence
many economists criticised such unruly expansion and put forward an idea of
‘area’ or ‘micro approach’ for smooth, coordinated and rapid development of
banking activities in the rural areas. The National Credit Council Study Group
(NCCSG) under the chairmanship of Prof. D.R. Gadgil stated this idea. The
group strongly recommended for ‘area approach’. Another committee, known
as committee of bankers or Nariman committee appointed by the Reserve Bank
of India also expressed its support to the idea of ‘area approach’ and christened
it as ‘lead bank scheme’. In the same year i.e. 1969, RBI accepted the idea of
lead bank scheme and resolved to implement this scheme in all the 380 districts
across the country leaving just a few totally urbanised areas such as union
territory of Delhi, Goa, Chandigarh and metropolitan cities of Mumbai, Kolkata,
and Chennai.
Lead bank were entrusted to perform a leading role in their respective area
before surveying the needs of farmers, look after and plan out branch expansion,
make available the banking facilities in non-banking area and other function
aiming at providing better and coordinated banking facilities all over its
jurisdiction.
II. To survey the facilities for stocking and warehousing, and assess specially
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the facilities for storing inputs such as fertilisers, seeds, insecticides etc.
III. To examine inability of primary lending agencies and in case they are
potentially viable, then to encourage and strengthen them.
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Cooperative Marketing
The National Co-operative Development Corporation has been promoting and financing a
wide range of economic activities in rural areas through co-operatives. The Co-operative
is a unique institution in the country catering to the development of the rural economy
and agriculture sector through co-operative. There is no other institution in the country
which is exclusively for meeting the requirement of co-operatives.
NCDC has been playing special attention to weaker sections co-operatives in various part
of the country. The promotional and development role of NCDC had lead to continuous
diversification and expansion of co-operative programs under its preview.
When producers of agricultural commodities or any other product form a society with an
objective of carrying out marketing of their produce, such society is called as co-
operative marketing society. The need for co-operative marketing arose due to many
defects observed and experienced in the private and open marketing system. Those are
2. There exists a chain of intermediaries between the producer and the final consumer.
They include village merchant, itinerant trader, wholesaler, commission agent, pre-
harvest contractor and retailer. They take their own margins for the services, they
render. But these margins are generally ex-orbitant, making the commodities costly
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for the consumers and reducing the producer's share in the consumer's price. A co-
operative marketing society can eliminate some or all of the intermediaries and can
reach to the consumers and establish direct trade relations with them. This will make
commodities cheaper to the consumers and also ensure good quality of produce to
them because much of the handling is avoided.
3. There are some services such as transport, storage, financing, grading, packing,
loading/unloading which are carried out by some private functionaries who charge
high rates for these services. A co-operative marketing society performs these
services efficiently and at cheaper rates.
Organization:
Membership :
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Membership of a co-operative marketing society is open to individual farmer who
produces the crop for which the society is formed. Other co-operative societies in the area
can also become institutional members.
Resources:
1. Share capital
2. Deposits.
5. Reserve funds.
Functions :
1. To arrange for the sale of members produce to the best possible advantage.
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3. To provide storage facilitates to their members by renting or owning the godowns
and thereby facilitate to grant advances against pledge of produce.
4. To protect members from all types of malpractices eliminates the middleman in the
chain of marketing.
5. Co-operative marketing society ensures grading, etc. and supply of good quality
material to consumers.
6. It teaches business methods to farmers and serves them as agency for supply market
information.
7. The society is able to stabilize prices over a long period by adjusting the supply
with the demand.
8. Marketing societies are also encouraged to undertake export trade so that they can
give better prices to their members.
Although, many advantages are envisaged in the co-operative marketing the structure has
remained relatively weak as compared to credit co-operatives. There are only about 1000
marketing societies as against 20,000 credit societies in Maharashtra. Their marketing is
more difficult involving many technical and commercial aspects. Marketing of perishable
is still more different. Arranging quick transport, arranging storage to avoid losses, to
keep watch on demand - supply position to ensure good prices to members are all matters
need for good marketing. For want of these managerial aspects, desired number of co-
operative marketing societies have not come up and those which were started could not
succeed. Several marketing surveys/studies at farmer's levels have revealed that among
several marketing channels, co-operative channel has offered greater share of consumer's
prices to the producers. Whichever, marketing is unorganized, farmer - producers have
expressed that marketing co-operative societies should be formed.This was particularly
reported in the cases of marketing of perishables.
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Few Successes:
State Trading
State trading in its narrow sense means import and export transactions of a state-owned
or state controlled agency involving purchase of goods on commercial sale. In a broader
sense, it includes purchases from abroad for governmental use and disposal of surplus
stores originally purchased for governmental use. A Report prepared by the E.C.A.F.E.
Secretariat defines state trading as “Direct participation by the government (or its agent)
in foreign trade including those trading activities in which the government (or its agent)
holds title to export before transactions and acquires titles to import.”
The main objective of state trading is to facilitate development of trade with countries
where trade is in government hand, and to assist the government in solving difficulties
and problems for which private trading channels are found to be inadequate. State
trading enables the private trading countries to negotiate with equal bargaining power
and, thus, safeguard against exploitations, which a large number of private importers and
exporters competing with each other, are confronted with monopolistic trading agency.
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State trading has various advantages as compared with private trading.
Secondly, with its vast initial investment, it tries to develop new markets for exports and
new sources of supply of imports and also promotes exports of non-traditional items.
Thirdly, state trading helps the state in honouring its bilateral agreements.
Fourthly, it can be directed to patronize national banking, shipping and insurance for
encouraging the development of these services.
Fifthly, it undertakes bulk- buying and so lowers the cost of imports, dispenses with the
services of middlemen and thereby eliminates their commissions.
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d. To stabilize the domestic prices of specified products by controlling their
production and marketing;
e. To explore export markets for products and to dispose of exportable surpluses of
commodities;
f. To obtain advantage of bulk transactions;
g. To facilitate trade with centrally planned economics;
h. To facilitate the import of goods financed under foreign aid programmes;
i. To facilitate the implementation of trade agreements and barter deals;
j. To transfer trade from the control of non-nationals;
k. To direct trade in accordance with development policies;
l. To raise revenue for the treasury;
m. To influence changes in the distribution of income derived from foreign trade
transactions; and
n. To facilitate sanitary and public health controls.
The S. T. C. has been constituted as a limited liability company under the Indian
Company's Act, 1956. It normally has 10 Directors. As per its Memorandum of
Association the objectives of the S. T. C. are, “to organise and effect exports
from and imports in to India of all such goods and commodities as may be
determined by the Company from time to time, and to undertake the purchase,
sale and transport of and the general trade in such goods and commodities in
India or anywhere else in the world.”
Functions:
With the passage of time, the role and activities of the Corporation have
widened. Besides, the above objective, other important objectives are:
1. To explore new markets for traditional items of export and develop new
items with a view to diversifying and expanding the export trade;
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2. To undertake import and/or internal distribution of commodities in short
supply with a view to stabilizing prices and rationalising distribution;
6. To manufacture, store, export, import, and deal in all kinds of articles and
things, which may be required for the purpose of any business of the
company.
The Committee on Public Undertakings has classified the above functions of the
S T C under the following six main heads:'
1. Exports
a. To promote export of traditional items, to introduce non traditional items
in the world markets and to find out new markets for Indian exports.
b. To facilitate and organise exports of difficult-to-sell items (such as
manure, meal, sodium, dichromate, deoiled linseed cake, cement etc.) by
linking essential imports with additional exports and under special trade
promotion agreements.
c. To organise product to meet export demands and to help product units in
overcoming difficulties of procuring raw materials and other essential
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requirements.
d. To develop new lines of exports.
e. To ensure implementation of trade plans with East European countries.
f. To help local producers by procuring reasonable prices and to hold stocks
to maintain ultimate production at optimum level of commodities with high
export potential, thus, avoiding dislocation in production, maintaining
adequate availability for export and ensuring a fair price to local producers.
g. To participate in fairs and exhibition abroad so as to create atmosphere for
expansion of exports and for introducing new products in foreign markets.
2. Imports
a. To import capital goods, industrial raw materials and certain scarce
commodities required for the economic development of the country.
b. To import items which are canalised by the Government through this
Corporation so as to ensure that adequate supplies at the right time and at the
economical prices are made and are distributed to the industries and other
users in a co-ordinated manner.
c. To undertake import of commodities where bulk purchase would give
better terms.
d. To undertake imports from state trading countries or from where
monopolies are involved.
e. To import commodities, which is in short supply in the country.
f. To import speculative and high profit margin items with a view, to
stabilise the prices and to do distribution of such commodities in an
organised manner at fair prices.
g. To ensure the implementation of trade plans with the East European
countries and other special agreements.
3. Internal Trade
a. To undertake internal trade in certain commodities like imported cars.
b. To undertake price support and buffer stock operations with a view to
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ensure fair prices to the growers of certain agricultural commodities, to
stabilize internal production and sustain foreign demand.
Besides these, S T C had also undertaken price support operations (at the
instance of the Central Government) for natural rubber in 1970 and tobacco in
1972. Growers were assured of remunerative prices and surplus quantities,
mopped up by the S.T.C., were exported.
Media
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There’s no surprise in learning that over 70%, (roughly 670 million) of India’s teeming
masses live in rural areas. Of these, some 260 million live in almost complete media
darkness, without access to TV, radio, and beyond the reach of newspapers and
magazines. Widespread illiteracy allied with the multitude of languages and dialects puts
the most of these people beyond the reach of conventional media planning.
Yet the villagers are increasingly important as consumers. A survey by India’s National
Centre for Applied Economics and Research revealed double-digit rural growth rates in a
cross section of products ranging from scooters to confectionery between 1995 and 1999.
For companies such as Unilever, Nestle, Glaxo, Lucky Goldstar rural consumers are a
huge market opportunity. About 45% of soaps, 40% of teas and 60% of watches sold in
rural India. Now that penetration for many consumer products in urban areas is high, the
rural markets are growing in importance for both marketers and their agencies.
Ogilvy Outreach, O&M’s rural arm, started with one employee supported by the head of
the media division in 1994. Today it has a team of 1,000 supervisors plus another 5,000
people who work on a project basis
Tapping the rural market calls for new insights into what helps consumers remember and
understand brand messages. Research carried out by Ogilvy Outreach discovered that the
rural audience identifies more with colours, numbers, and visuals of animals all woven
together in loud colorful messages. These findings appear supported by the high recall
levels enjoyed by brands like Lifebuoy (popularly known as the lal sabun), 555, and
Monkey brand tooth powder.
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McCann Erickson are also developing rural initiatives in India. Their strategy for the
rural market is built on two key planks. Consumer Insight which will helps understand
rural consumers from their own perspective and Experiential marketing, which
executives say will be the most relevant, emotive and impactful tool, given the language
and cultural diversity of rural India.
Currently ResultMcCann, which is McCann India's integrated Communications
Company, is working for TERI (Tata Energy Research Institute) on a World Bank funded
project for Farmer education on Farm Forestry in the rural areas.
The knowledge gained from rural marketing in India is already being applied in
Bangladesh, Cambodia, Africa, and part of China and may yet prove the pathway that
extends the franchise of many brands to Asia’s rural billions beyond the reach of
television and the internet.
There is a wide gap between urban and rural segments in terms of purchasing power,
literacy, and readership habits and media exposure. The purchasing power of the rural
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consumer has been increasing in the recent years with the rise in income levels due to
agricultural prosperity.
The trends in media penetration show that the penetration of print media (barring regional
publications), radio, and cinema is on the decline in both urban and rural areas; the only
media that is growing is Television through Satellite Channels. Also gone are the days
when advertisements could be conceived in English and then dubbed in regional
languages.
Marketing companies had initially turned to rural India on a look out for newer markets.
Clearly, the possibility of converting approximately 700 million innocents into voracious
Cadbury- homping, shampoo lathering consumers has galvanised the industry. The focus
of the companies, apart from increasing the geographical width of their product
distribution is to capture the television-savvy rural consumer. Introduce their brands and
develop marketing strategies specific to the rural consumers. The existence of the divide
between the urban and rural consumer triggered these. The seriousness of the efforts is
evident from an in-house study conducted by ORG-MARG that revealed that 75% of
both Indian and the multinational companies are taking the help of the rural marketing
organisations to establish distribution links across the length and breadth of the country.
An Indian farmer working in jeans sounds improbable. But, Arvind Mills did not think
so. In the first two months the demand for its Ruf & Tuf kits crossed a million pieces as
against a production capacity of 0.25 million kits.
The rural thrust was a part of HLL’s “Operations Bharat”. Last year, HLL perhaps
conducted the most extensive exercise of its kind, to create demand for its products in
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the rural market. They peddled 15-rupee packs containing soap, toothpaste and a
fairness cream in 20,000 villages, which resulted in an incredible 30% conversion.
Britannia launched Tiger Biscuits especially for rural markets thus increasing its
share of the Glucose market from 7% to 15%
HLL A1 tea became a INR 1000 million brand in less than a year after it was
introduced in the rural market
Hindustan Motor signs joint venture with OKA Motors of Australia to launch
special rural transport vehicle.
DCW Home products are test–marketing Captain Cook Super White Salt for non –
urban areas.
The key to the success of most of these products was that these products were designed
keeping the rural consumer in mind and recognising the fact that the two consumer sets
are different. Several surveys on rural marketing have pointed out that segmenting urban
and rural consumers on the basis of income alone will not help in formulating a correct
rural marketing strategy.
Factors like cultural diversity, including lifestyles in the area, literacy levels, standard of
living, consumption patterns, types of communication facilities and above all the size of
the rural market need to be considered in formulating an appropriate marketing strategy.
The key to the gateway of the rural segment emerged as expansion in distribution and
growing media penetration leading to increased usage.
The consumption baskets of the rural and urban markets also show a similar constitution,
with the products not very different. Approximately, 50% of the toilet soaps, washing
cakes and blades, 40% of the washing powder, tooth powder, tea, salt, digestive,
antiseptic cream, half of the market for black & white TVs, motorcycles, pressure
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cookers, fans, cassette recorders, and blades are purchased by the rural market This paper
will analyse the urban and rural markets in the above context.
The objective of this paper is to answer whether a divide exists between the two markets
and to measure the magnitude and the flavour of the divide in terms of key marketing
parameters like Distribution, Products and Markets
The sources of data for this paper include the ORG–MARG’s Retail Store Audit, Rural
Consumer Panel, Indian Readership Survey and other secondary sources like reports of
CMIE, NCAER, etc.
The rural market's potential for growth is the cynosure of marketers' eyes. Identifying
where the divide exists and how to capitalise on it is the need of the day for FMCGs and
consumer durables as the urban market is showing signs of saturation.
MEDIA REACH
"The medium is the message" acquires critical importance for advertisers and marketers
in India as different media have varying penetration levels. For example terrestrial TV
has the highest penetration among all types of media with 78 per cent penetration in
urban India and 36 per cent in rural India. It's reach is the highest in the 14 to 19 age
group with 62 per cent. It has an astonishing 91 per cent penetration in urban Himachal
Pradesh.
In contrast satellite TV reaches only 13 per cent of India. The medium's highest
penetration of 52 per cent is in urban Maharashtra. But in the rural parts of the state it has
a penetration of a mere 4 per cent. Similarly in Assam and Orissa satellite TV reaches
only 4 per cent of the population.
Given the high literacy levels it is natural that print media has the highest penetration in
Kerala. It reaches 76 per cent in urban Kerala and 65 per cent in rural parts of the state.
Print media has the lowest reach in Assam with 11 per cent.
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Cinema has a high penetration in the southern states of India. In urban Kerala the reach of
cinema is 61 per cent. It varies from 40 - 45 percent in other southern states. Cinema
reaches more than 30 per cent of the population in the age group of 15- 25 across the
country.
DTH & Internet more relevant for the upper SEC class of the population.
This segment is very difficult to catch and hence innovative media solutions are
the order of the day.
Brand building is the order of the day as it is important to synergise media with brand
objectives
No other country exists on earth, which offers such a dazzling array of Entertainment
choices as India does!
In India, entertainment encompasses a wide plethora of options. Right from cinema (the
largest of its kind in the world) to television (amongst the fastest growing in the world) to
soothing music (the most diverse in the world) to awesome festivals (richest in culture)
and richest-possible food and finally its fanatical devotion to sports like cricket.
Music in India is as rich as can be. Music in India is a means for spiritual exploration, a
path of realisation, in addition to deriving aesthetic entertainment.
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Be it classical or the folk or the modern Indian pop-bhangra, Indian music reflects Indian
life, having no predetermined beginning or end, but flowing uninterrupted through the
composer-performer. The purpose of Indian music is to refine one's soul, discipline one's
body, to make one aware of the infinite within one, to unite one's breath with that of
space and one's vibrations with that of the cosmos.
The basic tenets of classical music have been laid down by numerous ancient texts. The
classical music is not pre-conceived but pre-written. While the underlying notes are pre-
written, within the framework of the rules governing the raaga, the musician has
complete freedom to exercise full imagination and creativity.
In tribal societies, from birth to death, songs, dances and musical instruments are used to
mark every occasion. The origins of classical music are also traced back to tribal tunes
and songs.
The music of India is a mosaic of different genres and levels of sophistication. At one
extreme, classical music is performed in the urban concert halls for purely artistic
reasons, and, at the other, many kinds of functional rural music accompanies life cycle
and agricultural rites. In between are many other musical genres of different regions of
the country, reflecting the diversity of its peoples, their life-styles, and their languages
The Indian society is a complex social system with different castes, classes, creeds and
tribes. The high rate of illiteracy added to the inadequacy of mass media impedes reach
almost to 80% of India's population who reside in village. Mass media is too glamorous,
interpersonal and unreliable in contrast with the familiar performance of traditional artist
whom the villager could not only see and hear, but even touch. Besides this villagers are
more conservative buyers then their urban counterparts. Their desire to innovate with
new product is restricted.
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Traditional media can be used to reach these people in the marketing of new concept. The
traditional media with its effective reach, powerful input and personalized
communication system will help in realizing the goal. Besides this when the
advertisement is couched in entertainment it goes down easily with the villager.
Few of the available options in the traditional media are Puppetry, Folk Theater & Song,
Wall Painting, Demonstration, Posters, Agricultural Games, and Post Cards etc.
Puppetry
Puppetry is the indigenous theatre of India. From time immortal it has been the most
popular form and well-appreciated form of entertainment available to the village people.
It is an inexpensive activity. The manipulator uses the puppets as a medium to express
and communicate ideas, values and social messages.
Song and Drama Division of the Government Of India make wide use of puppets in its
campaigns to promote various government projects. Several other organizations,
government, semi-government and private, have also used puppets in support of
individual schemes.
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Life Insurance Corporation of India used puppets to educate rural masses about Life
Insurance; enlisting the help of the literacy house in Luck now. These plays were shown
to the audience in villages in UP, Bihar, & MP. The number of inquires at local Life
Insurance Companies during the period immediately following the performance was
compared with normal frequency and found to be considerable higher. The field staff of
the corporation also reported a definite impact on the business.
Folk Theater
Folk theaters are mainly short and rhythmic in form. The simple tunes help in informing
and educating the people in informal and interesting manner. It has been used as an
effective medium for social protest against injustice, exploitation and oppression.
Folk Theater / Songs Forms In India
Andhra Pradesh: Veethi Natakam, Kuchupudi, Burratatha
Assam: Ankiya Nat, Kirtania Natak, Ojapali Bihar: Bidesia, Serikela Chhau, Jat-Jatni
Bidpada, Ramkhelia
Gujarat: Bhavai
Haryana: Swang, Naqqal
Himachal Pradesh: Kariyala, Bhagat, Ras, Jhanki, Harnatra Haran or Harin.
Jammu & Kashmir: Bhand Pathar or Bhand Jashna, Vetal Dhamali
Karnataka: Yakshagan, Sanata, Doddata-Bayalata, Tala Maddle or Prasang, Dasarata,
Radhna.
Kerala: Kodiyattam, Mudiattam, Therayattam, Chavittu Natakam, Chakiyar Kooth,
Kathakali
Madhya Pradesh: Maanch, Nacha Maharashtra: Tamasha, Lalit Bharud, Gondha,
Dashavatar
Orissa: Pala Jatra, Daskathia, Chhau Mayurbhanj, Mangal Ras, Sowang,
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Punjab: Nautanki, Naqaal, Swang
Rajasthan: Khyal, Rasdhari, Rammat, Turra Kilangi, Gauri, Nautanki, Jhamtara
Tamilnadu: Therukuttu, Veethi Natakam, Bhagwat Mela Natakam, Kurvaanji, Pagal
Vasham, Kavadi Chindu
Uttar Pradesh: Ram Leela, Ras Leela, Nautanki, Bhagat, Sang-Swang, Naqqual
Goa, Daman & Diu : Dashavatar, Tiyatra.
Folk songs have been effectively used during revolts of Telangana and Naxalbari and
now a days it's best exploiters are Political Parties.
Government has used this media for popularizing improved variety of seeds, agricultural
implements, fertilizer etc. Punjab Agricultural University produced Two Audio Cassettes.
A) Balliye Kanak Biye - Wheat Cultivation.
B) Khiran Kepah Narme - Cotton Cultivation.
Both were well received by farmers.
BBLIL used Magician quite effectively for launch of Kadak Chhap Tea in Etawah.
Demonstration:
"Direct Contact" is a face-to-face relationship with people individually and with groups
such as the Panchayats and other village groups. Such contact helps in arousing the
villager's interest in their own problem and motivating them towards self-development.
Demonstration may be
A. i. Method demonstration
ii. Result demonstration
B. i. Simple Demonstration
ii. Composite Demonstration
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In result demonstration, help of audio -visual media can add value. Asian Paints launched
Utsav range by painting Mukhiya's house or Post office to demonstrate that paint does
not peel off.
Wall Paintings
Wall Paintings are an effective and economical medium for advertising in rural areas.
They are silent unlike traditional theatre .A speech or film comes to an end, but wall
painting stays as long as the weather allows it to.
Retailer normally welcomes paintings of their shops, walls, and name boards. Since it
makes the shop look cleaner and better. Their shops look alluring and stand out among
other outlets. Besides rural households shopkeepers and panchayats do not except any
payment, for their wall to be painted with product messages. To get one's wall painted
with the product messages is seemed as a status symbol. The greatest advantage of the
medium is the power of the picture completed with its local touch. The images used have
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a strong emotional association with the surrounding, a feet impossible for even a moving
visual medium like television, which must use general image to cater to greatest number
of viewers.
A good wall painting must meet some criteria to generate awareness and remind
consumer about the brand. The most frequented shops can be painted from inside also
one feet above the ground level.
It is courteous to take the verbal permission of owner .The permission is normally given.
However by taking the permission of the rural retailers or house owners, one gets the
owner morally committed to taking care of wall painting.
It should be peaked up during the festival and post harvest season. To derive maximum
mileage their usage needs to be planned meticulously.`
For the rural market, strategies for the 4P’s of the marketing mix would be an ideal one.
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(B) Pricing Strategies
(C) Distribution Strategies
(D) Promotional Strategies
A) Product Strategies
The following are the product strategies for the rural market and rural consumers:
1. Small unit packing: This method has been tested by products life shampoos,
pickles, biscuits, Vicks cough drops in single tablets, tooth paste, etc. Small packings
stand a good chance of acceptance in rural markets. The advantage is that the price is
low and the rural consumer can easily afford it.
Also the Red Label Rs. 3.00 pack has more sales as compared to the large pack. This
is because it is very affordable for the lower income group with the deepest market
reach making easy access to the end user satisfying him.
The small unit packings will definitely attract a large number of rural consumers.
2. New product designs: Keeping in view the rural life style the manufacturer and the
marketing men can think in terms of new product designs.
For e.g. PVC shoes and chappals can be considered sited ideally for rural consumers
due to the adverse working conditions. The price of P.V.C items is also low and
affordable.
For them, heavier weight meant that it has more over and durability.
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4. Utility oriented products: The rural consumers are more concerned with utility of
the product and its appearance Philips India Ltd. Developed and introduced a low cost
medium wave receiver named BAHADUR during the early seventies. Initially the
sales were good but declined subsequently.
On investigation it was found that the rural consumer bought radios not only for
information and news but also for entertainment.
5. Brand name: For identification, the rural consumers do give their own brand name
on the name of an item. The fertilizers companies normally use a logo on the fertilizer
bags though fertilizers have to be sold only on generic names. A brand name or a logo
is very important for a rural consumer for it can be easily remembered. Many a times
rural consumers ask for peeli tikki in case of conventional and detergent washing
soap.
Nirma made a peeli tikki specially for those peeli tikki users who might have
experienced better cleanliness with the yellow colored bar as compared to the blue
one although the actual difference is only of the color.
B) Pricing Strategies
Pricing strategies are linked to the product strategies. The product packaging and
presentation also keeps the price low to suit the rural consumer.
1. Low cost/ cheap products: the price can be kept low by low unit packings like
paisa pack of tea, shampoo sachets, vicks 5 grams tin, etc. this is a common strategy
widely adopted by many manufacturing and marketing concerns.
2. Refill packs / Reusable packaging: in urban areas most of the health drinks are
available. The containers can be put to multipurpose uses. Such measures can a
significant impact in the rural market.
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For example, the rural people can efficiently reuse the plastic bottle of hair oil.
Similarly the packages of edible oil, tea, coffee, ghee etc can be reused. Pet jars free
with the Hasmukhrai and Co Tea, Ariel Super Compact.
C) Distribution Strategies
While it is necessary to formulate specific strategies for distribution in rural areas, the
characteristic of the product – whether it is consumable or durable, the life of the product
and other factors have to kept in mind.
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society for serving to the rural consumers. Many of the societies extend credit to the
members for purchases.
3. Utilization of public distributory system: The PDS in the country is fairly well
organised. The revamped PDS places more emphasis on reaching remote rural areas
like the hills and tribals. The purpose of PDS is to make available essential
commodities like food grains, sugar, kerosene, edible oils and others to the consumers
at a reasonable price. The shops that distribute these commodities are called fair price
shops. These shops are run by the state civil Supplies Corporation, co-operatives as
well as private entrepreneurs. Here again there is an arrangement for centralised
procurement and distribution. The manufacturing and marketing men should explore
effective utilisation of PDS.
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6. Shandies/Haaths/Jathras/Melas: These are places where the rural consumers
congregate as a rule. While shandies/heaths are held a particular day every week,
Jathras and melas are held once or twice a year for longer durations. They are
normally timed with religious festivals. Such places attract large number of itinerant
merchants. Only temporary shops come up selling goods of all kinds. It can be
beneficial for companies to organize sales of their product at such places. Promotion
can be taken, as there will be ready captive audience. For convincing the
manufacturing and marketing man with regard to the importance of these places from
rural marketing point of view a visit to such places is necessary. It is estimated that
over 5,000 fairs are held in the country and the estimated attendance is about 100
million rural consumers. Biggest fair ‘Pushkar Mela’ is estimated to attract over 10
million people. There are 50 such big rural fairs held in various parts of country,
which attract urbanite also like ‘Mankanavillaku’ in Malappara in Kerela, Kumbh
Mela at Hardwar in U.P. ‘Periya Kirthigai’ at Tiruparunkunaram in Tamil Nadu.
D) Promotional Strategies
The promotion measure should be cost effective due to the low literacy rate of
the rural population. Word of mouth is an important message carrier in the rural
areas and “opinion leader” play a significant role in influencing the prospective
rural consumers about accepting or rejecting a product or a brand. There are
other attributes in the promotion strategy which are explained as under:
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1. Mass media: In the present world mass media is a powerful medium of
communication. The following are the mass media generally used:
• Television.
• Cinema
• Radio
• Print media: Handbills and Booklets, posters, stickers, banners,
etc.
Philips India was among the first consumer durables companies to hit the rural
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market with its Bahadur brand of Transistors in the 1950s. but somewhere down
the line, the rural focus was gone. However, in the mid-1998, Philips felt the need
to improve its market share in upcountry markets. It decided to launch a special
project in Tamil Nadu and Andra Pradesh at a total cost of Rs. 5 Crore.
Rural consumers need to be seen as ‘different’ and ‘not inferior’. It is with this
belief that Philips approached rural buyers in Tamil Nadu and Andra Pradesh. “the
idea was to present Philips in a relevant manner to the rural consumer, position it
as a truly International brand, the way a rural buyer would understand it,”says
V.Swaminathan, Philips general manager (distribution & rural marketing) at its
consumer electronics department division. So Philips held road shows, van
promotions, merchandising etc. in villages with populations of about 5000.
Back in Tamil Nadu, promotions revolving around the word “super” were kicked
off. Exhibitions of Philips products titled “Supershows” were organized.
Interactive sessions such as “sit and draw” contests for children to create brand
recognition were held. The participants were asked to copy the Philips logo. They
were also asked to copy the brands “Lets Make Things Better” line English so that
Philips name is recognised irrespective of language. In a karaoke contest villagers
had to sing along with the catchy Philips jingles and win prizes.
During the exercise, Philips painted 1 lakh square ft of wall area in Tamil Nadu
and Andhra Pradesh. 4 ad campaigns- 2 for B&W (Black &White) TV and 1 each
of C (Colour) TV and audio systems- were created in Tamil and Telugu. These
were executed in cinemas, theatres and through video vans (68% of people in
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Tamil Nadu watch films and 81% in Andhra). The electronic media ads were
slickly used. Philips did not compromise on the production values.
The storyboard was created keeping in mind the way of life. Girls in small towns
and villages often embroided the cloth which covers the television sets in the
house. The ad shows one such girl spreading the embroidered cloth waiting for her
in Dubai to return with a C TV. Of course he does not bring the C TV and explains
that Philips makes world-class TVs in India. Predictably, a Philips TV is brought
home and lovingly covered could easily relate to the story.
The results of the entire exercise: sales rose by between 25% and 30% in these
states in the last 6 months. Now, Philips is extending the exercise to Uttar Pradesh
and Maharashtra.
Conclusion
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in this way " There will be always, one can assume, need for some selling. But
the aim of marketing is to make selling superfluous. The aim of marketing is to
know and understand the customer so well that the product or service fits him
and sell itself. Ideally, marketing should result in a customer who is ready to
buy. All that should be needed then is to make the product or service available."
Through this we feel that the gist of marketing in rural & urban is the same. It is
nothing but teasing the minds of people, their desires, needs, expectations &
playing with their physiology. But the market for a product may vary in rural &
urban area and the marketing strategies to market the product is also different in
urban and rural area.
We can see that the purchasing power of the people in a city like Mumbai is
more than a semi rural area like Ambernath and willingness of the people in the
rural area to spend towards movies or any other mode of entertainment is quite
less than that of the people residing in urban area.
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