Agricultural Marketing in India: Defects and their Remedial Measures!

Main Defects of Agricultural Marketing in India:

The position of agricultural marketing sys­tem in India seems to be far from perfect.

The ma­jor defects of the system are the following:

1. Lack of Output Quality:

Prima facie, the quality of produce is low due to a number of fac­tors:


(i) Poor quality of seeds,

(ii) Primitive meth­ods of cultivation,

(iii) Lack of pest and disease control measures,

(iv) Dependence on erratic monsoon (drought or flood),


(v) Lack of adequate storage facilities to protect the crop from rains and rats,

(vi) Deliberate adulteration and dumping and so on.

Of course, things have changed of late due to the setting up of regulated and organised mar­kets by different State Governments.

2. Absence of Grading:

As a general rule, there is hardly any grading of the commodities to be marketed. Therefore, the purchaser has little, if any, confidence in the quality of the product(s). Of course, the British Government passed the Ag­ricultural Produce (Grading and Marketing) Act in 1937 to solve this problem. But nothing really has happened. As per the Act, licenses are issued on a selective basis to reliable merchants, under the supervision and control of the Government staff. The graded commodities are subsequently passed on to the market under the label of “AGMARK”.

3. Inadequate Storage and Warehousing Facilities:


The average Indian fanner does not have .adequate storage facilities. Moreover, there is no satisfactory warehousing facilities in the market. For these two reasons the farmer has to sell his produce immediately after the harvest. He cannot wait to obtain better prices in the future. More­over, due to lack of storage facilities, farmers are unable to obtain loans from co-operative market­ing societies or even commercial banks against the security of the stored output.

4. Lack of Adequate Transport Facilities:

India’s railroad network is grossly inadequate com­pared to its needs. There are hardly 2.8 km of rail tract per 100 square km area in India. The condi­tion in rural areas is even worse. The road condi­tions in rural areas are really very bad. Even the rich cultivators, having surplus to dispose off, are often not interested in going to the mandis. Most rural roads are un-metalled and cannot be used dur­ing the monsoon season.

5. Lack of Information:

The market for ag­ricultural products in India is not perfectly com­petitive in the sense that the farmers do not usu­ally get adequate information about the price that prevail in big and organised markets. Due to lack of communication facilities, the information about market prices rarely reaches the farmers.

Since most farmers are illiterate and ignorant they take at face value whatever price rules in all parts of the mar­ket. Instead, lack of market information causes variations in market prices. Daily prices of some essential commodities are no doubt made public by the A.I.R. and T.V., but the number of radio sets and T.V. in rural areas is very small.

6. A Long Chain of Intermediaries:

The number of middlemen and intermediaries between the farmer and the final consumer of most agricul­tural commodities is very large. Therefore, the to­tal margin going to the traders is quite a large part of the market price. Some of them, such as the dalals, hardly perform any economic function. So the farmer hardly gets anything compared to the effort put and expenses incurred.

7. Unethical Practices:

Many fraudulent practices are observed in rural markets. The entire method of transaction is against the interest of the farmer. In the mandis, the farmer has to approach a broker (a dalal) to be able to dispose of his pro­duce to the arhitiya. These two intermediaries often use code words to settle the price under cover and not in open. Although they act for both the buyer and the seller, they serve the interest of the buyer than that of the seller by forming collusion with the arhitiya.

Moreover, false weights and measures are used and unnecessary deduction is made from the quoted price on the pretention that his produce is of inferior quality. Thus, the farmer is exploited in various ways and, the whole method of transaction is against the interest of the farmer. In short, most transactions are unfair and unethi­cal.

8. Multiplicity of Charges:

A related point may be noted in this context. There are multiplic­ity of charges on the seller. Some of these are le­gitimate such as commission, carriage and weightment, while others are not (such as charges for the arhitiya buyers’ servants and apprentices, charity, religious festival and so on). In each case the seller has to pay more than the buyer.

Peasants are also to pay various indirect taxes such as octroi (a tax on the inter-State movement of goods), terminal taxes and municipal tolls. In theory, these are normally paid by the consumers because the demand for agricultural commodities is elastic. But in practice these are paid by the seller—the poor and helpless cultivator.

9. Lack of Proper Marketing Facilities:


In very-recent times, the quantum of marketed sur­plus has increased significantly in certain areas due |td] the spread Of Green Revolution. But this has not been supported by a. corresponding in­crease in market yards and other ancillary facili­ties. Consequently, the farmer has been the lone sufferer.

10. Debt Obligation and Distress Sales:

Finally, the average farmer is almost always in debt. So he cannot wait after the harvest so as to obtain better prices in future. He has to make distress sales to the moneylender or the trader immediately after the harvest, for clearing his debt. This weakens the position of the farmer. His condition deteriorates further when, at a later date, he has to make dis­tress purchase from the open market by obtaining consumption loan.

So the main point is that the farmer has to sell his produce at the wrong time, at a wrong place and at an unfavourable price. As a result his rev­enue falls.

Remedial Measures of Agricultural Marketing in India:

For all the above defects of India’s agricul­tural marketing system the farmer does not get a fair deal from the market. However, his condition can be improved by removing the defects.


The following measures may be taken to improve the present system of agricultural marketing in India:

(a) Regulated Markets:

Regulated markets may be established with a view to eliminating un­healthy and unethical trade practices and reduc­ing various marketing charges with a view to benefitting the poor cultivator. Quite recently, nu­merous regulated markets have been set up in vari­ous States to safeguard the interest of the farmers.

(b) Expansion of Market Yards:

This is a vital necessity. This must be supported by a corre­sponding expansion of ancillary facilities in the various existing markets and setting up new mar­kets and market yards for handling the pheno­menal increase in market arrivals, particularly in those areas where the Green Revolution has oc­curred (viz., Punjab, Haryana and western U.P.).

(c) Cooperative Marketing Societies:

I here is need to set up such societies. Some progress has been achieved in this direction. In India, the co­operative marketing structure consisted of more than 7,000 co-operative marketing societies dur­ing 1999-00, covering all important agricultural markets in the country. The total value of agricul­tural produce marketed by co-operatives amounted to Rs. 22,500 crores in 1999-00, as against Rs. 169 crores in 1960-61.

(d) Storage Facilities:


An extension of stor­age facilities at the farm land and Storage and Ware­housing Corporation, with a view to constructing and managing a. whole network of warehouses in all towns and mandis. The co-operative societies get necessary financial and. technical assistance from the Government for promoting warehouses in villages.

Moreover, the National Co-operative Devel­opment Corporation has been set up for planning, promoting and financing the programme of aug­menting storage capacity of co-operatives at vari­ous levels. The storage capacity of 150 lakh tones had already been constructed in the co-operative sector by the end of March 2000 as against a capa­city of 8 lakh tones in 1960-61.

(e) Credit:

Steps may be taken to provide cheap credit to farmers, especially from institu­tional sources like commercial banks and co-operatives. Co-operative societies are providing credit facilities to farmers with a view to improv­ing their economic conditions, protecting them from the exploitative practices of village money­lenders and for helping them to get reasonable prices for their produce.

(f) Transport Facilities:

Expansion of trans­port facilities between the villages and mandis seems to be the need of the hour. Rural transport has been given emphasis in the five year plans and quite some progress has been made in this direc­tion.

(g) Other Measures:

Various other measures taken include Prompt supply of market informa­tion through published documents and T.V. pro­grammes, standardisation and grading to ensure quality to consumers and better prices to produc­ers.