chapter ii 26.06 - shodhgangashodhganga.inflibnet.ac.in/bitstream/10603/24886/7/07_chapter 1.pdf ·...
TRANSCRIPT
CHAPTER II
REVIEW OF LITERATURE
This chapter is devoted to present a review of literature on the past
research studies relating to costs and returns, resource-use efficiency and
marketing of agricultural commodities. Though voluminous literature is
available in these areas, only a few important related works are reviewed
here. For better exposition the review has been organised under the
following heads:
(i) Studies Relating to Cost and Returns
(ii) Studies Relating to Productivity and Resource use Efficiency
and
(iii) Marketing and Marketing Agencies of Paddy
2.1 Studies relating to Costs and Returns
Production of any output is a result of prudent and efficient utilization
of different quantities of inputs. Cost of production is defined, as the sum
total of costs of all inputs that aided production and farmers’ profit is
dependent on the cost of production.
25
Cost of production in general comprises four concepts namely, Cost
A1, Cost A2, Cost B and Cost C. Various authors have defined these four
concepts differently. The Directorate of Economics and Statistics used this
concept in many of the cost of production studies and farm management
studies and they are discussed below1
Cost A1 – it approximates the actual expenditure incurred in cash and
kind. It includes value of used human labour, value of bullock labour
(owned and hired), machine labour, value of seeds, manures and fertilizers,
plant protection chemicals, irrigation charges, land revenue and cess, water
rates, interest paid on working capital and depreciation on implements,
machinery and farm buildings.
Cost A2 – it comprises cost A1 plus rent paid for leased land.
Cost B – it includes cost A2 plus rental value of owned land plus
interest on fixed capital excluding land.
Cost C – it includes cost B plus imputed value of family labour.
1 Directorate of Economics and Statistics, Studies in Economics of Farm
Management in Coimbatore District, (Tamil Nadu), Report for the year
1971-72 Controller of Publications, New Delhi, 1977, pp.501-502.
26
Selvan has included annual maintenance costs comprising the land
revenue and other taxes incurred during the current year in the growth phase
of orchard in direct cost. Annual establishment cost up to bearing stage and
interest on fixed and working capital were included in the indirect cost2.
Bhattacharjee in his study, “Reflections on the Approach to Studies in
Farm Economics in India’, reveals national welfare and farmer’s welfare as
objectives of cost schedules. The former included input-output relationship,
utilization of resources and costs at aggregate farm level and the latter
included allocation of resources, the nature and inter-relationship of different
enterprises and the relationship between input and output at individual farm
level3.
An Economic appraisal of the existing spatial distribution of grape
vine-yards by Videv with reference to mean yields, total and net production
per unit, net income, cost price of production and the profitability norm in
Bulgaria revealed that it did not comply with the aims of raising the level of
2 Selvan, V, Problems in Production and Marketing of Country Pear in
Kodaikanal, Madurai District, Report No.2, Agricultural Economics, 212,
Madurai; Department of Agricultural Economics, Tamil Nadu Agricultural
University, 1981, p.30.
3 Bhattacharjee, Reflection on the Approach to Studies in Farm Economics in
India, Indian Society of Agricultural Economics, Bombay ,1961, pp.108-120.
27
production concentration, improving vertical integration or increasing the
production efficiency and achieving a greater degree of specialization in
agro industrial complexes4.
Rajagopalan et.al., in their studies on cost of production of major
crops in Tamil Nadu have included the following cost components5:
1. Cost A
(i) value of human labour including family labour
(ii) value of bullock labour
(iii) value of machinery charges
(iv) value of seed
(v) value of insecticides
(vi) value of manure and fertilizers
(vii) cost of irrigation and
(viii) interest on working capital
4 Videv, V. “Improvement of Spatial Distribution of Vine Growing: An Important
Factor in Raising Production Efficiency”, World Agricultural Economics and
Rural Sociology Abstract, Vol.XIX, No.8, 1977, p.52.
5 Rajagopalan, V. et al., Studies on Cost of Production of Major Crops in Tamil
Nadu, Tamil Nadu Agricultural University, Coimbatore, 1978, pp.2-3.
28
2. Cost C
Cost A plus rent (including actual rent paid by the tenant or rental
value of owned land), interest on fixed capital, land revenue, cess and taxes
plus depreciation of implements and machinery.
Cost A was assumed to be approximately 70 per cent of cost C and
therefore cost A was computed from Cost C, which is highly arbitrary.
Harrison studied the cost and return structure of small and large farms
in his study on “Agricultural Modernisation and Income Distribution”. The
study was conducted in Tanjore District, Tamil Nadu. Primary data were
collected for ADT 27 paddy cultivation in the Kuruvai season (June-
October) in the year 1967-68. His study revealed that small farmers spent
higher amount per hectare on the input. Chemical fertilizer as the highest
input cost was incurred by the small and large farmers, followed by the
input, seed6.
6 James Quingly Harrison, Agricultural Modernisation and Income Distribution, in
Economic Analysis of the Impact of New Seed Varieties on the Crop
Production of Large and Small Farms in India, Ph.D., Thesis submitted to
Princetos University, U.S.A., 1972 (Mimeo).
29
Hanumantha Rao examined the changes in cost and return structure of
high yielding varieties versus local varieties of rice per acre and revealed the
following7:
1) The cost per unit was reduced and the share of profits was
increased under the high yielding varieties technology.
2) The new technology was turned out to be cost saving on three
factors namely land, labour and capital. The greatest cost saving on
land was followed by labour and capital.
3) The unit cost of fertiliser declined significantly.
4) The capital labour ratio was raised.
5) The increase in fertiliser use was positively associated with the
capital labour ratio and
6) The analysis was based on the Farm Management Data for the year
1969-70.
Nirmala in her study on rice cultivation observed that female
labourers were preferred for most of the farm activities. The small farmers
7 Hanumantha Rao, Changes in Costs and Returns with the Use of High Yielding
Seeds, Technological Change and Distribution of Gains in Indian Agriculture,
Macmillan Company of India Ltd., Delhi, 1975, pp.75-88.
30
incurred more expenses on labour employment compared to large farmers.
The input-output ratio per acre in terms of operational cost to total cost was
less for small farmers than for large farmers. The small farmers incurred
higher cost of cultivation and obtained larger quantity of output per acre than
the large farmers8.
Singh and Govindarajalu in their study, “New Technology of Paddy
Yield : Adoption and Yield Differential”, observed that the cost of
production and cost-output ratios reveal the cultivation of high yielding
varieties to be more economical than the local varieties. In the cost structure,
operating cost shared about three fourth of the total cost. The profit per acre
for paddy crops was higher in Hospet than in Mandya, even though the more
intensive use of inputs was done in Mandya taluk. The ratio of total cost of
output for producing one rupee worth of output was Rs.0.47, Rs.0.63 and
0.65 in Hospet, Bhadravathi and Mandya respectively9.
8 Nirmala, V, Economic Analysis of Rice Cultivation, Concept Publishing Co., New
Delhi, 1992, pp.87-102.
9 Singh, J.P. and K.V. Govindarajalu, New Technology of Paddy Yield: Adoption
and Yield Differentials, Sterling Publishers Pvt., Ltd., New Delhi, 1979, pp.3-89.
31
Sunder Singh et al in their study, “Energy and Cost Requirements for
Cultivation of Rice, Wheat and Maize”, point out the following10
:
1. Rice-wheat rotation required 25,056 MJ/hec. energy for
performing various farm operations of which irrigation alone
consumed 68 per cent of energy.
2. In the case of maize-wheat rotation 13,469 MJ/hec. energy was
needed, of which 39 per cent was used in irrigation.
3. Cultivation of maize-wheat was less dependent on commercial
source of energy.
4. Rice consumed more energy from commercial sources than maize.
5. The energy supplied by chemical fertilizers was 19,651 MJ/hec.
for rice-wheat and 15,836 MJ/hec. for maize wheat rotations.
6. Energy ratio and benefit cost ratio were slightly more for maize –
wheat (4.47 and 1.60 respectively).
Haridoss and Sannasi in their study observed that the cost of
production and output per acre on the small farms were higher than the large
farms. The small farmers enjoyed greater monetary benefit than the large
farmers due to better management techniques in the utilization of inputs,
10
Sunder Singh, Madhup Singh, P.S. Rana, V.K. Mittal and Rupa Bakshi, “Energy and
Cost Requirements for Cultivation of Rice, Wheat and Maize”, Indian Journal of
Agricultural Sciences, September 1989, p.558.
32
constant watch, timely application of necessary inputs, concentrated
involvement and utilization of the imputed inputs11
.
2.2 Studies Relating to Productivity and Resource use Efficiency
Sharma in his study, ‘Impact of Selected Aspects of Labour and Land
on per acre Productivity”, fitted a linear production function and analysed
the impact of nine independent variables on productivity. He observed that
in predominantly rice-growing districts, other factors remaining constant,
unit increase in human labour per acre tended to reduce marginal labour
productivity and also observed wider variation in productivity per acre and
also in human labour in respect of wheat and millet growing districts as
compared to rice-growing areas12
.
Peter in his study fitted a Cobb-Douglas model of production function
to estimate the productivity of various inputs used in the banana plantations.
11
Haridoss, R and R. Sannasi, Energy Requirements for Paddy Cultivation – A
Study of Madurai District, Santha Publications, Madurai, 1997, p.125.
12
Sharma, P.S, “Impact of Selected Aspects of Labour and Land on Per Acre
Productivity”, Indian Journal of Agricultural Economics, Vol.XXI, No.1, 1966,
pp.31-43.
33
He proved that there was a highly significant positive response in gross
income to the positive changes in the manuring expenses13
.
Gopalakrishnan and Ramakrishna Rao in their article, “Regional
Variations in Agricultural Productivity in Andhra Pradesh”, examined the
number of factors affecting the productivity. The data were collected from
Season and Crop Report for the year 1959-60. They used the multiple
regression equation to examine the relationship between the value of output
per acre and the two associated variables namely percentage of irrigated area
and percentage of area under food grains14
Singh et al., in their study “Production Functions for Commercial
Crops in Haryana”, used Cobb-Douglas type of production function and
estimated the marginal value productivity of inputs. They concluded that the
13
Peter, D, “Input – Output Relationship of Banana Plantations in Kanyakumari District
(Tamil Nadu)”, Indian Journal of Agricultural Economics, Vol.29, No.2, 1974,
pp.59-65.
14
Gopalakrishnan, M.D and T. Ramakrishna Rao, “Regional Variations in Agricultural
Productivity in Andhra Pradesh”, Indian Journal of Agricultural Economics,
Vol.XIX, No.1, January – March 1964, pp.69-76.
34
marginal products of irrigation and human labour for cotton, fertilizers and
irrigation for sugarcane and human labour for oilseeds were negative15
.
Rathakrishna has examined the productivities of different regions in
Andhra Pradesh by using the production function technique. This study was
based on the farm management data for 70 farms in the First Region and 37
farms in the Second Region during the period 1957-60. Of the two regions
one region was a canal-irrigated area and the other was well-irrigated area.
Paddy was cultivated in two seasons. He expressed the output in value
terms. The following were the conclusions16
:
1. Farm business activity operated under constant returns to scale.
2. Increasing the working expenses in the form of better seeds, more
manures and fertilizers could profitably increase gross income and
3. A higher input of bullock and human labour had a definite impact
on the value of output.
15
Singh, I.J. A.G. Gangwar, O.P. Chikkara and P. Singh, “Production Functions for
Commercial Crops in Haryana”, Indian Journal of Agricultural Economics,
Vol.XXIX, No.3, 1974, pp.143-147.
16
Rathakrishna, D, “A Study of Regional Productivities of Agricultural Inputs”,
Indian Journal of Agricultural Economics, Vol.XIX, No.1, January – March,
1964, pp.76-82.
35
Hiremath et al., in their study on ‘Resource – Use Efficiency in Lime
Orchards, applied the Cobb-Douglas type of production function. The
regression co-efficient for land was 0.71 in medium and 1.57 in large
orchards that were statistically significant at one per cent level. The
regression coefficient of land for small orchards was 0.31 but non-
significant. The regression coefficient of labour was non-significant in small
and large orchards whereas in medium orchards it was 0.66 and significant
at five per cent level. There was no scope for increasing the production of
lime by increasing plant protection chemicals in small sized group and by
increasing farmyard manure in large sized group17
.
Olekar et al, in their study, “Resource Use Efficiency in Sunflower
Production”, found the variables, included in Cobb-Douglas type of
production function, were able to explain the variations in yield of sunflower
to the extent of 91 per cent and 86 per cent for small and large farms
respectively. The output elasticity of human labour, bullock labour and
farmyard manure were found to be significant indicating that there was
17
Hiremath, G.M, K.N.R. Sastry, G.K. Hiremath, V.G. Narawadi and
B.Sundarswamy, “Resource – Use Efficiency in Lime Orchards”, Agricultural
Banker, April-June, 1994, pp.14-17.
36
scope to increase sunflower production further by the increased use of these
inputs18
.
Aswatha Reddy et al, in their study, “Resource use Efficiency in
Groundnut Production under Rainfed Conditions”, state that the regression
co-efficient of land, farmyard manure and seeds were 0.4854, 0.0296 and
0.482 respectively and they were also significant. This meant that one per
cent increase in investment on these resources over and above the geometric
mean level would contribute to the percentage increase in groundnut yield.
The regression co-efficient of bullock labour was non-significant as well as
negative (-0.092) 19
.
Saini in his study, “ Resource Use Efficiency in Indian Agriculture”,
estimated the value with the method of least squares and by using the
production function type of log linear transformation. The analysis was
based on disaggregated farm management data obtained from Uttar Pradesh
18
Olekar,J.N., Kurnal,L.B. and Gaddi,G.M., “Resource use Efficiency in
Sunflower Production”, Agricultural Banker, October–December,1996, pp.18-21.
19
Aswatha Reddy,K.P., Chandrasekar,K.S. and Srinivasa Gowda,M.V. “Resource Use
Efficiency in Groundnut Production under Rainfed Conditions”, Agricultural
Banker, July – September, 1995, pp.29-36.
37
and the Punjab for the year 1956-57. The main findings of this study were as
follows20
:
1. Land and human labour were found to be the most important inputs.
2. An inverse relationship existed between the farm size and productivity
and
3. The marginal value productivity was the highest on small farms and
tended to decrease with an increase in the farm size. It implied that
land appeared to be utilized more intensively on small farms.
Sathilal and Hiremath in their study, “Resource-Use Efficiency in Ber
Orchards”, observed the ratio of marginal value product to marginal factor
cost for land (33.6) and plant protection chemicals (18.74), was more than
unity in small as well as large orchards. According to them there was scope
for increasing returns from Ber orchards by increasing the use of these
resources. The ratios were less than unity for labour and fertilizers in small
20
Saini,G.R. “Resource Use Efficiency in Indian Agriculture”, Indian Journal of
Agricultural Economics, Vol.XXIV, No.2, April – June 1969, pp.43-52.
38
orchards and for labour, farmyard manure and fertilizer in large orchards
indicated that the resources were over-used in production21
.
Gongwar and Singh in their study, “Production Functions for
Commercial Crops in Haryana”, examined the marginal value productivities
of the farm sector of Haryana for different crops namely cotton, mustard,
sugarcane and oil seed. In order to estimate the marginal value productivities
of inputs used in different crops, Cobb-Douglas production function was
used. They collected primary data for their analysis. The conclusions of the
study were22
:
1. The use of fertilizer, irrigation and human labour explained about
87.72 and 59 per cent of the variation in the production of
sugarcane, cotton and mustard respectively.
2. The marginal value of productivity of fertilizer and irrigation for
sugarcane was found to be less than one and
21
Sathilal,G. and Hiremath,G.K. “Resource – Use Efficiency in Ber Orchards”,
Agricultural Banker, July – September, 1995, pp.13-15.
22
GongwarA.C. and Singh,J. “Production functions for Commercial Crops in
Haryana”, Indian Journal of Agricultural Economics, Vol.XXIX, No.3, 1974,
pp.143-144.
39
3. Cotton was more profitable crop than sugarcane and mustard in
Haryana.
Venkataramana and Gowda in their study found that regression co-
efficient of the land area under the tomato crop (0.2881) and staking
materials (0.2076) were significant at five per cent level while those for
fertilizers (0.2049) were significant at both one per cent and five per cent
levels. In the case of large farmers, the co-efficient of fertilizers (0.3010) and
human labour (0.5135) and animal labour (0.1419) were significant at five
per cent levels. The sum of elasticity was 1.0434 and 1.0712 for small and
large farmers respectively. Increasing the area of land in case of small
farmers could increase the output but there was no scope for additional area
under tomato production for the large farmers. The ratio between marginal
value products to factor cost was used as a measure of resource-use
efficiency23
.
Dutta in his study, “Relative Efficiency Farm Size and Peasant
Proprietorship-A Case Study of Ranchi District (Bihar)”, collected primary
23
Venkataramana,M.N. and Srinivasa Gowda,M.V. “Productivity and Resource-Use
Efficiency in Tomato Cultivation – An Econometric Analysis”, Agricultural
Situation in India, September 1996, pp.409-412.
40
data for his analysis and used Lau and Yotopoulos profit function model. His
main findings were24
:
1. Small farms were relatively more efficient with regard to the level
of output in paddy.
2. The peasant farms were relatively efficient than the capitalist
farms.
3. Economic efficiency of large farms in the case of wheat cultivation
was high, and
4. The profit function for large farms had a lower intercept term
suggesting lower level of economic activity.
Mahendra Dev and others in their study aimed to examine the factors
influencing variations in yield, cropping intensity and man-land ratio. For
this purpose cross section data related to 53 National Sample Survey (NSS) -
Agro-Climatic regions in three triennia namely 1962-65, 1970-73 and 1975-
24
Dutta,L.N. “Relative Efficiency Farm Size and Peasent Properietorship – A Case
Study of Ranchi District (Bihar)”, Indian Journal of Agricultural Economics,
Vol.XXXVII, No.1, January – March 1983, pp.76-82.
41
78 were used. Double log linear models were used. The major conclusions
of the paper were as follows25
:
1. The estimates relating to the yield equation indicated that fertilizer,
irrigation and cropping pattern were the major factors that accounted
for variations in aggregate yields. Among these three factors, cropping
pattern seemed to be the most prominent one in all the three triennia.
The availability of labour represented by man-land ratio did not seem
to have an impact on aggregate yields.
2. The estimates for high as well as low labour productivity regions
showed that the net irrigation ratio had greater influence on cropping
intensity.
3. The estimates of high labour productivity region showed that
fertiliser use was the most prominent factor, while, for the low labour
productivity, cropping pattern seemed to have more influence on
aggregate yields and
4. Percentage of area under rice was found to be the single dominant
factor in explaining variations in man-land ratio across all regions and
25
Mahendra Dev, Shantanu Despande and Bandhi Kamaiah, “Inter Regional
Variations in Labour Productivity in Indian Agriculture; A Simultaneous Equation
Approach”, Artha Vijnana, Vol.XXXIII, No.3, September 1991, pp.175-191.
42
across high labour productivity regions. In the case of low labour
productivity regions, it was land productivity, which played a crucial
role in determining the level of man-land ratio across regions.
Elsamma Job and Mukundan in their study, “Economics of Rubber
Cultivation by Small holders in Kottayam District”, evaluate the cost and
returns, cost of production and capital productivity of rubber cultivation by
small holders in the study area. The total cost of cultivation till tapping
stage, namely for seven years was estimated at Rs.11,054 per hectare in
terms of 1980-81 prices. More than half of this was accounted for by labour.
Between the two zones of the study area, Zone I incurred more expenditure.
The reason for this can be attributed to the high expenditure involved in soil
conservation measures and labour cost rates. The cost of production also
showed that Zone II is economically more efficient than Zone I. The pay-
back period, benefit-cost ratio, internal rate of return and net present worth
for the district were 9.51 years, 2.04, 24.20 per cent and Rs.25,597
respectively26
.
26
Elsamma Job and K. Mukundan, “Economics of Rubber Cultivation by Small
Holders in Kottayam District”, Indian Journal of Agricultural Economics,
Vol.XXXIX, No.1, January – March 1984, pp.99-101.
43
2.3 Marketing and Marketing Agencies of Paddy
Progressive agriculture required among other things an efficient
system of marketing of agricultural produce. An efficient marketing system
is the one that makes available goods at reasonable prices to the consumers
and ensures reasonable price to the producers. It should also assist in
generating surpluses needed for development and reduce the wide variations
in price and availability over space and time. The wide variations between
the price the farmer gets ie., ‘producers price’ and the price the consumer
pays i.e. ‘consumer’s price’ is known as ‘price spread’ which is taken away
by the middlemen like the traders, transporters, brokers and other
functionaries.
Radha Raman Singh and G.K.Srivasta in their case study of
Mukundpur Sarasai village of Vishali District emphasise that the task to be
undertaken is to step up agricultural inputs and sell agricultural outputs by
improving the market conditions. They conclude their study saying that the
subsistence farmers who produce food at the minimum productivity rate
make ‘distress sales’ to meet the emergent needs based on their socio-
economic and cultural background, whereas the commercial farmers of the
44
market sector who produce relatively high profitable cash crops and food
crops befitting to farm resources avail considerably better remunerative
prices because of having better capacity to withhold their farm produce.
They respond well to price behaviour whereas the subsistence farmer is
compelled to sell a part of his produce, however small it may be, at harvest
price so that he can buy his bare requirements without considering whether
the price he gets for his produce is high or profit bearing.
According to Radha Raman Singh et.al. lack of organized marketing
system is responsible for rural poverty and it adversely affects both the
subsistence farmer and the commercial farmer and hampers the prospects of
agriculture. These researchers suggest government action to improve the
marketing system in the agricultural sector. They also suggest supply of
subsidized sale of inputs, provision of cheap or free social amenities in rural
areas, establishment of co-operative stores at every central place with
branches in every village with facilities to purchase agricultural products at
reasonable prices and supply of market information27
.
27
Radha Raman Singh and G.K. Srivastava, “Agricultural Marketing Constraints and
Prospects”, Indian Journal of Marketing, Vol.VIII, No.8, April 1978, pp.25-29.
45
Alka Srivastava and Janaki Chundi consider that the village economy
as a whole cannot be developed without effective and efficient rural
marketing which involves a two way marketing process compassing
marketing of products which flow to rural areas and also the products which
flow to urban areas from the rural areas. Since India’s majority of population
is rural and agriculture is their chief means of livelihood, greater emphasis is
given to innovations in efficient marketing of agricultural products, which
will ensure remunerative price for their produce and also supply of the same
to the consumers at reasonable price.
In the present times agriculture is emerging as an industry involving
the establishment of large number of firms under both private and public
sectors such as wholesaling and retailing firms, grading and standardization,
export and import, district market committees, regulated markets
cooperatives, storage and warehousing organizations etc., which offer
immense opportunities for entrepreneurs and executives emerging from
among the farming community and the non farming community. Alka
Srivastava et.al., feel that this scope for increased employment generation
assures not only higher income but also better income distribution among the
rural families. They also emphasise the need for farmers to be well informed
46
of production, market arrivals, day to day prices and changes in the stock
with prices, as such informations will enable them to withstand the
prevailing situation. Though the cooperatives have been playing a useful role
in improving the marketing services, they command only a small share of
the total markets and do not present any challenge to the private trade at
most places28
.
Nafeez, A. Khan’s study on the present state of agricultural marketing
and future strategy indicates the following as the chief problems faced by
agricultural marketing in India: (i) lack of organisation for farmers (ii) lack
of finance (iii) lack of communication facilities (iv) insufficient transport
system (v) inadequate storage facilities (vi) absence of grading and (vii)
superfluous middlemen.
Nafeez Khan suggests the following measures for improving
agricultural marketing: (i) modernization of regulated markets (ii) fixing
minimum standards of quality or size for farm products (iii) construction of
marketing huts at important places for small and marginal farmers (iv)
extension of credit facilities at reasonable rates of interest (v) training
28
Alka Srivastava and Janaki Chundi, “Rural Marketing”, Kisan World, Vol.27, No.3,
March 2000, pp.43-46.
47
farmers in the field of grading and standardization, quality control, packing
and modern methods of marketing (vi) improvement of communication and
information technology and (vii) increasing agro-exports for increasing
India’s share in world trade29
.
Dwelling at length on price determination, price policy, marketing
policy etc., A.S.Kahlon points out that in developing countries market price
tends to decline proportionately to the increase in production during periods
of bumber harvest and hence the need for an incentive support price policy
to guard the farmers against insecurities arising from unfortunate slumps in
rice price. But a support price policy for an agricultural commodity cannot
be decided in isolation. An efficient agricultural price policy requires a
coordinated approach, taking into account policies relating to production
including supply of inputs, credit and marketing including grading and
standardization. Kahlon concludes his analysis by emphasizing that the task
of agricultural price policy is much more than that of determining
appropriate prices in the short run30
.
29
Nafeez, A. Khan, “Agricultural Marketing: Present Position and Future Strategy”,
Kurukshetra, December 1998, pp.11-13.
30
A.S. Kahlon, Integrated Agricultural Marketing and Price Policies”, Agricultural
Situation in India, Vol.XLV, No.10, January 1991, pp.655-657.
48
M. Nazer and P. Chilar Mohamed have made an indepth study of the
role of marketing agencies such as Marketing Cooperatives and Regulated
Markets in rescuing the farmers from ‘distress sales’ of their produce.
According to them the unpredictable nature of the demand and supply
positions as well as the pressing personal needs and conditions of the
farmers are the forces that drive them to the necessity of indulging in distress
sales of their produces at a price not profitable to them. The researchers
suggest that institutional marketing agencies like Marketing Cooperatives
and Regulated Markets should create awareness among farmers about the
marketing services provided by them so as to enable them to get reasonable
price for their produce. Further they suggest improvement and
modernization of facilities of marketing cooperatives with storing facility
and modification in the role of the state and central ware housing
corporation on such lines as to strengthen the hands of the farmers.
Moreover marketing intelligence and marketing information system should
be strengthened at local, regional, state and national level. Government
agencies and the National Agricultural Cooperative Marketing Federation
49
(NAFED) should make special efforts to keep the farmers well informed of
the latest price picture31
.
Prasoon Kumar Roy, et.al., after a close perusal and analysis of the
working of the public distribution system in India, indicate the following
trends in the procurement and distribution of rice in the country. (i) a
positive relationship between production and procurement (ii) Procurement
as percentage of production varied between 9 and 13 and (iii) procurement
during the years 1974-1982 had been adequate, more than adequate for
distribution except in 1976-77 and 1979-80, when production and
procurement declined. According to them the major constraints in the
operation of the public distribution system are (i) low procurement price
which is below the open market price (ii) inadequate transport and storage
facilities (iii) lack of coordination between the state government and the
central government in regard to price policy. Hence they suggest increase in
production, provision of adequate transport facilities and more storage
31
M. Nazer et.al., “Distress Sale of Agricultural Produce and the Role of Marketing
Agencies in Tamil Nadu”, Indian Journal of Marketing, Vol.XXXIII, No.15, May
2003, p.21-22.
50
facilities at places where both procurement and public distribution points are
located or at places with minimum transport cost as remedial measures32
.
B.K.Arora’s study of the procurement system in vogue in our country
i.e. fixing procurement prices for agricultural produce in each season, has
led him to propose an alternative system known as ‘step pricing’ under
which the price of each agricultural produce is to be fixed at one level but it
will increase on a monthly basis. Under the current system of price fixation
the price is fixed by the government on the recommendation of the
Agricultural Prices Commission. Consequent to this, farmers bring their
produce to the market soon after harvest in a very short time which results in
heavy rush and overstraining. The procurement agencies operate only for a
short period after which prices are determined by the traders who tend to
exploit the farmers. Also rush sales and procurement tells upon quality
control. Once the short period of procurement is over, the procurement staff
have no work and hence they are diverted to other jobs. Hence Arora thinks
that this system should be replaced by an alternative system i.e. step pricing
which makes room for not only a support price soon after harvest but also
32
Prasoon Kumar Roy and Punamkumari Verma, “The Public Distribution System in
India at a Glance”, Southern Economist, Vol.26, No.9, September 1987, pp.13-16.
51
for a monthly increase to compensate for storage charges and cost of capital
held in the form of value of produce. The monthly incentive induces the
farmer to avoid distress sales also33
.
The problem of storing food grains has been studied by
K.Singaravadivelu, et.al. According to them several factors contribute to loss
of food grain during storage. If the moisture content of food grains is not
maintained at the required level the chemical composition of the food grain
(bound moisture) will be affected. Beyond a particular moisture level,
insects, micro-organisms and respiratory changes are activated and they
cause spoilage. So also temperature and oxygen availability influence
deterioration. Among biological factors insects, micro-organisms, rodents
and birds are also causing spoilage. Singaravadivelu suggests several
methods to prevent spoilage like proper cleaning and drying of the food
grains, proper ventilation and light facilities in the storage structure, air tight
33
B.K. Arora, “Step Pricing System for Food Grains Procurement”, Yojana, March
1-15, 1989, pp.31-32.
52
containers, and application of chemicals for making the environment
unfavourable for the growth of insects and micro organisms34
.
A.Ranganathan’s study on the latest development in warehousing
technology reveals the fact that in the current international setting, a modern
warehouse is something more than a marketing channel where the concept of
scientific storage is employed to store goods pending their sale. He points
out the significance of a new type of warehouse which can be called a
‘distribution centre’. Explaining the uses of different types of containers
used for conveying goods, Renganathan concludes that the establishment of
container freight stations under the public sector at Bombay, Delhi and
Chennai has contributed a new technological dimension to warehousing
activity. He suggests that in view of the functioning of 450 warehouses
under the Central Warehousing Corporation, currently handling and storing
over 200 commodities, it should be redesignated as ‘National Warehousing
Authority’35
.
34
K. Singaravadivelu and A. Dakshinamoorthy, “Grain Storage”, Kisan World ,
December 2000, p.17-19.
35
A. Renganathan, “Revolution in Warehousing Technology”, Yojana, March 1-15,
1989, pp.12-13.
53
K.Bhaskar has analysed the defective working of regulated markets.
Even though regulated markets are established to provide every convenience
to the farmer in marketing his produce, most of the farmers do not market
their produce through regulated markets for various reasons. Most of the
farmers are not aware of the existence of regulated markets and the benefits
accrue from them. Hence Bhaskar emphasizes the need to remove the
ignorance of the farmers and suggests measures for making regulated
markets more popular as follows: (i) wider publicity about the usefulness of
regulated markets (ii) establishment of more regulated markets
(iii) elimination of commission agents from market yards (iv) more effective
functioning of market officials and market committees (v) strict enforcement
of market regulations (vi) modification or amendment to constitution of
market committees with provision for election of members on democratic
lines and proper representation to small and marginal farmers in market
committees (vii) ensuring prompt payment by traders to the farmers
(viii) longer work hours of regulated markets (ix) concessional treatment to
small and marginal farmers as well as to traders from other states with
54
regard to market charges. Baskar concludes his study giving greater
emphasis to elimination of private trade36
.
N.K.Gandhi has dealt at length with the losses and wastages in storage
of food grains. Efficient storage plays a prominent role in sustaining and
stimulating production. According to Gandhi proper storage system
eliminates wastes and helps to conserve national resources. Further, in order
to share the gains of increased agricultural production and productivity
efficient storage system is very necessary as it helps to prolong the shelf life
of perishable commodities and preserve food-grains from spoilage. Gandhi’s
study reveals nearly 70 per cent of the food grains produced is retained at the
farm level for domestic consumption and seed purposes and the balance
which consists of marketable surpluses is taken to consuming centre through
various government agencies as well as private trade channels. The grains
retained at farm level are stored in indigenously made storage structures
such as Khathis, Bukharies, Bharorolas etc. which can hardly protect the
grains from insects, pests and rodents. The stocks procured by the public
agencies are stored in their own godowns. The grains stored at the farm level
36
K. Bhaskar, “Streamlining the Regulated market System”, Kurushetra, Vol.XXXV,
No.11, August 1987, pp.7-8.
55
suffer the maximum losses. Since the farmers retain 65 to 70 per cent of the
food grains, they should be trained in the scientific storage practices. Though
the government of India launched a ‘Save Grain Compaign’ under which
such training is imparted and demonstrations are given, it is very
insufficient. The public agencies which procure 30 to 40 per cent of the food
grains which is the marketable surplus, do not possess adequate scientific
storage facilities.
In view of the food grain losses due to improper storage at the farm
level and at the level of the organized sector it becomes imperative to create
scientific facilities in rural areas and reduce the unwanted losses of food
grain. Gandhi suggests the adoption of a system in which storage facilities
manned by government agency should be within the reach of small and
marginal farmers. A small farmer should be in a position to deposit or draw
his stock of small quantities as and when needed. This system will
popularize the utility of scientific storage technique among the farmers and
save them from the clutches of money lenders who extend credit facilities
against hypothecation of their stocks. Further, it will help farmers to wait till
favourable prices could be obtained instead of indulging in distress sale.
56
Lastly this system will reduce pressure on transport facilities and enable the
farmers to get agricultural inputs required for increasing production37
.
C.R.Reddy and D.V.Sureshkumar have highlighted the role of
Cooperative Marketing in Agricultural Development. Since the well being of
the farmers depends on the market price they get for their produce, the
government of India adopted a strategy of providing Cooperative Marketing
services in rural areas with an object of eliminating intermediaries who
deprive the farmers of their due share of price paid by the consumers for
their produce. The cooperative marketing structure consists of primary
marketing societies, district marketing societies and state cooperative
marketing federations which act as catalistic agents for increasing
agricultural productivity on one hand and as substitute for exploiting
middlemen on the other. One of the crucial functions of farm cooperatives is
to cater credit, partly in kind in the form of inputs like fertilizers. Further
cooperative marketing has taken up the purchase of produce from growers at
the time of harvest at fair prices and sale of such produce at consuming
centres through its widespread societies. Processing and storage facilities are
37
N.K. Gandhi, “Stepping Up Rural Warehousing”, Kurushetra, Vol.XXXI, No.22,
August 16, 1983, pp.4-6.
57
also handled by the Cooperative Marketing Societies. This has resulted in
more income savings, more investment on agriculture and adoption of
advanced farm technology which leads to higher productivity38
.
M.S.Senam Raju conducted a case study of the Jangoan Regulated
Agricultural Market in the Warangal District of Andhra Pradesh which was
started in 1950. His study reveals the fact that neither commission agents nor
the farmers are aware of the existence of support price fixed by the
government for the benefit of farmers. Even though the Market Act clearly
says that details of support prices should be displayed at the Market
Committee Office, it is not done. In the absence of such an important market
information, bidding price is determined by the forces of supply and
demand. In this farmers are at a disadvantage as the buyers are more
dominant in fixing price. Senam Raju concludes his analysis by saying that
unless changes are effected in the present system, the future of the Jangoan
38
C.R. Reddy and D.V. Suresh Kumar, “Co-operative Marketing in Agricultural
Development”, Indian Journal of Marketing, Vol.XII,No.11, July 1982, pp.23-24.
58
Regulated Market is bleak and the traders and commission agents will
directly purchase produce from the farmers in the village39
.
D.S.Sinthu has dealt with some aspects of agricultural marketing and
pricing policies in India and pointed out that marketing efficiency can be
improved by increasing operational efficiency and by increasing pricing
efficiency. The former focuses on cost effectiveness i.e. reducing costs
involved in the performance of different marketing functions like
transportation, storage, processing etc. and the latter refers to the structural
characteristics of the marketing system under which the sellers get the true
value of their produce and the consumers receive the true worth of their
money. D.S.Sinthu concludes that marketing will be meaningful only if it is
sensitive to the needs of the sellers as well as the buyers40
.
N.Rajan Nair carried out an intensive study of the evolution and
working of the Regulated Markets in Tamil Nadu and came to the
conclusion that the trend in the development of Regulated Markets in Tamil
39
M.S. Senam Raju, “Apprehensions of Farmers on Working of Regulated Agricultural
Markets – A Case Study”, Indian Journal of Marketing, Vol.XXXII, No.10, October
2002, pp.9-13.
40
D.S. Sinthu, “Some Aspects of Agricultural Marketing and Pricing Policies in India”,
Indian Journal of Agricultural Economics, Vol.XLV, No.4, October –December
1990, pp.433-434.
59
Nadu is in no way different from that in other states of India. The growth
achieved so far is not up to the expectations and it is far from satisfactory
because market regulations are not effectively enforced41
.
R.Haridoss opines that the extent of awareness generated by the
Regulated Markets can be measured by the quantum of market arrivals. His
study reveals that market arrivals of all the crops except groundnut, are
determined chiefly by the marketable surplus42
.
Beula Dasan analysed the progress and prospects of Regulated
Markets in the Kanyakumari District and came to the conclusion that since
1975 no regulated market has been opened in the district which is more than
an evidence for the lack of growth of Regulated Markets in the district. She
has also pointed out that the existing Regulated Markets attract only five per
cent of the marketable surplus. The farmers do not go to the Regulated
Markets because of their ignorance, illiteracy and the intervention of local
traders. Traders’ participation in the auctions is also irregular and nearly 40
41
N. Rajan Nair, A Study of the Evolution and Working of Regulated Markets in
Tamil Nadu, (Unpublished Ph.D., thesis University of Cochin), 1982.
42
R. Haridoss, “Determinants of Market Arrivals of Regulated Markets Under Madurai
Market Committee, Tamil Nadu”, Indian Journal of Agricultural Marketing
(Conference Special), 1994, pp.31-33.
60
per cent of their purchases are from the open market. She concludes that the
problems inherent in marketing the agricultural produce such as middlemen,
underweighment, absence of market information, unapproved market
charges etc., still persist within the notified market areas43
.
Baradhan formulated a function for marketed surplus and found that
the response of marketed surplus of paddy to its price was negative while
that of output supply to price was positive. The input prices had positive
effect on marketed surplus whereas they had negative effect on output
supply44
.
Ram and Swarup observed that the marketing costs, margins and
transportation costs were high because of the bulkiness of agricultural
products studied by them. A comparison between regulated and non-
43
Beula Dasan, Progress and Prospects of Regulated Markets in Kanayakumari
District, (Unpublished Ph.D., Thesis, M.S. University), 2002, pp.249-250.
44 K. Baradhan, “Price and Output Response of Marketed Surplus of Food Grains – A
Cross Sectional Study of Some North Indian Villages”, American Journal of
Agricultural Economics, Vol.XXXXXII, No.1, 1970, pp.50-61.
61
regulated markets showed no marked improvement in marketing efficiency
between the two45
.
Ramamoorthy and Srinivasan while analysing the problems of
production and marketing of tomatoes in Coimbatore taluk observed that in
the wholesale market, tomato was sold on volume basis in bamboo baskets
and the retailers sold tomato on weight basis. The farmers were not aware of
the ruling price for tomato in the retail markets, which led to a low share of
consumers’ rupee to the farmers46
.
Bhatia and Ram studied the marketing efficiency in retail vegetable
markets in Delhi through marketing costs and margins, consumer prices,
availability of physical marketing facilities and market competitions. They
found that the retailer’s margins accounted for about 50 per cent of the
consumer’s price and the consumers were to pay high prices due to the
perishability and bulkiness of the product. Among the different classes of
45
G.S. Ram and B. Swarup, “Marketing Costs, Margins and Efficiency in a Regulated
Fodder Market – A Case Study”, Agricultural Marketing, Vol.XVII, No.2, 1974,
pp.12 &17.
46
K. Ramamoorthy and N. Srinivasan, An Economic Enquiry into the Problems of
Production and Marketing of Tomato in Coimbatore Taluk, Department of
Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore, 1975,
p.45.
62
retailers, pavement sellers got the lowest average percentage of net retail
margins47
.
Kahage and Suryawanshi observed that the producer’s share in the
consumer’s price was 47.73 per cent while 43 per cent of the total cost was
the commission and profits of traders. The share of the different
intermediaries in consumer’s rupee worked out to 19.01, 16.12 and 8.47 per
cent for wholesaler, retailer and commission agent respectively in the
marketing of roses48
.
Shashanka et al., while analyzing the structural change in the arecanut
assembling market concluded that changes in buyer and seller concentrations
had opposite effects on the price of arecanut. Increase in buyer concentration
augmented the market price, while increase (decrease) in seller
concentration decreased (increased) the market price49
.
47
G.R. Bhatia and G.S. Ram, “Marketing Efficiency in Retail Vegetables Markets in
Delhi”, Agricultural Marketing, Vol.XX, No.4, 1977, pp.13-17.
48
P.M. Kahage and S.D. Suryawanshi, “Production and Marketing of Roses in
Western Maharashtra”, Indian Journal of Marketing, Vol. X, No.4, 1979,
pp.646-647.
49
Shashanka Bhide, Ashok Chowdhury, Earl O. Heady and M.A. Muralidharan,
“Structural Changes in an Agricultural Assembling market (Arecanut)”, Indian
Journal of Agricultural Economics, VolXXXVI, No.2, pp.25-34.
63
Sundaresan and Thanasekaran in their study on production and
marketing of grapes identified severity of diseases and pest attack, lack of
adequate capital facilities to meet the initial establishment costs and high
cost of inputs as the major production problems, while unorganized market
structure, high marketing costs and unnecessary deductions and lack of
finance facilities rank as the important marketing problems50
.
Warde et al., observed that the rotting losses of stored onion after 120
and 240 days had shown a significant difference. The total loss of onion
bulbs after 90 and 150 days was found to be significant while after 30, 60
and 120 days, it was non significant51
.
Naik et al., concluded that the cost of marketing incurred by farmers
varied not only between different size groups of farmers, but also between
different channels through which the sales were effected. The transportation
charge itself contributed to nearly 50 per cent of the total cost due to location
of market at a distant place followed by package cost. Sixty five per cent of
50
R. Sundaresan and M. Thanasekaran, “Production and Marketing of Grapes in
Madurai District” Indian Journal of Marketing, Vol.XIV, No.8, 1984, pp.26-27.
51
S.D. Warde, S.B. Desale and K.G. Shinde, “Storage Behaviour of Onion Cultivators
in Rangda (Late Rainy) Season”, Vegetable Science, Vol.XXII, No.2, 1995,
pp.120-121.
64
the farmers disposed of 82.83 per cent of their produce through village
traders because of their poor bargaining capacity and debt commitments
with village traders52
.
Gopal studied the existing market structure for vegetables in
Bangalore and concluded that the producers obtained a net share of about 55
per cent in the consumer’s rupee. Among different modes of transport used
by the producers, lorry was the cheapest53
.
Gupta and Ram observed that the producers received only 18 per cent
share in the consumer’s price, whereas the retailer’s margin and marketing
costs were quite high accounting for one fourth of the consumer’s rupee.
Income status and locality of retail buyers played an important role in
influencing retailer’s margin. Transport, packing and labour expenses were
the major components of marketing cost. They concluded that co-operative
52
A.D. Naik, H.G. Shankara Murthy and Kachapur, “Marketing of Onions in Bijapur
District, Karnataka – An Economic Analysis”, The Bihar Journal of Agricultural
Marketing, Vol.III, No.3, 1995, pp.319-324.
53
Gopal, “An Analysis of Problems of Marketing a Few Fresh Vegetables in
Bangalore City”, Thesis Abstracts, Vol.IV, No.1, 1978, pp.4-5.
65
endeavour at both the producer and consumer level and facilities for cold
storage and processing would help in improving marketing performance54
.
To measure the price-spread, Sha and Rao estimated changes in the
ratio value of output of groundnut at the farm level to the value of output in
different terminal markets over time using the value added method. They
concluded that the groundnut growers could realize high returns through the
formation of co-operatives55
.
Venkatraman identified four methods of estimating price-spread
namely, Lagged Margin, Concurrent Margin, Value Added and Residual
Methods. In Lagged Margin Method, price-spread was computed by taking
into account cost of assembling, processing, storage, transportation and
handling charges in moving the commodity from the producers to the
ultimate consumer.
In Concurrent Margin Method, margin was derived as the difference
between the price paid by the ultimate consumer and the price received by 54
A.K. Gupta and G.S. Ram, “Behaviour of Marketing Margins and Costs of
Vegetables in Delhi”, Indian Journal of Agricultural Economics, Vol.XXXIV,
No.4, 1979, p.210.
55
D.C. Sha and K. Hanumantha Rao, “Price Spread in Groundnut Marketing at Macro
Level”, Indian Journal of Agricultural Economics, 34 (4), 1979, pp.149-155.
66
the producer. In Value Added Method, margin was computed at each stage
of marketing and processing by deducting the cost of inputs and processing
cost from the value of output. In Residual Method, margin was derived as
the proportion of price received by the producer after accounting for the
share of all intermediaries in the marketing channel56
.
Shete et. al., in their study on “Measurement of Price-spread of
Tomatoes”, observed that the producer’s share in the consumer’s price was
low at 52.57 per cent and 56.33 per cent in case of rainfed tomatoes and
irrigated tomatoes respectively. This was due to excessive profit margin of
itinerant traders, commission agents and retailers in the trade. Lack of
transport facilities, malpractices of commission agents and itinerant traders,
lack of grading and weighment practices, perishability of tomatoes and lack
of market intelligence facility formed the major problems faced by the
producers in the marketing of tomatoes57
.
56
L.S. Venkatraman, “Price-spread of Agricultural Commodities in Recent Years”,
Indian Journal of Agricultural Economics, 234 (4), 1979, pp.227-241.
57
V.R. Shete, R.G. Patil and Jagannathrao, R. Pawar, “Measurement of Price- Spread
of Tomatoes”, Indian Journal of Marketing, 10 (6), 1980, pp.3-6.
67
Huger et. al., while estimating the price spread of vegetables in
Belgaum City, found that the price spread was relatively higher for sales
through commission agents as compared to co-operative societies. They
observed that retailer’s share formed a significant constituent of total
marketing margin. Marketing costs per quintal incurred by the producer
seller was the highest in tomato. The costs were lower when marketed
through co-operatives than through commission agents58
.
Srivastava, after examining the difficulties that arose in vegetables
marketing, concluded that the producer’s share was inversely related to
consumer’s price. The retailer’s share increased with an increase in the
consumer’s price, whereas producer’s, share decreased with an increase in
the consumer’s price. The benefit derived from an increase in the
consumer’s price was absorbed by the retailers59
.
Nagaraj et al., estimated that the share of producer in the consumer’s
rupee ranged from 37 to 68 per cent in respect of fruits and vegetables.
58
Huger, Lingappa, Bheemappa, “Marketing of Vegetables in Belgaum City – An
Economic Analysis”, Thesis Abstracts, 7 (4), 1982, pp.279-280.
59
G.C. Srivastava, “Dynamics of Vegetable Marketing”, Indian Journal of
Agricultural Economics, 39 (3), 1984, p.229.
68
Retailers appropriated a major share in the total marketing costs. The share
of retailers was larger for fruit crops than vegetables. The supply in
vegetables market was relatively less inelastic than that of fruits. Nearly 90
per cent of the farmers felt that the intermediaries did not accept the
producer graded vegetables60
.
Nanja Reddy et al., found that those producers who sold their onion to
wholesalers got the highest net price per quintal and maximized their
earnings through channel I (producer-village traders – wholesaler – Retailer
– consumer) which could realize the best as compared to other channels61
.
2.4 Research Gap
In this exploratory study, the researcher has presented a few aspects,
concepts and dimensions to throw necessary light on the position,
parameters, problems and prospects of paddy cultivation in Thiruvarur
district of Tamil Nadu. The researcher could analysis the primary and
secondary data and also the views and opinions of the farmers to satisfy his 60
N. Nagaraj, M.G. Chandrakanth and R. Ramana, “Market Appraisal for a Few
Fruits and Vegetables”, Indian Journal of Marketing, 16 (4), 1985, pp.13-19.
61
C. Nanja Reddy, M.S. Shyamsundar and Lalith Achoth, “Price Spread in the
Marketing of Irrigated Onion: An Economic Analysis”, Agricultural Banker, 19 (4),
1955, pp.33-35.
69
objectives and test the hypothesis adopted employing the relevant tools and
techniques carefully.
In order to gain the necessary insights and objective perceptions the
researcher has naturally made an attempt to peruse and review the literature
available relating to the problem chosen.
The earlier works and studies form a veritable wealth of information
and knowledge. They have shed much light on certain aspects like costs,
returns and marketing of paddy.
Still, some gap seemed to remain in this direction. The present study
makes an attempt to fill such research gaps in a modest way.