PerishableProduce Wholesale Markets in India: Their role and making them deliver

Sukhpal SinghCentre for Management in Agriculture (CMA)Indian Institute of Management (IIM)Ahmedabad (Gujarat)

Landholding profile of farmers in India

138 million farm holdings (2010-11) with 60% area rainfed.

Marginal – Below one hectare (65%); Small – 1 - 2 hectare (20%)

Marginal and small operate 44% area

All India average size of landholding:1.16 hac in 2010-11

Average farm size-3.77 and 2.25 hac in Punjab and Haryana and

only 0.22 and 0.77 hac in Kerala and West Bengal

Only in Punjab, average size increasing due to ‘reverse tenancy’

Focus on high value crops

Changing face of agribusiness policy and practice

APMC Act amendment – direct purchase, private markets, contract farming ((Agriculture a state (provincial) subject))

Warehouse Receipts Act

Organic farming and organic produce standards

Integrated food law (Food safety and standards Act, 2006):FSSAI

Corporate alliances with NGOs/Co-ops, Farmer Clubs (NABARD)

Institutional innovation: Producer companies

Role of wholesale fresh produce markets

Much less attention paid to fresh produce wholesale markets than needed

Traditional wholesale markets have not changed adequately to meet new (modern retail and consumption) needs in developing countries (unlike Europe where wholesalers supply to supermarkets as third generation markets)

Increasingly being replaced by contract farming and direct purchase from growers

But, traditional wholesale (APMC) markets still important for small retailers and small growers

Fresh Produce Markets (wholesale) in India

Through regulated (APMC) markets or

Unregulated local F&V markets

- F&V markets much less effectively regulated than grain markets

- High marketing/transaction and spoilage cost due to non-regulation (in Mah, farmer pays commission) and large number of intermediaries involved (CAs-kaccha and pucca)

- No/very little appreciation of quality (F&V washing machine for consumers due to chemical residues)

- Lack of hygiene and convenience

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The Model APMC Act

Non-Contract Farming Aspects

Single point registration and levy of market fee

Direct purchase from farmers

Private wholesale markets

Prohibition of commission agents (Only MP has done it)

New stakeholders in Wholesale markets

Wholesale cash ‘n’ çarry players

Food retail supermarkets (domestic and foreign)

Processors

Institutions

Small and marginal farmers

APMC(60-70%)

Vendor

Collection Centre

(procurement from

farmers)

Distribution Centre

(receival, grading, and

dispatch)

Retail Store Consumer

Producers (contact)(30-40%)

Payment

Procured by mandi buying team

Typical supply chain of a fresh food retail chain (Contact Farming)

Mechanisms for Making APMCs Vibrant

Understand Implications of FDI in retail for wholesale markets and traders/CAs therein

More efficient and lower cost APMC markets needed.

Ensure open auction system,

buyer competition with more licenses,

better facilities

e-payment of market fee,

Producer Company representation in APMC mgt.,

denotificationof CAs/Arthiyas like in MP, (APMC markets serve as competitors to contract and ‘contact’ farming (practiced by retail chains) and can help improve the terms offered by retail chains to growers as contract/contact prices are benchmarked to APMC prices

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Mechanisms for Making APMCs

VibrantAPMC markets are important for small farmers

as they serve as competitors to Contract farming and retail chain/supermarket buyers and help improve terms

Make warehouse receipts applicable to less perishable produce like potato/onions

Exempt F&V crops from APMC rules only for CF and Direct purchase

Role of the state: case of Bihar APMC Act

Thank You