A farmer wants to be able to maximise revenues from the agricultural produce grown. An artisan needs to get the best price for the handicraft made. An SME needs to be able to sell the goods made. Whether it is for the agricultural, non-manufacturing or manufacturing sector, access to markets is one of the key requirements for creating a virtuous cycle of increasing production, employment and incomes. In our discussion, we shall consider market access for three constituencies: agricultural products, non-manufactured products and SMEs.
In India, most farmers sell what they produce via Agriculture Produce Market Committees (APMCs), which have been set-up across India by the state governments. An example is the Maharashtra APMC. Its website provides more info: The APMCs were established by the State Govt. for regulating the marketing of different kinds of agriculture and pisciculture produce for the same market area or any part thereof. Every market shall consist of: agriculturists residing in the market area and being 21 years of age on the date specified from time to time by the Collector in this behalf, traders and commission agents holding licence to operate in the market area, and chairman of the co-operative society doing business of processing and marketing of agriculture produce in the market area.
The APMCs run the marketplaces, also called mandis. Considering that the infrastructure exists, it is possible that the marketplaces could be made more efficient via the use of technology. For example, by connecting various local markets together, it should be possible to increase the transparency of pricing information.
Co-operatives can also help in increasing rural incomes by aggregating the supply from a number of small providers. The Gujarat Co-operative Milk Marketing Federation (better known as Amul) has done wonders in the area of milk and its derivative products. There is a need for co-operatives in other sectors also.
To complement efficient marketplaces, there is also the need for a complementary set of services logistics, storage and distribution, and food processing facilities. This is where opportunities exist in rural India. A recent CII-McKinsey report, appropriately entitled FAIDA (Foods and Agriculture Integrated Development Action) offers some suggestions:
Despite being one of the largest agricultural producers, including in fruits and vegetables, the growth in India’s food processing sector has been slower than anticipated. The worth of the Indian food industry has gone up from Rs.3.09 trillion in 1993-94 to Rs.3.99 trillion in 2000-01. As a part of the agriculture sector, the value addition segment has recorded a 7.1 percent growth in the last seven years, compared to 3.1 percent for farm and livestock segment. While overall products like as wheat flour, fruit juices, ready-to-eat foods, soft drinks, pickles and savouries have grown at over 10 percent annually, the growth is over 20 percent in the organised sector for products like pickles, savouries and ‘papad’.
According to the CII-McKinsey FAIDA report, if India is to achieve the Rs.5 trillion food processing potential by 2005, it will have to create market driven linkages across the entire chain through partnerships and virtual linkages, rather than do-it-alone or build infrastructure. The report suggests that the success of companies in this sector lies in developing innovative products driven by consumer insights and delivery with quality, convenience and the right price in mind. “A distributed, asset-light manufacturing model and an innovative distribution system are essential elements of this system,” the report states.
It adds that while the direction and potential were clear, the pace of change towards realising this potential is uncertain. Direct access to agricultural produce, a level playing field through tax reform and a revised food law are among prerequisites sought by the industry for faster growth of the food industry potential. This would “push growth of key enablers such as retail, reduce market interference and proactively facilitate industry initiatives and exports”, the report states.
While mass-market basic foods were expected to remain the largest segment, value-added products like ‘rotis’ and ready-to-cook/eat products and condiments were also growing rapidly. In addition there was a growing niche market for exotic product categories in addition to exports. “Exports of food products can become a valuable growth driver for the industry, leveraging the historic base, new specialty categories and other areas where India can build a distinctive advantage and a strong brand,” the report stated. In addition to manufacturing, the report sees significant growth in terms of input providers, logistics suppliers and retail.
For the development of rural India, even as we need to make agriculture more efficient, there is need to grow the non-manufactured sector.
Tomorrow: Market Access (continued)