ABM 502 Lecture Notes

School of Agribusiness and Rural Management
MBA (Agri Business Management), semester II
Course title: Agribusiness Environment and Policy
Course code: ABM 502 Credit units: 2+0
Instructor: Dr. Mohit Sharma
Introduction of course:
Agribusiness is a broad theme and its importance in present context cannot be

underestimated. India being an agrarian economy is having global advantage in terms
of highest production in significant commodities. While so ever in context to market and
drawing business we are lacking behind. Moreover, depletion of natural resources,
increasing population, exhausted food systems has shifted the importance of modern
linkages for various farm commodities. In purview of same, it becomes necessary to
learn about the environment where agribusiness is conducted and various micro as well
as macro environmental forces and its impact on agri-business.
Course objectives:
 To provide a learning exposure to students about the environment where Agri

Business is conducted
 To enable student to understand policy environment, public - private policy

domains, Agri sub sector analysis
 To enable students to appreciate the range of possible government agribusiness

sector interventions
Methodology
The classes will have an emphasis on class discussion, based on input from readings,
lectures and presentations. Lectures, textbook readings and presentations (which focus
on learning theoretical concepts) will be supplemented by group discussion, experiential
exercises, videos, and case studies (which focus on applying theory concepts to real-
world situations).
Evaluation Components
Evaluation
 Exam: There will be two examinations – mid-term exam and end-term exam.
Course description_ABM 502_Mohit Sharma_SABRM_RPCAU_Pusa

 Quiz: There will be surprise quizzes.
 Class participation/individual and group assignments/projects
Grading Scheme
Mid- Term 30%
Quiz 10%
Assignment/Viva 10%
End – Term 50%
Course Expectations
1. Class Participation: Class participation is a very important part of course. This class
requires active class participation. It is expected that every participant comes prepared
to the class with assigned readings, cases and assignments in appropriate forms as
communicated by the instructor through course outline/verbally.
2. Class Assignments/Term paper/Group projects: Students will be asked for

relevant home assignments and at the end of semester they have to submit policy
paper. Details of the same are mentioned here under
Policy paper: All students are required to write an individual policy paper. They are
advised to select a topic prior to midterm examination. Paper submission will be due on
last day of class, there will be no exceptions. Papers must be submitted both by email
and in hard copy.
Guidelines for writing the paper are as follows:
A good policy paper will have the following parts:
Introduction/Background
Keep it short and to the point. This section frames the issue.
Problem Statement
The problem statement may come at the end of the introduction. It concisely identifies
the problem to be solved. It may be in the form of a question. Why the policy is not
working? Why it is being conducted this way?
Objectives

Identify the objectives of the entity that is trying to solve the problem. Usually, the entity
is a nation or an alliance, but it can also be a transnational actor. Focus on a single
decision-maker or decision-making body. Consider the domestic political goals that may
be associated with your policy recommendation.
Options
Enumerate the options and describe them briefly. It is common to provide three
options, but don’t force it to that. For and against arguments do not constitute two
options. Give the decision-maker some choices.
Analysis of Options
How does each option serve the objectives listed above and what is the other cost
issues associated with each. Consider positive and negative externalities. You should
be sensitive to the options’ domestic political repercussions.
Recommendation
Select the best option and recapitulate why it is the best. Do a reality check. Does the
recommendation solve the problem; is it actionable? Your recommendation should
ideally be a stand alone, and not require another iteration of the process to figure out
how to implement it.
Some possible policy paper topics:
Crops related (rice, wheat coarse grains), livestock and poultry related, fisheries related,
fruits and vegetables, food assistance, nutrition policy and rural employment related etc.
At the end of semester, student will make a formal Power Point presentation to the class
on their policy paper. The dates for the presentations as well as other details regarding
the length and format of the presentations will be specified throughout the semester.
Homework assignments will be assigned regularly. Homework assignments are

intended to help students enhance understanding of the material covered in the class.
Homework assignment must be submitted and discussed with instructor on due date at
the beginning of the class.
Course description: Provided in hard copy
Session Plan
Unit Topics Assessment criteria

I Assignment/quiz
i. Role of agriculture in Indian economy
ii. Problems and policy changes relating to farm Assignment/quiz
supplies
iii. Farm production Assignment/quiz
iv. Agro processing Assignment/quiz
v. Agricultural marketing Assignment/quiz
vi. Agricultural finance in country Assignment/quiz
II Assignment/quiz
i. Structure of Agriculture
ii. Linkages among sub-sectors of the agribusiness Assignment/quiz
sector
iii. Economic reforms and Indian agriculture Assignment/quiz
iv. Impact of LPG on Agribusiness sector Assignment/quiz
III Assignment/quiz
i. Emerging trends in production, processing, marketing
and exports
ii. Policy controls and regulations relating to the Assignment/quiz
industrial sector with specific reference to agro-
industries
IV Assignment/quiz
i. Agribusiness policies- concept and formulation
ii. New dimensions in agri-business environment and Assignment/quiz
policy
V Assignment/quiz
i. Agricultural price and marketing policies, PDS and
other policies
Suggested Readings:
 The Agribusiness Book, by Mukesh Pandey and Deepali Tiwari

 Yearbook of Ministry of Agriculture
 Relevant reports of Niti Aayog e.g. Strategy for new India @ 75.
 Economic survey reports
Learning outcomes of the course:
- Various linkages of agribusiness in academic, industry and public sector

- Developing a policy paper
- Relationship in different components of agribusiness and predicting trends in the
domain
Other Important Information
1. Late assignments may not be accepted.
2. Written work, including the report, is graded on the basis of content first, but also on
the quality of grammar and punctuation.

3. Academic honesty is expected of all students. Plagiarism, cheating, and other acts
that lack academic honesty may result in a zero on the particular assignment.
4. Students are required to be regular and strict to attendance norms. There will not be
any flexibility in such regard.
Best wishes

An introduction to Agribusiness
Agri-Business
Agri Business
Agribusiness
ABM 502_MS_UNIT 1_RPCAU_SABRM

Why Agri Business is important?
• India comprises:
About 2.4% of world’s geography, 4% water

resources
While it needs to sustain 17% population and

15% of livestock of world

• Can Agribusiness serve as contributor in its
transition from an agrarian economy to
world’s food factory?
• More than 570 million farms, majority small

holders owing to 2 ha or less

• What is Agriculture?
• What is Business?
• Lets define Agribusiness !

Concept of Agri Business begins
with the farmers’ purchase of
seed and livestock and ends
with product fit for the
consumers table.

By Goldberg and Davis in 1957
“Agribusiness is the sum total of all operations

involved in the manufacture and distribution;
production activities on the farm and the storage,
processing and distribution of farm commodities
from them”.
It is a sensitive business due to climatic factors,

socio cultural preferences, govt. interventions
and also nature of commodity produced.
Genesis of Agri Business
• During 1800, agriculture was considered to be
self contained industry;
• Farm families produced its own food, fuel,
shelter, animal feeds, tools and implements
and even most of its clothing
• Very few materials had to be bartered off farm
• For the economy to be operated like this, 80%
of total work force to be engaged

Technological revolution on the farm
• In the decade of 1830, John lane, John Deere
pioneered in the development of farm
implements revolutionize the process of
preparing soil for planting
• Simultaneous to the mechanization, has been

the application of research, use of scientific
methods started

Contd.
• Notable trends in advancing the scientific side of
farming were the Morrill act of 1862 creating
land grant college systems, estd. of USDA,
• Hatch act of 1887 giving impetus to state
experiment stations,
• Smith Lever act of 1914 authorizing the extension
service and
• Smith Huges Legislation of 1917 promoting
vocational agriculture as a subject in secondary
schools
Tech revolution off the farm
• Development of commercial facilities for

handling, storing, processing and distributing
farm commodities and products made there
from
• Industrial revolution, textile industry, shifting

of labour to industrial centers

Contd.
• Concentration of population in industrial
centers created a corresponding need for
moving food from the farm to urban areas.
• In 1957, agriculture employed about 12% of

workforce in contrast to 72% in 1820 and 59%
in 1860.
• Paralleling this change has been the
development of commercial food processing,
distributing industry
Contd.
• To meet the food requirements of a constantly
increasing urban population, tech. revolution
took place in methods of handling, preserving,
distributing food and some improvements in
transport, refrigeration, grading packing.
• Simultaneous with these improvements, has

come the evolution of food chain and the
supermarkets as techniques for mass
merchandizing

2nd phase of off farm tech revolution has
evolved from the increasing tendency of
farmers to utilize production supplies
originating from off the farm
Farmers started purchasing equipments from

industrial firms, use of more scientific
knowledge.

• Modern Agri Business is the result of a
combination of forces actively at work for a
century & a half & with roots running back
even deeper into history.
• It is a product of a complex of evolutionary

forces without any central guidance or
direction

Components of Agribusiness
INPUTS SUPPLY
Services
Seed,
Fertilzer,
Research &
Agro chemicals, FARM Development,
Farm & Irrigation BUSINESS Communication,
Equipments, Field Crops, Finance,
Animal Feed and Fruit & Storage and
Medicines Vegetables, Warehousing,
Energy PROCESSING
Flowers, Logistics,
Food Items, Marketing,
Other Crops, Beverages and Consultancy
Forestry, Drinks,
Livestock, Textiles,
Fish Other Processed
Products

• Do we think of our food system?
• Do we need to change our food system?
• Why do we need to change?

• Everyday we eat, just like 7.2 billion on planet
• By 2050 at least 2 billion more people will join
• Will you be able to consume the food in same

way?

Lets’ take a look !
Scenario I
• 1 out of 3 people suffer from malnutrition
• 794 million people suffer from hunger &
• 2 billion people do not have access to vitamins

and minerals necessary for health
• About 1.9 billion overeat and 600 millions are
obese, consequently more people suffer from
illness such as Type II diabetes
2nd scenario
• Our food is too rich in fat, sugar, salt and
meat; such diet has impact on health and
environment e.g. increase in heart diseases &
high GH gases from meat production
• There is less diversity of food. 75% of food

comes from 12 plants (rice, corn, wheat) & 5
animal species (pigs, chicken)

3rd scenario
• 1/3rd of food is wasted. After all food we
receive is not consumed but thrown away
4th scenario
Depletion of natural resources; 33% of soils are
degraded. Biodiversity is threatened and many
plants, animals became endangered.

• Such limitations clearly show that food system
must be transformed.
• Each step of food system needs to be adjusted
to ensure healthy food to population while
limiting harmful environmental impact
• Most important is to bring all stakeholders

together to examine all points to work
effectively.

Agro Based industries
• Input Supply
• Agri -production
• Processing
• Agri-services

Input sector
• It provides producers with the feed, seed,
credit, machinery, fuel, chemicals they need to
operate
• High quality inputs often leads to efficiency

Agri Production sector
• This sector aims at
producing crops,
livestock, and other
products
• This sector has been the

cause of much of the
change in agribusiness,
particularly, in terms of
technology
Agro- processing
• Food Processing • Allied Agro Processing
– Grains – Cotton Textile
– Pulses Milling – Sugar Industry
– Fruits/vegetable Processing – Jute Industry
– Bakery Items – Paper Industry
– Ethnic Foods
– Edible Oils / Fats
– Milk and Milk products
– Beverages
– Fish, Poultry Products (Eggs)
– Meat and Meat Products
– Alcoholic Beverages

Services in Agri Business
– Public Sector (Ministries, ICAR, R&D, Credit,
Marketing)
– Private Sector
– Free agents (Agri/Horti graduates)

ABM institutionalization in INDIA
• A small group called Agco group was set up in
1963 to work on the problems of agriculture
sector & cooperatives.
• Group was redesigned as the Center for

Management in agriculture in 1971 with a
goal to help the process of modernization of
agri- food sector by using management
science

• In 1974, special Program in Agriculture was
started by IIMA
• Center for Food and Agri Business was started
in 1998 by IIML
• MANAGE, Pantnagar started ABM program in
1996
• NIAM- 2001, NAARM- 2009

Market size of Indian Agriculture
• Food grain production in 2018-19:
285.2 million tonnes
• Horticulture production: 306.82 million tonnes
• Between April- October 2018 agricultural
exports were US$ 21.61 billions
• India is also the largest producer, consumer and
exporter of spices & spice products.

• Spice exports reached US$ 3.1 billion in 2017-18
• Tea exports reached US$ 240.68 million kgs
• Coffee exports reached 3.95 lakh tonnes
• Food and grocery retail market in India was
worth US$ 380 billion in 2017
• By early 2019 India will start exporting sugar to
China
• 1st mega food park established in RJ in March ’18
• Agri food start ups received funding of US$ 1.66
billion
Glance at govt. initiatives
• New export policy aims to increase
agricultural exports to US $ 60 billion by 2022
• For stabilishing agril. price PM AASHA, for
which govt. announced Rs. 15053 crores
• Assistant package for sugar industry 5,500
crore Rs.
• AGRI-UDAAN, with aim to boost innovation
and entrepreneurship in agriculture

Contd.
• Developing irrigation sources for providing a
permanent solution from drought, investment
of rs. 50,000 crores
• Plans to triple the capacity of food processing
sector (SAMPADA)
• 100% FDI in marketing of food products & in
food product e-commerce under the
automatic route

Contd.
• eNAM launched in April 2016, 9.87 million
farmers, 1,09,725 traders registration, 585
mandis, while additional 415 mandis will be
linked in 2019, 2020
• Around 100 million Soil Health Cards (SHCs)

distributed and soil health mobile apps
launched to help Indian farmers

Notable trends in ABM
• Changing consumer tastes, preferences and
sensitization on quality, healthy ingredients
• Expansion of various International companies
• Rising demand on Indian products in foreign
markets
• High consumption of horticulture crops
• Product innovation as key to expansion
• Strengthening procurement by direct farmer-
firm linkages

Scope of Agri Business in India
• Improved agro climatic variations, facilitates
enormous variety production
• There is growing demand for agricultural
inputs like feed and fodder, inorganic
fertilizers, bio-fertilizers
• Forest resources, Livestock, Beekeeping,
organic farming, bio pesticides, hi tech
horticulture, ornamental fish culture etc.

Assignment 1
What is the Scope of Agri Business at RPCAU?

Importance of agriculture in Indian economy

Various sectors contributing to Nation’s GDP
• Agriculture, forestry and fishing (17.4%)

• Industry- mining, electricity, gas, water supply,
construction etc. (28.9%)
• Services- (53.80% ) Trade, hotel, transport,

storage, communication, services related to
broadcasting, financial, real estate,
professional services, Public administration,
defense and other services
• With about half of population employed in
agricultural activities, it should be prominent
source of India’s GDP if not the major source?
• Why so?

Price spread between farm harvest prices and retail
prices for select agril commodities, 2015-16

• India is the world’s largest producer of pulses, rice, wheat, spices
and spice products
• Second largest producer of fruits and vegetables in the world
accounting for 10.9% and 8.6% of the world fruit and vegetable
production
• India is also among the top producing milk and silk
• India has many areas to choose for business such as dairy, meat,
poultry, fisheries and food grains etc

Contribution
to national
income
Source of Source of
Government Livelihood
Revenue
Importance
of agriculture
in Indian
economy
Commercial Source of
Importance Food Supply
Agriculture
for industrial
development

Contribution to national income
• The share of agriculture has declined to 54 per cent in 1960-61,

48 per cent in 1970-71, 40 per cent in 1980-81 and then to 17.0
per cent in 2016-17
• U.K. and U.S.A. agriculture contributes only 3 per cent to the
national income
(Rs. in Crore)

Share of agriculture and allied sector in GSDP
Share of agriculture and States
allied in GSDP
30 % and above Arunachal Pradesh
20-29 % AP,Assam,Bihar,Chattisgarh,J&K,MP,Manipur,Naga
land,Punjab,Rajasthan,Tripura,UP
15-19% Haryana, Himachal

Pradesh,Jharkhand,Karnataka,Meghalaya,Mizoram,
Odisha,Telangana,West Bengal
Less than 15% Goa, Gujarat, Kerala, Maharashtra, Sikkim,

Uttarakhand, Tamilnadu

Source of Food Supply
•Agriculture is the only major source of food supply as it is providing

regular supply of food to such a huge size of population of our
country. It has been estimated that about 60 per cent of household
consumption is met by agricultural products
In million tonnes
Source of Livelihood
• In India over 50 % of working population are engaged directly

on agriculture and also similarly depend for their livelihood in
comparison to that of 2 to 3 per cent in U.K. and U.S.A., 6 per
cent in France and 7 per cent in Australia
Average daily wages rates in agriculture operation

Agriculture for industrial development
• Agriculture in India has been the major source of supply of raw

materials to various important industries of our country. Cotton and
jute textiles, sugar, tea, coffee, rubber and agro-based cottage
industries are also regularly collecting their raw materials directly
from agriculture
Source of government revenue

• Some other sectors like railway, roadways are also deriving a good
part of their income from the movement of agricultural goods

Commercial importance
• Indian Agriculture is playing a very important role both in the
internal and external trade of the country
• Agricultural products like tea, coffee, sugar, tobacco, spices,
cashew-nuts etc. are the main items of our exports and constitute
about 50 per cent of our total exports
• Besides manufactured jute, cotton textiles and sugar also contribute
another 20 per cent of the total exports of the country
• Thus nearly 70 per cent of India’s exports are originated from
agricultural sector

Top 10 exporters of Agricultural products
In US $ billion
Source-wto,2016

India’s top 10 agricultural commodity (Export)
(value Rs. crore)

India’s top 10 agricultural commodities (Imports)
Value Rs. crore

Schemes that support agriculture
development
• National Food Security Mission
• National Mission on Sustainable Agriculture
• National Mission on Oilseeds and Oil palm
• National mission on Agriculture Extension and Technology
• Mission of Integrated development of Horticulture
• Rastriya Krishi Vikas Yojna
• Pradhan Mantri Krishi Bima Yojna
• Integrated Schemes on Agriculture Cooperation
• Integrated Schemes on Agriculture Marketing
• Pradhan Mantri Krishi Sampada Yojana

Highlights of agriculture in budget 2018
• The government has announced institutional credit for agriculture

sector to Rs. 11 lakh crore for the year 2018-19 from Rs.10 lakh
crore in 2017-18
• Doubling the farmer income by 2022
• Minimum support price (MSP) for all upcoming kharif crops has
been raised to 1.5 times the cost of production
• Agricultural market with corpus of Rs 2,000 will be created for
22,000 gramin agricultural markets and 585 APMC
• Allocation for food processing ministry has been doubled from 700
crore to 1400 crore

Contd..
• 200 crore for organic farming sector
• A restructured National Bamboo Mission with corpus of Rs 1,290
crore will be set up
• Rs 10,000 crore are allocated to set up two funds to promote
fisheries and animal husbandry
• To set up new mini labs in Krishi Vigyan Kendras (KVKs) and
ensure 100% coverage of all 648 KVKs in the country
• In addition, 1000 mini labs will be set up by qualified local
entrepreneurs
• Operation green will produce farmer producer organisation,
logistics, warehousing etc. allocation of Rs 500 crore

Contd…
• For Long Term Irrigation Fund Rs. 20,000 crores announced
• To achieve the goal, 'per drop more crop'. The Fund will have an
initial corpus of Rs. 5,000 crores
• The coverage of National Agricultural Market (e-NAM) will be

expanded from the current 250 markets to 585 APMCs
• For dairy processing and infrastructure development fund would be

set up in NABARD with a corpus of Rs. 8,000 crores over 3 years.
Initially, the fund will start with a corpus of rs. 2,000 crores

Contd…
• The Fasal Bima Yojana launched by our government is a major step
in this direction
• The coverage of this scheme will be increased from 30% of cropped

area in 2016-17 to 40% in 2017-18 and 50% in 2018-19
• To settle the arrear claims, for 2017-18, sum of Rs. 9,000 crores has
allocated
• Export of agricultural commodity has been liberalized to meet

india’s agricultural exports potential of $100 billion

Budget 2020
• State governments will be encouraged to
follow model laws such as: Model Agricultural
Land Leasing Act of 2016, Model Agricultural
Produce and livestock and Marketing Act of
2017 and Model Agricultural Produce and
Livestock contract farming and services
promotion and facilitation Act of 2018

Pradhan Mantri Kisan Urja Suraksha evem Utthan
Mahabhiyan (PM KUSUM) to be expanded to provide
20 lakh farmers in setting up stand alone solar pump.
Village storage scheme run by SHG
Kisan rail for transportation of perishables
Focused product for one district
Financing on negotiable warehouse receipts to be
integrated with eNAM
Rural youth to promote fishery through sagar mitras
Balance use of fertilizers, warehouses set up, Krishi
UDAN, agri credit, milk processing

• HOW WE CAN ENSURE INCOME TO FARMERS?
• HOW INDIA CAN ENSURE FOOD SECURITY TO

GROWING POPULATION?
• MODERN DAY CONSUMERS AND FOOD

HABITS
• SCOPE FOR AGRI BASED INDUSTRIES IN

INDIAN CONTEXT
Agricultural Economics Research Review
Vol. 26 (No.2) July-December 2013 pp 135-157
Presidential Address
Agricultural Policies in India: Retrospect and Prospect§
V.P.S. Arora
Vice-Chancellor, Supertech University, Rudrapur, Uttarakhand
Agriculture continues to be an important sector of revolution. During the Eleventh Five-Year Plan, the
Indian economy, though its share in the gross domestic agriculture and allied sector has registered an average
product (GDP) has declined from about 50 per cent in annual growth rate of 3.6 per cent, slightly lower than
early-1950s to 14 per cent in 2011-12. Employment in the target of 4.0 per cent, but higher than the average
agriculture has also shown a decline, albeit slowly, and annual growth rate of 2.4 per cent attained during the
presently it accounts for 52 per cent of the country’s Tenth Plan. This improved performance in recent years
total labour force. The declining share of agriculture is also credited to the impressive growth in capital
in GDP and employment is consistent with the theory formation in the sector. The gross capital formation in
of economic development. However, a faster and agriculture and allied sector has more than doubled in
sustainable growth in the sector remains vital for the past 10 years with an average annual growth of 8.1
creation of jobs, enhancing incomes, and ensuring food per cent.
security.
As per the latest Agricultural Statistics at a Glance
India has 140 million hectares of net cropped area, (2012), India is the world’s largest producer of pulses,
next only to that of the USA. Similarly, India’s irrigated milk, many fresh fruits and vegetables, major spices,
area (63.26 Mha net and 86.42 Mha gross) is also the select fresh meats, select fibrous crops such as jute,
second largest in the world, next only to China. The several staples such as millets and castor oil seed. India
country is well-endowed with natural resources and is the second largest producer of wheat and rice,
diverse climatic conditions, and much of the land in groundnut, fruits, vegetables, sugarcane, and cotton.
India can be double cropped. Traditionally, crop India is also the world’s third largest producer of
production has accounted for over four-fifths of the cereals, rapeseed, tea, tobacco, eggs, several dry fruits,
agricultural output, but over the past two decades or and roots and tuber crops.
so the situation has changed dramatically. The share
of livestock in the agricultural production has risen Evolution of Agricultural Policies
sharply and now accounts for close to 30 per cent of
the total agricultural output. Overall, the composition Agriculture has remained a highly regulated sector
of agricultural output has gradually been shifting in India with government agencies and parastatals
towards high-value crops and animal products, exercising a pervasive influence over it. These
especially milk. regulatory controls are imposed by both central and
state governments. The state governments, however,
The performance of agricultural sector has been continue to retain the constitutional authority over the
quite impressive, making the country self-reliant in sector. After independence, India pursued a policy of
food. The country has even started exporting some food
food self-sufficiency in staple foods — rice and wheat.
products. This performance is due largely to green
The policies were initially focused on the expansion
of cultivated area, introduction of land reforms,
§ Based on Presidential Address delivered on 10 September,
2013 at the 21st Annual Conference of Agricultural Economics
community development, and restructuring of rural
Research Association (India) held at SKUAST-Kashmir, credit institutions. Trade was strictly regulated through
Srinagar. quota restrictions and high tariff rates.
136 Agricultural Economics Research Review Vol. 26 (No.2) July-December 2013
The main policy measures in the agriculture sector Phase II: Green Revolution Period (1965-80)
were adopted in the mid-1960s. These included input
The second phase of agricultural and food policy
subsidies, minimum support prices, public storage,
started in the mid-1960s with the advent of green
procurement and distribution of foodgrains, and trade
revolution. The adoption of improved crop
protection measures. The gains from green revolution
technologies and seed varieties became the main source
technologies continued through the mid-1980s, but
slowed down thereafter. Unlike reforms in other of growth during this period. The Government of India
emerging economies of the world (e.g. Brazil and adopted the approach of importing and distributing the
China), a series of reforms instituted in India in the high-yielding varieties (HYVs) of wheat and rice for
early-1990s, left its agricultural sector relatively cultivation in the irrigated areas of the country. This
untouched, except for the removal of export controls. was accompanied by the expansion of extension
While reforms in agriculture have been modest, the services and increase in the use of fertilizers, agro-
macroeconomic reforms of the 1990s had two chemicals and irrigation. A number of important
important impacts. First, the reforms increased per institutions were set up during the 1960s and 1970s,
capita income and strengthened the domestic demand. including the Agricultural Prices Commission (now
Second, they reduced industrial protection and Commission for Agricultural Costs and Prices), the
improved agriculture’s terms of trade to attain food Food Corporation of India, the Central Warehousing
self-sufficiency, ensure remunerative prices to farmers, Corporation, and State Agricultural Universities.
and maintain stable prices for consumers. India’s Another major policy decision was the
protectionist trade policies, introduced in the 1960s, nationalization of major commercial banks to enhance
continued virtually unchanged, until the major credit flow to the agricultural sector. Several other
economic reforms were introduced after signing the financial institutions, for example the National Bank
AoA (Agreement on Agriculture) under WTO. for Agriculture and Rural Development (NABARD)
and Regional Rural Banks (RRBs), were also
Phase I: Pre-Green Revolution Period (1950-65) established to achieve this objective. The cooperative
The main policy thrust in the first phase (after credit societies were also strengthened.
Independence) was on enhancing food production and This strategy produced quick results with a
improving food security through agrarian reforms and quantum jump in crop yields and consequently, in the
large-scale investment in irrigation and power. The first foodgrain production. However, impact of the green
major agricultural legislation enacted by the state revolution technology was largely confined to two
governments after Independence was the Zamindari crops, wheat and rice, and in the irrigated regions. The
Abolition Act (1950s). The basic objective of this traditional low-yielding varieties of rice and wheat were
policy was to eliminate land intermediaries, ensure replaced by the high-yielding varieties. Today, more
ownership rights to the tillers of land, and ensure a than 80 per cent of the area under cereals is sown with
permanent improvement in the quality of the high-yielding varieties. The use of fertilizers (NPK)
landholding. The government made additional changes has risen sharply over the past three decades, albeit
to the land ownership policy to ensure greater equity from a low base. In 2011-12, the Indian farmers used
in the rural society. These decisions involved placing almost 144.3 kg of fertilizer per hectare of cultivated
a ceiling on the size of holdings, state control on idle land. The use of pesticides, including herbicides,
or unused lands, and the distribution of some of the increased until 1990, but has fallen steadily, partly due
idle land to the underprivileged rural people. Provisions to the shift in emphasis, away from the heavy use of
were also made to ensure that recipients of this land
chemical pesticides to a more environment-friendly
do not lease out or sell the land. The consolidation of
integrated pest management system.
fragmented and scattered landholdings was encouraged
so that farmers could have better access to The biggest achievement of the green revolution
mechanization and land improvements could be made. era was the attainment of self-sufficiency in foodgrains.
Other policy measures during this period included The green revolution also had an impact on the
enhancing of farmers access to credit, markets and agricultural input industry, resulting in a rapid growth
extension services. in the fertilizer, seed and farm machinery industries. A
Arora : Agricultural Policies in India: Retrospect and Prospect 137
significant increase in the funding of agricultural However, there were several policy challenges
research and extension, marketing of agricultural facing the agricultural sector, including the need to
commodities and provision of credit to farmers was reverse the sharp decline in output growth, which
also noted. occurred in the late-1990s, and the need to ensure more
sustainable use of the existing natural resources. A
Phase III: Post-Green Revolution Period steady fall in the public sector investment in agriculture
(1980-91) posed a big challenge which necessitated policy
The third phase in agricultural policy development initiative to attract private investment in agriculture
started in the early-1980s and was characterized by for the long-term growth and competitiveness of the
the expansion of green revolution technology to other sector. Another important challenge during this phase
crops and regions. This resulted in a rapid growth in was on improving competitiveness along the agro-food
agricultural output. During this period, the main chain, especially through enhancing efficiency in
production, marketing and processing of agricultural
policies aimed at encouraging investment in the sector.
commodities.
Moreover, the agricultural economy started
experiencing the process of diversification towards In 2000, the Government of India, for the first time,
high-value commodities like milk, fish, poultry, published a comprehensive agricultural policy
vegetables and fruits. The growth in output of these statement — the National Agricultural Policy (NAP)
commodities accelerated. Finally, the ongoing research that sets out clear objectives and measures for all the
on pulses, oilseeds and coarse grains started showing important sub-sectors of agriculture. Over the next two
a positive impact with the expansion of these crops decades, this policy aims to attain an agricultural
into the drier areas. growth rate in excess of 4 per cent per annum. The
main elements of the policy include:
Phase IV: Economic Reforms Period (1991 • Efficient use of natural resources, while
onwards) conserving soil, water and biodiversity.
Following several decades of sustained output • Growth with equity, i.e. growth which is
growth, the focus of agricultural policy since 1991 has widespread across regions and farmers.
shifted to improving the functioning of markets,
• Growth that is demand-driven and caters to the
reducing excessive legislation, and liberalising
domestic markets and maximizes benefits from
agricultural trade. Economic reforms launched in the
exports of agricultural products in the face of
1990s virtually by-passed the agriculture initially.
challenges arising from economic liberalization
However, the subsequent trade policy reforms have
and globalization.
been aimed at liberalizing the export and import of
agricultural and food commodities by gradually • Growth that is sustainable technologically,
removing various restrictions and controls on environmentally and economically.
agricultural trade. The policy also seeks to utilize large areas of
Over the past 10-15 years, India’s share in world wasteland for agriculture and afforestation. Moreover,
agricultural trade has been gradually increasing, albeit the NAP calls for special efforts to raise crop
from a low base. India has also taken an active role in productivity to meet the growing domestic demand for
promoting regional economic co-operation and trade food and agricultural products. The major focus is on
in South Asia through the South Asian Association for horticulture, floriculture, roots and tubers, plantation
Regional Cooperation (SAARC). In April 1993, a crops, aromatic and medicinal plants and bee-keeping.
regional trading block was formed with the signing of Higher emphasis is also placed on raising the
the SAARC Preferential Trading Agreement, which production of animal and fish products.
was improvised in 2004 in the form of an Agreement While the overall investment (public and private)
on South Asian Free Trade Area (SAFTA) that in agriculture remains low (1% of the GDP), the
supersedes the Agreement on SAARC Preferential reforms in domestic regulations would improve the
Trading Arrangement. incentive structure for increasing private sector
investment in the agro-food sector and thus enhancing responsibility of respective state governments. The
productivity growth. The new policy also proposes to allocation of funds to agriculture is guided by the
re-channel resources from agricultural input and price Planning Commission and is routed primarily through
support measures to capital investment in the sector. the Ministry of Agriculture to various departments. Box
The NAP also mentions private sector participation 1 gives an idea of the number of ministries,
through contract farming, assured markets for crops, departments, and institutions involved in evolving,
especially for oilseeds, cotton and horticultural crops, implementing and monitoring agricultural policies.
increased flow of institutional credit, and strengthening
and revamping of the cooperative credit system and Land Reforms
agricultural insurance as other important issues
Indian agriculture is dominated by a large number
deserving policy attention. The NAP is a very
of small-scale operators that are predominantly owner-
comprehensive statement covering almost all
operators. In 1995-96, there were 115 million farmers
dimensions of the Indian agriculture. The land reforms
operating on an average holding size of 1.41 hectares.
launched during the 1950s and revisited in 1970s also
This number increased to 137.76 million in 2010-11.
find place in this document. The policy states that
About 67 per cent of the landholdings have an average
“Indian agriculture is characterized by pre-dominance
size of only 0.38 ha, and another 17.9 per cent have an
of small and marginal farmers. Institutional reforms
average size of 1.42 ha.
will be so pursued as to channelize their energies for
achieving greater productivity and production. The Land reforms now need to address three important
approach to rural development and land reforms will issues:(i) to map land carefully and assign conclusive
focus on the following areas: titles, (ii) to facilitate land leasing, and (iii) to create a
• Consolidation of holdings all over the country on fair but speedy process of land acquisition for public
the pattern of north-western states; purposes. The National Land Records Modernization
Programme (NLRMP) which started in 2008, aims at
• Redistribution of ceiling surplus lands and waste updating and digitizing land records by the end of the
lands among the landless farmers, unemployed Twelfth Plan. Eventually, the intent is to move from
youths with initial startup capital; presumptive title — where registration of land does
• Tenancy reforms to recognize the rights of the not imply that the owner’s title is legally valid — to
tenants and share croppers; conclusive title, where it does. Digitization will help
enormously in lowering the cost of land transaction,
• Development of lease markets for increasing the
while conclusive title will eliminate legal uncertainty
size of holdings by making legal provisions for
and the need to use the government as an intermediary
giving private lands on lease for cultivation and
for acquiring land so as to ‘cleanse’ the title. Given the
agribusiness;
importance of this programme, its rollout in various
• Updation and improvement of land records, states needs to be accelerated.
computerization and issue of land pass-books to
the farmers; and For large public welfare projects, such as the
proposed National Industrial and Manufacturing Zones
• Recognition of women’s rights in land. and National Highway Project, large-scale land
acquisition may be necessary. Given that the people
Current Agricultural Policies currently living on the identified land will suffer
The process of formulating and implementing significant costs, including the loss of property and
agricultural policies in India is very complex, involving livelihoods, a balance has to be drawn between the need
a number of ministries, departments and institutions at for economic growth and the costs imposed on the
both the centre and the state levels. The Union Ministry displaced. The Land Acquisition, Rehabilitation and
of Agriculture, under the guidance of the Planning Resettlement Bill 2011 passed by the Lok Sabha
Commission, provides the broad guidelines for recently, is likely to ensure the Right to Consent, Fair
agricultural policies. However, the implementation and Compensation and Transparency to farmers in the
administration of agricultural policies remain the process.
Box 1
Ministries and public institutions involved in implementation and monitoring of agricultural policies in India
Particulars Agencies at central level Agencies at regional/state level
Production Ministries of Agriculture, Food Processing, Ministries of Agriculture, Horticulture, Food

Water Resource, Energy, and the ICAR Industry/ Processing, Irrigation, Power, SAUs
Prices Ministries of Agriculture, Food Processing, Ministries of Agriculture and Finance, SAUs
Commerce, and Commission on Agricultural
Costs and Prices
Marketing Ministries of Agriculture, and Rural Ministry of Agriculture, Directorate of
Development, APEDA, Directorate of Agricultural Marketing, State Level -
Marketing and Inspections, NAFED, Food Agricultural Cooperative Marketing Federation,
Corporation of India (FCI), Cotton State Level – Agricultural Marketing Boards,
Corporation of India (CCI), Central Primary, Central and State level marketing
Warehousing Corporation (CWC), Jute societies/unions, Special marketing/processing
Corporation of India (JCI), National Dairy societies, Tribal Cooperative Marketing
Development Board (NDDB), Special Federation (TRIFED)
marketing/processing corporations,
Commodity Boards,
Credits Ministry of Finance, Reserve Bank of India, Ministry of Finance, State Level Bankers
and National Bank for Agriculture and Rural Committee, Regional Offices of NABARD,
Development (NABARD) Commercial Banks, Credit Cooperatives,
Regional Rural Banks
Trade Ministry of Commerce, Commodity Boards, Agri Export Zones (AEZs), Ministry of
Agricultural and Processed Food Export Agriculture
Development Authority(APEDA), National
Agricultural Cooperative Marketing Federation
(NAFED)
Research Indian Council of Agricultural Research, State Agricultural Universities, Private
Veterinary Council of India (VCI), Indian Council Agricultural Colleges, Private Institutions and
of Forest Research (ICFR), Central Agricultural Autonomous Institutions
Universities, Deemed Universities
Education Indian Council of Agricultural Research, Indian State Agricultural Universities, Private Colleges,
Institute of Management, Central Agricultural Agribusiness Management Institutes (e.g.
Universities, MANAGE, IRMA, NIAM CABM)
Extension Ministry of Agriculture, Indian Council of State Agricultural Universities, Krishi Vigyan
Agricultural Research Kendras, Krishi Gyan Kendras, State
Government Departments
Agricultural Credit Policy scheme involved commercial banks, cooperative

institutions, government, and semi-government
The Third Five-Year Plan emphasized the urgent agencies in the process of economic development. The
need to create an institution to provide funds for nationalisation of 14 scheduled commercial banks in
investment in the agricultural sector. This resulted in 1969 made this transition easier and influenced further
the establishment of the Agricultural Refinance developments in banking for agriculture. However,
Corporation (ARC) in 1963. In 1969, the Lead Bank during 1990s, a cut on bank branch network in the rural
Scheme was introduced with the primary objective of areas; fall in the credit-deposit ratios; disproportionate
taking a territorial approach to rural development. The decline in credit to small and marginal farmers; and a
worsening of the regional inequalities in rural banking Marketing (Development and Regulation) Act was
were noted. The gap so created was attempted to be formulated in 2003 and circulated to all the state
filled with expansion of micro credit projects in the governments for amending respective Act. The rules
rural area. However, this met with only limited success under the Act were also circulated in August 2007. The
due to high transaction costs. reforms proposed under the Act include :
Several issues in the area of rural credit still remain • Replacement of fragmented nature of markets by
to be addressed. The major one relates to the provision an integrated and unified market place
of cheap and timely credit to the small and marginal
• Permission for direct procurement from farmers
farmers with low transaction costs and associated risks.
Another issue relates to the developing of ways to • Promotion of grading and quality control services
provide working credit to tenant farmers. The recent
• Introduction of single point reasonable market fee
developments in credit policy include agricultural loans
within the state.
waiver of margin/ security; advances granted for
agricultural purposes being treated as NPA (non- • Formulation and implementation of legal and
productive assest); incentives to bank branches to institutional framework for contract farming
finance self-help groups with minimum of bureaucratic • Simplification and introduction of a “unified”
procedures; and launching of Kisan Credit Card single licensing system
Scheme.
• Single window clearances to replace multiple
Marketing Reforms and Policies authorities for various market operations.
The process of market regulations started in the • Simplification of market tax laws
mid-1960s with the enactment of Agricultural Produce • Encouragement of private investment in market
Market Regulation Act (APMC). It is, however, noted infrastructure development
that in many ways the physical markets are restrictive,
over-regulated and monopolistic. Direct procurement • Permitting functioning of private mandis outside
from the farmers was seldom permitted; in most states the purview of the APMC Act
private players were not permitted to create private • Creation of ‘Special Markets’ for commodity or
mandis; cartelization of local traders often resulted in commodity group specific
lower price realization by the farmers; and there was
often lack of transparency in the process of price • Permitting electronic pan-geographic spot mandis
formation and dissemination. • Promotion of commodity exchanges
There has remained a huge variation in the density • Linking spot markets closely with futures markets
of regulated markets in different parts of the country. for price discovery
While the all-India average area served by a regulated
• Managing market committees more professionally
market is 459 sq km, the same is 103 sq km for Punjab
and 11,215 sq km in Meghalaya. The National • The Essential Commodities Act should be either
Commission on Farmers had suggested that the services repealed or provisions relating to stock limits and
of a market should be available within a radius of 5 movement restrictions removed from its purview.
km. This and the monopoly of APMCs have led to large
In 2004, there were 7418 (2402 principal markets
intermediation and have effectively resulted in limiting
and 5016 sub-market yards) regulated markets, to
the access of farmers to market.
which the central government provided assistance in
The agricultural marketing policies in the country establishing the required market infrastructure and in
have moved considerable distance away from the setting up rural warehouses. The number of regulated
restrictive regulations of 1960s and 1970s, dominated markets, however, came down to 7190 (2456 principal
by the excessive and needless use of the Essential and 4734 sub-market yards) as on 31st March 2013
Commodities Act and other restrictive laws. To further with the Bihar State Government repealing the APMC
reform the sector, a model Agricultural Produce Act.
There is an urgent need to legalize contract farming inadequate post-harvest handling, cold storage, and
in the interest of farmers as well as the “sponsors”. processing facilities and convenient marketing
There should be an institutional arrangement to record channels. A huge quantity of grains too is wasted
all contractual arrangements with a government body because of improper handling and storage, pest
or a local body such as the Panchayat. There is a strong infestation and poor logistics management. The farmer
need for an independent market regulator for the issue gets low price as his produce varies in size, shape and
of single registration/license to the market functionaries quality. The small harvest lots do not bring economies
to transact their business in the entire state and collect of scale in transportation and lower net realization. With
single point market fee, specially for ‘Contract the growth of organized retailing, new supply chain
Farming’ (including recording, registration and dispute structures, using global technologies and best practices
settlement) and direct marketing or sourcing of produce and offering customized product and services, will
from the farmers, setting markets in more than one become possible. Involvement of global players in
market area and to ensure transparency and quality retailing would improve services to consumer and
service to the farmers. would lead to efficiency in supply chain, reducing costs
and realization of better prices, benefiting both the
The Terminal Markets are wholesale markets
supplier and the end consumer.
which ensure better price realization and timely
payment of sales proceeds to the producer, lower price The enactment of the Warehousing (Development
payable by the final consumer, and remove and Regulation) Act 2007 in October 2010 should
impediments to smooth supply of raw materials to agro- facilitate improved commodity financing and also give
industries and minimize post-harvest losses and a fillip to attracting investment in warehousing. This
wastages by allowing direct procurement from the along with initiatives being taken both by the
producer. The private sector can bring in the required government and the private sector in setting up cold
investment and management skills for successful storages and grading, standardization and quality
development of these markets. certification would significantly contribute to
modernizing agricultural marketing practices. Under
The Central Government is committed to support
the legislation, Warehouse Receipts (WRs) have
the initiative by providing equity assistance up to 49
become negotiable instruments that can be traded. The
per cent of the project equity, returnable at par on
legislation also provides for the establishment of a
successful operation of the project through the Venture
Warehouse Development and Regulatory Authority
Capital Fund of the Small Farmers Agribusiness
(WDRA) to regulate the WR system. Notwithstanding
Consortium. The Terminal Market Complex (TMC),
the lacunae in the legislation, this is landmark
based on PPP model, at Patna (Bihar) and Perundurai
legislation and will provide a lot of fillip to both
and Chennai (Tamil Nadu) have been approved under collateral commodities financing as well as the growth
the National Horticulture Mission (NHM). of private sector investment in agriculture warehousing.
The recent rapid growth in the organized retail has The establishment of commodity exchanges in
attracted attention of media as well as elected recent past has provided a new platform for price
representatives. The critics fear that organized retail discovery and price risk management for the farming
will be to the detriment of the large multitude of small community. The challenge is to widen farmer
retailers. These fears appear to be largely misplaced as participation in the exchanges and ensure that the
the retail space that would be occupied by the large exchanges provide a platform for genuine price
corporates would remain insignificant. It also needs to discovery and hedging opportunities for the farming
be recognized that small retailers in India have inherent community. Futures markets, by themselves cannot
advantages. They are located next to the consumer, improve supply efficiency and boost agriculture credit
know them well, some even by name, offer sale on and financing of the agricultural sector unless
credit, and enjoy low fixed costs. concomitant reforms take place along the entire value
The organized food retail business in India is chain. The next generation of reforms should facilitate
among the least developed in the world. A large chunk emergence of pan-Indian electronic trading platforms
of fresh fruits and vegetables is lost because of (Spot Exchanges) leading to an integrated market.
Simultaneously, there should be freeing of the “futures” recent years, and India has been no exception. Apart
market by providing autonomy to the Forward Markets from the increase in money supply which has
Commission (FMC), empowering it to regulate the contributed to the price rise, inflation in food articles
‘futures’ market professionally sans government has been primarily due to continuous shortages on the
control and interference. supply side and increase in demand which has led to
an upward thrust to prices. Further, global shortages
An electronic spot exchange will ensure greater
transparency in price determination as electronic screen in agricultural commodities also got translated into
terminals across the country will display the prices and higher domestic prices with the correlation between
quantities of various commodities traded. Transparency international and domestic prices being very strong. It
of transaction would help governments in addressing needs to be noted that the annual average inflation in
evasion of mandi taxes. Electronic exchanges will both pulses and cereals has been generally higher than
promote quality standardization which would ensure the overall inflation rate even in the period prior to the
greater access to finance from banks and other financial introduction of futures trading in these commodities.
institutions (FIs) to the farmer. Transaction costs are Growing current account deficit and fiscal deficit are
lower under the electronic auction system as compared also responsible for inflation in the country. Some
to the current mandi system by about 10 per cent. observers have noted that the benefit of futures trading
to farmers has been limited due to lack of awareness.
Futures markets provide a platform for risk It is true that the direct participation of farmers on the
mitigation, price discovery, arbitrage and clearing and futures trading platform has been limited in India as
settlement. For speculators, hedgers, and other traders, elsewhere.
trading in the futures markets offers an opportunity
for financial leverage. The participants in the exchange Price Policy
are able to control a large quantity of a commodity
The major objective of the price policy is to protect
with a comparatively small amount of capital, because
both producers and consumers. Currently, food security
of the small margin, normally set at 2-5 per cent of the
system and price policy basically consist of three
value of commodity.There are, however, a number of
instruments: procurement prices/minimum support
misconceptions and concerns about future exchanges,
prices (MSP), buffer stocks operations, and the public
few of which are briefed hereunder.
distribution system (PDS). Originally, the price support
Price Volatility — Empirical evidence suggests that policy of the government aimed at providing a safety
the introduction of derivatives does not destabilize the net or insurance to farmers against sharp fall in farm
underlying market; either there is no effect or there is gate prices. Subsequently, however, need was felt to
a decline in volatility. Further, the literature strongly provide remunerative prices to farmers for maintaining
suggests that the introduction of derivatives tends to food security and increase farm incomes. The policy
improve the liquidity and informativeness of markets. has had a positive effect on farm income and led to
To the extent that carrying costs are predictable, price economic transformation, particularly in well-
smoothing through storage becomes an arbitrage endowed, mainly irrigated, regions.
activity. If agents are risk averse, this should lead to
Besides announcement of MSP, the government
increase inter-temporal price smoothing. Futures
also organizes procurement operations of concerned
markets may also influence spot prices if they have an
agricultural commodities through various public and
effect on the behaviour of producers. Since futures
co-operative agencies such as Food Corporation of
markets allow the producers to hedge price risk, the
India, Cotton Corporation of India, Jute Corporation
existence of futures may affect a producer’s decision
of India, Central Warehousing Corporation, National
of what to produce, how much to produce, and what
Agricultural Co-operative Marketing Federation of
production techniques to use. In addition, the futures
India Ltd, National Consumer Co-operative Federation
price may contain information about anticipated
of India Ltd and Tobacco Board. The state governments
demand that can feed back into production decisions. also appoint state agencies to undertake price support
Futures Trading and Inflation — It is widely scheme (PSS) operations. The Department of
recognized that prices of several agricultural Agriculture and Cooperation is the nodal agency to
commodities have been rising at the global level in implement PSS.
Market Intervention Scheme (MIS) — For agricultural commodities as an opportunity for realizing
horticultural and agricultural commodities, not covered more revenues. Thus, it is noted that the rate of VAT
under the MSP, Market Intervention Scheme (MIS) has been increased in Punjab and Andhra Pradesh, and
provides ad hoc support measure. If price of a purchase tax has been imposed in Madhya Pradesh.
commodity covered under MIS falls below the The high level of taxes and other statutory duties in
specified “economic” level, the Government of India states like Punjab, Haryana, Andhra Pradesh have
can intervene, on the request of the state government, driven away the private traders and bulk purchasers
by purchasing the product at intervention price, not from the market, forcing the government agencies to
exceeding the cost of production. The central and state step into procure more so as to protect farmers from
governments share equally the losses incurred in the market risks.
implementation of MIS. However, the loss is restricted
Some states announce bonus on procurement of
up to 25 per cent of the total procurement value
wheat or rice over and above the MSP fixed by the
including Market Intervention Price (MIP) paid to the
central government that cause price distortions in the
farmer plus permitted overhead expenses. Profit earned,
market at national level. Since MSP takes care of all
if any, in the implementation of the MIS is retained by
the procuring agencies. The MIS is implemented when the relevant economic factors like cost of production,
there is at least 10 per cent increase in production or marketability and cost of living, etc. and the
10 per cent decrease in the ruling prices over the government decides the MSP by taking into account
previous normal year. various socio-political and economic considerations,
there is no justification for any state announcing such
Procurement of Foodgrains — With increasing MSP a bonus over and above the national MSP.
over the years and assured purchase through more
robust procurement machinery, the percentage of Reforming Price Policy — So far, the price guarantee
procurement of foodgrains like wheat and paddy to to farmers could not be implemented in all the states
the total quantity produced is also increasing (around and markets for obvious reasons. Further, it has not
42% of total production of wheat in 2012-13 and 36% been found feasible for the public agencies to procure
of rice in 2011-12). The procurement of wheat and rice the marketed surplus of each and every commodity
is done in both centralized (through FCI) and de- everywhere in the country to prevent price falling
centralized (State agencies) modes. below a floor level; nor would this be desirable. Thus,
some innovative mechanisms have to be devised to
The scheme of Decentralized Procurement (DCP) protect producers against the risk of the price falling
of foodgrains was introduced in 1997-98 for rice and below the threshold level throughout the country. One
wheat with a view to enhance the efficiency of way of doing this is to provide a price guarantee for all
procurement and the Public Distribution System and the major crops grown in each state either through
to encourage local procurement and reduce out go of MSPs or a Minimum Insured Price (MIP). The basis
food subsidy. At present, the states of West Bengal, for the MIP could be the paid-out cost or average price
Madhya Pradesh, Chhattisgarh, Uttarakhand, Andaman of the past three or four seasons. The MSP should be
and Nicobar Islands, Odisha, Tamil Nadu, Karnataka restricted to basic staples like paddy and wheat, and it
and Kerala are procuring rice under the decentralized should be made effective through a procurement
procurement scheme. The Government of India is mechanism in all the districts that have a reasonable
actively pursuing this issue with the remaining state surplus of the crops. All other major crops should be
governments to adopt the DCP scheme. covered by the MIP.
The average annual combined procurement of Food Security Concerns — To ensure the food
wheat and rice has increased from 38.22 Mt during
security in the country, the agricultural price policy
2000-01 to 2006-07 to 56.99 Mt during 2007-08 to
should shift focus on harnessing the agricultural
2010-11. The comfortable position of central stocks of
potential of low productivity regions like Bihar, eastern
foodgrains and procurement increase helps deliver
Uttar Pradesh, Odisha, Assam, Madhya Pradesh, and
more towards the food security.
Chhattisgarh. This can be done by extending
Market Taxes on MSP — Some of the state procurement operations under MSPs therein including
governments have viewed the growing size of procured remunerative and assured prices. It is stated that the
Government of India is focusing on the eastern region 3. Eligible households to be identified by the states
of the country where there is good potential to harness 4. Special focus on nutritional support to women and
ample natural resources for enhancing agricultural children
production under a programme namely, “Bringing
5. Food security allowance in case of non-supply of
Green Revolution to Eastern India (BGREI).” As a
foodgrains
result, against an average production of 42.60 Mt of
rice in the 7 Eastern States of Assam, Bihar, 6. States to get assistance for intra-state
Chhattisgarh, Jharkhand, Odisha, Uttar Pradesh transportation and handling of foodgrains
(eastern part) and West Bengal prior to launch of 7. Reforms for doorstep delivery of foodgrains
BGREI, the production increased to 46.97 Mt in 2010- 8. Women empowerment—Eldest women will be the
11, 55.27 Mt in 2011-12 and 55.62 Mt in 2012-13. head of a household
The Targeted Public Distribution System is one of 9. Grievance redressal mechanism at district level
the core programmes of the Government of India which 10. Social audits and vigilance committees to ensure
plays a vital role in ensuring food security of the people. transparency and accountability, and
Under the TPDS, subsidized foodgrains are provided
11. Penalty for non-compliance.
to about 18 crore households under Below Poverty Line
[including Antyodaya Anna Yojana (AAY)] and Above Agricultural Subsidies and Investment
Poverty Line categories, through a network of more
than 5 lakh fair price shops in the country. Besides, the Agricultural subsidies are of two kinds: investment
government is also implementing schemes to subsidies and input subsidies. Investment subsidies aim
specifically address the nutrition-related concerns, to improve the farm productivity on sustainable level
especially among women and children, through by encouraging farmers to develop infrastructural
schemes like Integrated Child Development Services, facilities like installation of drip irrigation system,
Mid-Day Meals, etc. If the 1960s saw India as an construction of rain water harvesting system, and
importer of food aid, today, India is poised to commit acquiring farm implements. The input subsidies are
over 60 Mt of home-grown and nutri-millets to fulfill provided primarily through subsidizing fertilizers,
the legal entitlements under the Food Security Act. The irrigation water, and power (electricity) used for
National Food Security ordinance has been passed in irrigation and other agricultural purposes. From time
July, 2013 and government is keen to implement the to time, input subsidies have also been provided on
same in different states. seeds, as well as on herbicides and pesticides. In
addition, commercial banks, cooperatives and regional
Food Security Bill 2013 rural banks are required to provide credit to agricultural
producers at interest rates below the market rate.
The Food Security Bill, 2013, was passed by Lok
One of the most contentious issues in India about
Sabha in August 2013. It gives right to the people to
input subsidies is how much of these subsidies actually
receive adequate quantity of foodgrains at affordable
find their ways to the farmers and how much are
prices. The Bill has special focus on the needs of
siphoned away along the path. Further, the debate is
poorest of the poor, women and children. In case of
also about the real beneficiaries of the subsidies, small
non-supply of foodgrains, people will get Food
or large, poor or rich, and well-endowed or less-
Security Allowance. The Bill provides a wide scale endowed areas. Other issues of concern are to what
redressal mechanism and penalty for non-compliance extent input and price support subsidies are essential
by public servant or authority. Other features of the for sustaining increased farm productivities or to what
Bill are as follows: extent these subsidies damage the environment.
1. Coverage of two-thirds population to get highly The fertilizer subsidy has increased significantly
subsidized foodgrains from 0.85 per cent of GDP in 1990-91 to about 1.50
2. Poorest of the poor continues to get 35 kg per cent of GDP in 2011-12. Further, these subsidies
foodgrains per household per month at subsidized are concentrated in a few states, namely, Uttar Pradesh,
price Andhra Pradesh, Maharashtra, Madhya Pradesh, and
Punjab. Rice is the most heavily subsidized crop, Table 1. Public and private investment in agricultural
followed by wheat, sugarcane and cotton. These four and allied sectors as percentage of total GDP
crops account for about two-thirds of the total fertilizer
Year Public Private Total
subsidy. The small and marginal farmers have a larger
investment investment investment
share in fertilizer subsidies as against their share in the
total area cultivated by them. Thus, any cut in fertilizer 2004-05 0.5 1.8 2.3
subsidies will hurt the small and marginal farmers most 2005-06 0.6 1.9 2.4
as they are not benefitted much from price support 2006-07 0.6 1,8 2.4
programme. 2007-08 0.5 1.9 2.5
The biggest problem in agricultural subsidy is its 2008-09 0.5 2.4 2.9
targeting to the deserving beneficiaries. Only 30 per 2009-10 0.5 2.3 2.7
cent subsidies go to marginal, small, and medium 2010-11 0.4 2.3 2.7
farmers. There is an urgent need to increase the Source:National Accounts Statistics (various issues), Central
subsidies to investment categories and to make the Statistical Organisation, GOI.
distribution of subsidies transparent, targeted, and
short-term in nature.
consisting of ICAR with its wide network of research
Until 1980, the public investment in rural/ institutions and SAUs. The strong emphasis on research
agricultural infrastructure continued to rise and has contributed to a number of technology driven
contributed to the rapid growth in agricultural output. revolutions including the green (foodgrains) revolution,
Since early-1980s, however, the increase in investment white (milk) revolution, blue (fish) revolution and the
in rural infrastructure ceased and has steadily fallen golden (oilseeds) revolution.
over. More specifically, from 4 per cent of total GDP
in the early-1980s the public investment in agriculture The number of ICAR research units increased as
fell to about 1.5 per cent in 2002. The decline in public well as the number of coordinated research programmes
investments in agriculture is considered to have had rose from a handful to about 100 and that of State
an adverse impact on the development of rural Agricultural Universities rose to over 50. Moreover,
infrastructure and on the long-term growth prospects ICAR’s involvement and investment in extension
for the farm sector. However, the policy measures through training by Krishi Vigyan Kendras (KVKs) and
initiated during the previous decade resulted in gradual frontline demonstrations also increased substantially.
rise in public investment and also attracted private The World Bank sponsored National Agricultural
investment too. In the year 2010-11, the total Technology Project (NATP) was established in 1998
investment in agriculture and allied sector was and ambitious National Agricultural Innovative Project
estimated at 2.7 per cent of the total GDP (Table 1). in 2008 to give boost to research activities. The NARS
continues to be largely publicly funded sharing less
Agricultural Research, Extension, and than one per cent of agricultural GDP.
Education
Agricultural Trade Policies
The major reforms in agricultural research and
education took place in the 1960s with the Despite having a comparative advantage in
establishment of first Farm University at Pantnagar on production of many agri-food products, India’s share
the land grant system in the US. This resulted in the in international trade remains as small as about 1.5 per
development of the State Agricultural University cent. By commodity, India’s share in total world exports
System in the country. This approach revolutionized of dairy products is 0.2 per cent, of cereals 1.4 per
the system of agricultural education, research, and cent, of coffee, tea and spices 4.4 per cent; and of
extension in India, under the auspices of the Indian fisheries 2.6 per cent. Brazil gives India tough
Council of Agricultural Research (ICAR). As a result, competition in case of sugar, coffee, tobacco and
a strong agricultural research and development mango. USA competes for groundnut, rice, tobacco,
programme has emerged through the publicly funded grape, apples, wheat, poultry meat and fish exports
National Agricultural Research System (NARS) while China has recently emerged as a major
Table 2. Competitive strength of India’s agricultural exports

(in per cent)
Commodity Major exporting countries/major competing suppliers for India India’s share in
world exports
Groundnut Argentina (32.7) 17.2

Tea Sri Lanka (23.3), Kenya (18.6) 8.7
Rice Thailand (35.2), Viet Nam (12.5), USA (11.3), Pakistan (11.1) 4.1
Sugar Brazil (43.6), Thailand (10.6), France (5.2), Mexico (3.5), Germany (2.4) 2.3
Coffee Brazil (22.3), Viet Nam (7.8), Germany (7.7), Colombia (7.4), Switzerland (4.8) 2.0
Tobacco Germany (14.3), Netherlands (14.2), Brazil (7.5), Poland (4.6), USA (4.3) 1.7
Mangoes Mexico (15.9), Netherlands (12.8), Brazil (10.9), Peru (8.9), Thailand (7.4) 1.1
Potatoes Netherlands (22.3), France (15.5), Germany (8.8), Egypt (5.8), Canada (5.2) 1.0
Tomatoes Mexico (25.2), Netherlands (18.4), Spain (14.1), Morocco (5.4), Turkey (5.2) 0.9
Grapes Chile (19.4), USA (15.2), Italy (9.3), Netherlands (7.9), Turkey (7.9) 0.8
Wheat USA (23.7), France (14.4), Australia (13.4), Canada (12.2) 0.1
Rapeseed Canada (43.2), Australia (10.2), France (10.1), Ukraine (5.9), UK (3.9) 0
Cocoa Côte d’Ivoire (29.2), Ghana (25.5), Nigeria (8.7), Netherlands (6.6), Indonesia (6) 0
Apples Italy (14.2), USA (13.6), China (13.1), France (10.6), Chile (9.7) 0
Bananas Ecuador (24.2), Belgium (14.3), Colombia (8.8), Costa Rica (7.8), Guatemala (5.1) 0
Cucumbers Spain (28.3), Netherlands (20.5), Mexico (13.1), Canada (6.9), Jordan (6.3) 0
Poultry meat Brazil (28.4), USA (17.7), Netherlands (8.9), France (5.8), Poland (4.7) 0
Fish China (11.5), Norway (9.4), USA (5.3),Viet Nam (4.4), Canada (3.9) 2.6
Eggs Netherlands (21.6), USA (9.1), Turkey (8.9), Germany (7.4), Poland (6.3) 0.2
Source: Author’s compilation from ITC Trade Map, 2012
Note: Figures within the brackets are the percentage share in total world export of respective countries.
competitor for groundnut, apples and fish. Relative 2. In the phase starting from the mid-1960s, this
competitive strengths of Indian major agri-products is policy was pursued more rigorously, and food self-
shown in Table 2. sufficiency became the corner stone of the
development strategies in agriculture. Two severe
The agricultural trade policy has been basically
droughts in 1965-66 and 1966-67, and the
designed to pursue twin objectives of food self-
difficulties in importing foodgrains from food
sufficiency and promotion of exports of the so-called
surplus countries forced the policymakers to opt
‘commercial crops’. These twin objectives witnessed
for such a policy. The policy continued till early-
four phases of implementation of the policy:
1990s.
1. The county adopted the policy of protectionism
3. The economic reforms of 1991-92 brought about
after Independence under which agricultural trade
major changes in India’s import trade barriers.
was strictly regulated with high tariffs and
India’s agricultural export policies liberalized in
quantitative restrictions and was channelled
part since 1994 in terms of reduction in products
through public trading agencies. Regulation and
subject to state trading, relaxation of export quotas,
control of agricultural trade was taken over by the
and removal of minimum export prices.
canalizing agencies, State Trading Corporation
(STC) and the cooperative federations. Public 4. Finally, under the WTO regime, India had to
sector agencies played the important role of revamp its policy of import substitution to an open
importing inputs, particularly fertilizers and economy with export-oriented growth in
chemicals. agriculture. Agricultural trade policies of India
were to be structured in line with the WTO market access regime for agricultural products did not
commitments under three pillars of Agreement on undergo a parallel process of liberalization. The rules
Agriculture (AoA) (i) Market access (reduction of the WTO agreement fortunately permitted India to
in import tariffs), (ii) Domestic support (reduction maintain quantitative restrictions on agricultural
in farm subsidies) and limits on public stock products under the balance-of-payments exception and
holdings of grains for food security, and (iii) during the negotiations they were allowed to offer
Export subsidies. ceiling bindings on the products on which such
The Government of India utilizes a variety of restrictions were maintained.
policy instruments in attempting to achieve the Consequently, India had bounded its agricultural
commitments made at the WTO front. These measures tariffs at 100 per cent for commodities, 150 per cent
include: for processed products and 300 per cent for some edible
• Border measures such as tariffs, quotas, and non- oils. Only on a few products including cereals and milk
tariff measures to protect domestic producers from products, the pre-existing GATT bindings at zero tariffs
import competition, manage domestic price levels, were carried forward. With such high bound levels
and guarantee domestic supply. India was under no pressure to bring down its applied
levels of tariffs. Even so, the applied rates of duty
• Domestic subsidies to inputs, outputs, trended lower. It was not until April 1, 2001 that India
transportation, storage, and consumption to reduce decided to lift all quantitative restrictions, following
producer costs and consumer prices. the ruling in a WTO dispute that the balance-of-
payments justification for these restrictions had ceased
Market Access to exist.
Even though export-oriented measures were taken The elimination of tariff restrictions in 2001 led
in the post-WTO period, the issue of import protection India to increase tariffs in a number of agricultural
continued to be important in the agricultural trade products because of the fear of large-scale imports. In
policies. This is justified due to the reason that the early the year 2000, in view of the impending phase-out of
years of the Uruguay Round Agreement did not cause quantitative import restrictions, India re-negotiated the
much difficulty because international prices of bulk bound tariffs and raised them from zero to 60 per cent
products were high. Subsequently, as international for skimmed milk powder, from zero to 60 per cent to
prices fell, India’s imports started to steadily rise. Over 80 per cent for maize, rice and certain other cereals,
the three year period of 1996-99, imports almost and from 45 per cent to 75 per cent for rapeseed, colza
doubled to reach a peak of USD 3.7 billion in 1999. and mustard oils. In these re-negotiations, India made
This caused concern as policymakers’ expectation of compensatory reductions in a number of agricultural
big gains in export earnings in the post-WTO period products. A wide gap between applied and bound tariff
through increased market access to developed country’s rates still existed for most products. These gaps
markets did not materialize. This surge in imports provided India with the discretionary ability to adjust
threatened the domestic production of the staple food tariffs to balance competing producer and consumer
products. For example, the world price for cereals in interests. In order to further protect the domestic
2001 was only 50 per cent of the price recorded in the economy with import surge, India offered tariff-rate-
mid-1990s. This occurred at a time when India had quotas (TRQ) at a lower in-quota tariff in respect of
large and rising stocks of rice and wheat. skimmed milk powder, maize and rape, colza and
Understanding that the international prices were mustard oils (Table 3).
far more volatile than domestic prices, allowing The wide gap between India’s bound and applied
foodgrains imports to any sizeable extent would have tariffs on agricultural products has been a matter of
been tantamount to importing price instability. It was concern for India’s trading partners. The gap occurred
this concern of the policymakers which prompted India principally because India has been reducing the applied
to find out measures of WTO compatible import tariffs unilaterally and autonomously. For instance, in
protection measures. Therefore, while quantitative the case of certain edible oils, the duty has been
restrictions were eliminated on industrial products, eliminated, although the bound level is as much as 300
Table 3. Basic customs duty on selection products
Product Bound rates Schedule rates Remarks Rates under exemption

ad valorem (%) of BCD
Meat and poultry 35-150 30-100 All tariff lines are

at 30 except chicks
cut in pieces at 100
Milk 40-100 TRQ of 30-60 TRQ of 50,000 tonne at zero
10,000 tonne bound for SMP
at 15 for SMP
Peas, beans, 100 30 Zero from 2007-08 onwards
lentils
Fresh fruits 30-150 25-50
Rice 70-80 70-80 The BCD of 70 on milled rice
was fully exempted during
2009-12 but raised in
2012-13
Wheat 100 50-100 Zero until 1.4.2013
Tea, coffee 100-150 100
Spices 100-150 30-70
Vegetable edible 45-300 TRQ of 0-7.5 Zero for crude oil
oils 150,000 for rapeseed, and 7.5 for refined
coiza and mustard
oils at 45
Sugar 100-150 100 10 for raw and white sugar
(conditional on end-use and
registration)
Wool 25-100 5-10
Cotton 100-150 0-30 BCD on cotton,
carded not carded
and combed is zero
Source: Goyal, Arun BIG’s Easy Reference Customs Tariff 2013-14, 34th Budget edition
per cent ad valorem. High bound or statutory applied the exempted levels, particularly in cases in which the
tariffs on some basic foodstuff products are needed in exempted levels have remained low for many years.
India in the context of high volatility in international
commodity prices, which in the past has been Input Subsidies
exacerbated by the domestic support and export subsidy
practices of industrialized countries. India cannot afford The input subsidies are the far most expensive
to allow a situation to develop in which a sudden drop instrument of India’s food and agricultural policy
in international prices threatens to rob millions of regime, requiring a steadily larger budget share. The
farmers of their livelihood. Once special agricultural government pays fertilizer producers directly in
safeguards have been agreed to in the WTO, during exchange for the companies selling fertilizer at lower
future multilateral negotiations there would be greater than market prices. Presently (November 2012),
willingness on the part of India to bring down the bound farmers pay only 58 to 73 per cent of the delivered
duties on agricultural products across the board. In the cost of potassic and phosphatic fertilizers, while the
meantime, in order to impart greater stability to the rest is borne by the government as subsidy. Irrigation
applied tariff regime, India could take a step and electricity, on the other hand, are supplied directly
autonomously towards lowering the statutory rates to to farmers at prices that are below the production cost.
Waiver/relief for farmers excluding

marginal and small farmers
Subsidy in other schemes
Subsidies (in billion USD)
Interest subvention for providing
Percentage
short-term credit to farmers
Irrigation subsidy
Fertilizer subsidy
Electricity subsidy for agricultural

use
Subsidy as a % of total value of
output
Year
Figure 1. Trend in non product specific subsidies in India
The cost of agricultural input subsidies as a share of can be made of hemp instead of trees and cotton.
agricultural output almost doubled from 6.0 per cent Soybean plant cellulose can replace plastic (made from
in 2003-04 to 11.6 per cent in 2009-10, driven mostly oil). Ethanol from farm waste or hempseed oil can
by large increase in the subsidies to fertilizer and replace gasoline. Rainforest medicinal plants grown
electricity (Figure 1). locally can replace many imported medicines. Such
According to GoI reports, input subsidies have measures can reduce farmers’ dependency on
resulted in overutilization of inputs. This overutilization subsidies.
has in turn led to soil degradation, soil nutrient The first task in fertilizers must be to extend the
imbalance, environmental pollution, and groundwater Nutrient Based Subsidy (NBS) scheme to urea. The
depletion, all of which have caused decreased NBS should be fixed in nominal terms, allowing
effectiveness of inputs. The growing cost of input and inflation to erode it in real terms over time. An
food subsidies has also contributed to fiscal deficits in alternative could be to shift to the system of conditional
many states. cash transfers, whereby direct payments are made on
Food subsidies were instituted to minimize the the condition that farmers get soil analysis done and
impact of higher food prices on the consumers. In know the proportions of nutrients suitable for their
general, domestic support to agriculture needs to move holdings.
from measures that cause more than minimal trade- Agricultural credit subsidy may be phased out and
distortion and effects on production to measures that the policy initiatives in future must aim at improving
do not have such effects, from input to investment the adequacy of credit. To avoid the pitfalls of leakage
subsidies and from consumption subsidies in kind to and diversion of benefits, the TPDS must be replaced
direct or conditional cash transfers. The funds so saved by a system of conditional cash transfers, in which the
might be used for greater public investment in physical transfers are conditional on the beneficiary families
infrastructure and in research, extension and measures sending children to primary schools and meeting basic
to safeguard animal health. Moreover, organic health care requirements. To cut down the burden of
agriculture, which uses little pesticides and experiences Food Corporation of India of open-ended procurement,
relatively little nitrate runoff, should be encouraged the private sector be engaged in foodgrains trade by
with subsidies. not limiting exports, reducing or eliminating purchase
Replacement crops can also reduce the country’s tax, abolishing levies on rice-millers, and finally
reliance on subsidies. For instance, instead of importing eliminating restrictions on stocks and inter-state
sugar, a nation can make sugar from sugar beets, maple movement. Alternatively, schemes such as deficiency
sap, or sweetener from stevia plant. Paper and clothes payments may be introduced.
Export Controls (in the G20) and elsewhere for a worldwide political
consensus on prohibiting such restrictions. The time
India’s policy on exports of key agricultural has, therefore, come for the government to go for the
product in the past has reflected a greater concern for alternative of limiting exports, if needed, through
the consumer than for the farmer. Exports are curtailed export duty rather than prohibition or quantitative
or prohibited if there is an estimated shortfall in restriction.
domestic production in order to pre-empt an upward Despite efforts at WTO forum, Indian exports have
pressure on prices. Recently, however, the government not been able to make their mark in most of the agri-
has tended to show greater sensitivity to the interests importing countries. India’s agricultural products’
of the farmer and there has been a willingness to give export markets do not coincide with the major
them the opportunity to sell the produce in the importing countries for the respective products in the
international market in which they can earn a better world market (Annexure I). This implies that Indian
price. The government has been influenced also by the export products do not get acceptance in these markets.
criticism coming from outside the borders as export The possible reasons for the mismatch and absence of
control measures have played a role in exacerbating India in major importing countries are as follows:
price spikes on global markets at times of shortages. One of the reasons of losing our export share in
Since a number of countries have adopted measures major importing nations for the commodities of export
for restricting exports of foodstuffs in particular, and interest to India is the high final landing price in these
effective disciplines on such restrictions are lacking in markets as compared to other competing suppliers.
the WTO Agreement, there has been a growing demand Figure 2 supports the situation, taking the instances of
Mangoes in USA Tea in USA
Rice in UK Refined sugar in Australia
Figue 2. Price comparisons for select export items in major importing countries
Source: Author’s calculations
prices of mangoes and tea in case of USA, rice in case Bangladesh, India’s major trading partner, imposes a
of UK and sugar in case of Australia. tariff of 37.5 per cent on milk imports. On other
livestock products, Oman imposes a 5 per cent duty
The poor price competitiveness in the form of high
on eggs and no duty on sheep meat. Malaysia also does
C.I.F is further aggravated by the presence of high
not impose any duty on sheep meat. The tariff on coffee
tariff/import duty rates levied in the importing
imports to Russia was 5 per cent and zero per cent in
developed country markets. The European Union,
the US. The EU imposed zero per cent duty on
Japan, and the United States use, to varying degrees, caffeinated coffee that is not roasted and 8.3 per cent
such protection tools: low but highly dispersed ad duty on de-caffeinated coffee. Duty rate on roasted
valorem tariffs, specific duties, seasonal tariffs, tariff coffee is 7.5 per cent for non-decaffeinated and 9 per
escalation, and preferential access along with tariff- cent on caffeinated. Like coffee, Russia imposes a 5
rate quotas. per cent duty on tea imports. Duty on tea imports into
Marine products, which are the highest export the EU varies from zero to 3.2 per cent, and from zero
earner of India, attract zero per cent duty in USA and 5 to about 6.3 per cent in the US. The rate of duty on
per cent in Japan (refers to shrimp and prawns). In the tobacco is 5 per cent in Russia. The EU and the US
European countries, duty on shrimp is around 7 per impose specific duties on tobacco. In the EU, flue cured
cent to 8.5 per cent and for different marine products Virginia tobacco from India is charged at EUR 18.4 to
duty rate varies from 0 to 18 per cent. China, which is EUR 22 per 100 kg, while the rate of duty in the US
the third largest importer of fish from India, applies 21 ranges from USD 0.77 to USD 0.85 per kg.
per cent MFN duty though general duty in China is 70 The prevalence of non-tariff barriers, as highlighted
per cent. Oil meal and cakes are the second biggest in Annexure II and high cost of compliance worsen
agricultural exports of India. Their import to Indonesia the price competitiveness of Indian agro-exports. The
is free. Korea and Japan levy 3 per cent and 4.2 per compliance of sanitary and phyto-sanitary requirements
cent duty on oil cake. The duty rate in Singapore is 12 of most trading partners calls for substantial investment
per cent, while Bangladesh applies highest duty at 15 in developing quality standards and infrastructural
per cent, MFN. India’s rice export attracts zero per cent facilities. These non-tariff barriers are important in
duty in South Africa, Bangladesh and Malaysia and view of WTO commitments. This becomes important
50 per cent in Philippines. Indonesia imposes specific due to the fact that about 14 per cent of Indian
duty of Indonesian Rupiah 430 per kg. agricultural exports are subject to only NTMs and 79
per cent are subject to both Tariffs and NTMs.
Wheat from India is imported freely into Indonesia
and Malaysia, while other trading partners impose a It is generally expressed that farm exports from
small duty, e.g. Korea Republic imposes a duty of 1.9 India are not given fair treatment in some developed
countries. It is also believed that sanitary and phyto-
per cent, Bangladesh 5 per cent and Philippine impose
sanitary (SPS) measures are applied in the guise of
a 7 per cent duty on feed grade wheat and 3 per cent on
protecting plant, human and animal life to keep a check
other wheat. There is no duty on India’s maize exports
on exports. These measures are believed to be applied
to Bangladesh and Indonesia, while Sri Lanka and the
in an indiscriminate manner, lack transparency and are
Philippines impose tariffs of 35 per cent and 40 per costly in compliance. These apprehensions are largely
cent, respectively. Oilseeds like rapeseed/ mustard and based on the survey of exporters whose exports were
groundnut are imported without duty into the EU, detained or rejected in the importing countries and
Oman and Japan; Singapore and Nepal levy 11.7 per provide anecdotal evidence of NTBs on selected
cent and 10 per cent duty, respectively. products. These relate to export of spices, fishery
The duty imposed on sugar varies from zero per products, rice, tea, and egg powder. Moreover, there
cent in Malaysia and the EU for limited shipments are also general bans on the exports of some products.
under the SP agreement to 20 per cent in Indonesia Export of meat and milk to the EU and that of
and Pakistan and 25 per cent in Bangladesh. There is mango to US and Japan is subject to strong conditions.
no duty on India’s cotton exports to major destinations, The EU bans imports of meat from India due to
except China, which imposes a duty of 54 per cent. rinderpest disease in Indian livestock (cattle, buffaloes,
sheep, goat, etc). While the country has been free of • Export of plant portions, derivatives and extracts
rinderpest since 1995, the ban has not yet been lifted. has been liberalized with a view to promote
Exports of milk to the EU are not permitted due to exports of medicinal plants and herbal products.
quality control measures. The research literature
Export policy for food commodities and non-food
supports the existence of non-tariff barriers in the case agricultural commodities is expected to vary. The well
of exports of spices, peanut, fish products, rice, tea, established policy of encouraging exports of
and egg powder. India’s exports of chilli and pepper commercial crops has to continue. Further, our trade
have faced NTBs in Spain, Italy and Germany. India’s policy needs to be inclined towards the commodities
peanut exports also face severe standard requirements in which we have a comparative advantage. A study
in the EU markets. Some tests are required only for by Reddy and Badri Narayanan (1992) has revealed
products from India and Egypt, whereas exports from that we do not have any comparative advantage as a
other countries are exempt from these tests. India has wheat exporter. Therefore, our policy should not
made good progress to improve aflatoxin standards of encourage the export of wheat. We have distinct
peanut and to meet the various regulations and advantages in rice, and can emerge as a moderate
requirements of the EU. There are several reports of exporter of rice. We need to continue the export of
the rejection of basmati and non-basmati rice shipments basmati rice to West Asia, Europe and the US, but
to the US on the grounds of low hygiene standards. should recognize the limit beyond which we will not
The US regulations require the manual sorting of rice be able to export basmati and other fragrant rice
and the treatment for weevils. The issue of pesticides varieties. The potential market for rice is in South East
residues is frequently raised by the EU and Japan. Asian countries, Indonesia, Malaysia and Philippines
Pesticide residues are also a concern in the case of tea and in East Asian countries, Japan and South Korea.
exports to the EU.
To summarize, the following could be used as
In the light of strict import controls in both guidelines:
developed as well as developing countries in the form
• Commodities such as cereals deserve an export
of tariff as well as non-tariff measures, it is important
thrust only after the domestic demand is satisfied.
for India to develop a focused and suitable trade policy
which ensures a strong linkage between the domestic • Commodities with large fluctuations in the supply
and international markets. The policy should take or in prices (cotton, sugar) should be traded with
holistic view of food security, poverty alleviation, caution, unless compensatory mechanisms are put
sustainable development, WTO rules and India’s in place, such as forward trading to compensate
commitments therein. Some of the steps taken under for the risk and uncertainty.
Foreign Trade Policy in this context include: • Commodities where we have dynamic
• A new scheme called Vishesh Krishi Upaj Yojana, comparative advantage, such as fruits and
has been introduced to boost the exports of fruits, vegetables (because of diverse climate and soil
vegetables, flowers, minor forest produce and their conditions), and dairy products (because of large
value-added products. cattle herd and low cost of production) should
receive special attention.
• Duty-free import of capital goods under the Export
Promotion Capital Goods (EPCG) scheme. • The commodities having growing world market
(rice for the East Asian markets, millets for cattle
• Capital goods imported under EPCG for feed, and maize and barley as industrial raw
agriculture permitted to be installed anywhere in materials) should be given high priority in our
the agri-export zones. export strategy.
• Assistance to States for Infrastructure
Development of Exports (ASIDE); funds to be also Concluding Remarks and Implications
utilized for the development of agri-export zones. Indian agriculture is becoming export-oriented
• Import of seeds, bulbs, tubers and planting material after having attained nearly self-sufficiency in basic
has been liberalized. food production. In addition to the traditional export
commodities, India is now also an exporter of rice and attain maximum yield and also to maintain the soil
wheat, as well as livestock products. The direction of health in a sustainable manner. Small landholders
trade is also changing. Although, trade with the will prefer to lease out their fields without the risk
neighbouring countries in the region continues to of losing title and will seek engagement elsewhere.
dominate, trade with OECD country markets is This will lead to consolidation of landholdings and
becoming important, especially for exports of high- size of holdings will become sufficiently large for
value food products. The emerging agricultural policy adoption of technology.
directions include liberalization of the sector by cutting • Liberalization of APMC Act — Flexibility in
tariffs, removing QRs, globalization of agriculture by APMC Act will enable farmers to benefit from
providing outward look to the mindset; and focusing demand–supply phenomenon. Currently, this
on commercial dimensions of agriculture as never benefit is reaped in by middlemen, as buyers are
before. As a result, there has been an increase in the not allowed to trade directly with farmers.
private investment in agriculture (besides public Investment in food processing industry is also not
investment), farmers are becoming market-oriented, happening due to this reason. Under APMC Act,
level of value addition has gone up, agricultural exports operating cost is high which is keeping the
are growing, and farm income is rising. investors away.
None the less, a number of critical issues remain • Investment in Infrastructure in Agricultural
to be solved such as significant dependence of Sector — The infrastructures like roads, canals,
agriculture on vagaries of nature, monsoon being micro irrigation, tube-wells, warehouses, food
inconsistent and unpredictable; small and fragmented processing facility, etc. are important for the
landholdings, land reforms not being pursued; lack of growth in agriculture. Investment in such
infrastructure for marketing of perishable commodities infrastructure is to be made by the government as
efficiently and effectively; shortage of labour for farm well as attract private investment to make
operations in general and of skilled labour in particular; agriculture processing viable. Higher the
high cost of critical farm inputs, e.g., hybrid seeds, investment, better would be the growth and income
agro-chemicals, etc; lack of market assurance; low and of farmers.
stagnating returns per unit area; and inadequate • Skill Development — Skill deficit in agriculture
government support. has been a major concern. It hampers the adoption
The major challenges before the policymakers are of technology and mechanization of agriculture.
sustainability of farm productivity; protection of Looking at the importance of agricultural
environment; degradation of natural resources like productivity to ensure food security, mechanism
land; depleting sources of water; and value addition to institutionalize skill development is critical to
and agribusiness. Moreover, the drive for more growth. Skilled drivers, operators and technicians
downstream processing of agricultural products and in agriculture will arrest the growing inefficiencies
greater competitiveness along the agro-food chain are and encourage farmers to adopt modern
also key priorities. Addressing of the problems being technology for higher yields.
confronted by farmers as mentioned above and macro • Accurate Forecast of Monsoon — More than 50
level challenges before policymakers call for inclusion per cent of foodgrains production is dependent on
of the followings in the policy framework: monsoon. Accuracy in forecast of monsoon is
• Legalization of Leasing of Agricultural Land important for sustaining and enhancing
— The leasing of land for agricultural use is not productivity. Scientific technology is available for
permitted in many states, except Punjab, West proper forecasting for adoption.
Bengal, Maharashtra, and Tamil Nadu. Though • Producer Company at Village Level —
land lease is in practice. Legalization of land- Landholdings are fragmented making agriculture
leasing will attract entrepreneurs with passion for less remunerative. Concept of producer company
agriculture to undertake commercial farming. Such is well thought out proposition for small farmers
entrepreneurs will adopt scientific technology to to aggregate not only resources for efficient
utilization but also decision-making process like Bibliography

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Chand, Ramesh (2003a) Government Intervention in
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• Food Processing — Food habits in urban India Paper 19, National Centre for Agricultural Economics
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Agriculture, Eds: Suresh Pal, Mruthyunjaya, P. K. Joshi Economics and Policy Research, New Delhi.
and Raka Saxena, National Centre for Agricultural Singh, R.B., Kumar, P. and Woodhead, T. (2002)
Economics and Policy Research, New Delhi. Smallholder Farmers in India: Food Security and
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Annexure I
India’s export markets do not match with the major importers
Commodities India’s top export Major Competing suppliers in importing India’s share
partners# importing markets* in import
countries markets (%)
Grape UAE (54.81), USA Chile (60.2), Mexico (32.7), Peru (3.7) 0
Bangladesh (37.50) Netherlands South Africa (36.6) , Chile (18.1) , Brazil (6.9) 4.9
UK Turkey (15.7), South Africa (15.5), Chile (14.3) 2.9
Mangoes Saudi Arabia (33.88), USA Mexico (56), Peru (11), Brazil (8.8) 0.5
Netherlands (18.60), Netherlands Brazil (47.6), Peru (25.1), Mexico (3.3) 0
UK (10.33) China Thailand (81), Indonesia (15.2), 0
Oranges Bangladesh (93.32), Russian Fed Egypt (29.5), South Africa (26.1) Turkey (15.7) 0
Nepal ( 3.11) France Spain (73), South Africa (11) , Tunisia (3.8) 0
Netherlands South Africa (40.5), Spain (20) 0
Onions Bangladesh (26.88), USA Mexico (65.2), Canada (13.5), Peru (11.4) 0
Malaysia (23.20), UK Netherlands (40), Spain (18.3) , Poland (8.5) 0.3
UAE (17.99),
Sri Lanka (10.09)
Tomatoes Pakistan (49.67), USA Mexico (83), Canada (15.9), Guatemala (0.4) 0
UAE (32.80), Germany Netherlands (27.8), Egypt (15.2) , France (7.9) 0
Bangladesh (11.95)
Source: Author’s compilation from ITC Trade Map, 2012
Note: Figures within the brackets are the percentage share in total world export of respective countries
Annexure II
Non-tariff barriers on India’s agricultural exports to the EU, USA and Japan
Product Non-tariff barriers Country
Spices No uniform standard and common regulation in EU. No fixed permitted level Spain, Italy
(chillies) of aflatoxin or pesticide residue. Adversely affecting spices exports from India. and Germany
Meat India free from rinderpest since 1995 still export to EU not permitted EU
Milk Exports to EU not permitted as Indian cows are not mechanically milked EU
Fishery EU put a ban in 1997. Allows only the form at its approved plants in India. EU
product standards for fishery products are very stringent, cumbersome, and costly EU
Peanut Aflatoxin standards of EU are more stringent than international standards on EU
India’s export. Prescribed testing method known as Dutch code and other
required methods are very rigorous and very costly. Permissible limits are
different in different countries and keep changing. Some tests are required only
for India and Egypt and not for exports from USA and Argentina.
Mango and Requirement of costly vapour heat treatment for export of fresh mango, US, Japan,
mango pulp labelling, pesticide residues. and Jordan
Rice Pesticide residues consignment of basmati and rice rejected in US on ground of EU, Japan, USA
being filthy and containing foreign matter. US regulation require manual sorting
of rice and fumigants and weevils have to be blown out. Delay in clearing
consignments, repeated tests.
Tea Pesticide residue. Complaint of high residue level of Ethicon in Darjeeling tea EU and Germany
Fish Anti-dumping duty imposed by US on Indian shrimp in 2005 USA
Tobacco Internationally permissible level of DDT residue is 6 ppm while Japan and USA Japan, USA
had set their DDT levels at much lower level; Japan insists on 0.4 ppm of DDT
level Indian tobacco has DDT level of 1-2 ppm which is well below the
international standard but Japan does not allow tobacco import from India.
Egg powder Consignment first time subjected to additional criteria of MRPL (minimum EU
required performance limit) in May 2003 despite valid equivalence issued by
EU. No action on applications for equivalence for 7-8 years.
Sources: Adapted from Jha (2003 ); Mehta and George (2003); RIS (2003)
KEY FACTORS OF AGRIBUSINESS ENVIRONMENT - FINANCE, INFRASTRUCTURE,
LEGAL AND REGULATORY FRAMEWORK
AGRICULTURAL FINANCE IN INDIA
Finance in agriculture is as important as development of technologies. Technical inputs can

be purchased and used by farmers only if sufficient money (funds) is available with
farmers. Most of the times farmers suffer from the problem of inadequate financial state.
This situation leads to borrowing from an easy and comfortable source.
Classification of loans
A. On the basis of Time
B. On the basis of Purpose
A. On the basis of Time
1. Short-term Loans:
Short-term loans are required for the purchase of seeds, fertilizers, pesticides, feeds on
fodder of livestock, marketing of agricultural produce, payment of wages of hired labour
are classified according to the use and kind of application as insecticides, fungicides,
herbicides and other pesticides.
The repayment period of short term loans is up to 15 months. Agencies for granting such
loans are the moneylenders and cooperative societies.
2. Medium-term loans: are obtained for the purchase of cattle, small agricultural
implements, repair and construction of wells etc. The repayment period of such loans
Lecture_notes_ABM502_SABRM_Agricultural finance
extends from 15 months to 5 years. These loans are generally provided by money-lenders,
relatives of farmers, cooperative societies and commercial banks.
3. Long-term loans: are required for effecting permanent improvement on land, digging
tube wells,’ purchase of larger agriculture implements and’ machinery like tractors,
harvesters etc. The period of such loans extends beyond 5 years. Such loans are normally
taken from Primary Cooperative Agricultural and Rural Development Banks (PCARDBS).
B. On the basis of Purpose
1. Productive loans
Under productive needs we can include all credit requirements which directly affect
agricultural productivity. Farmers need loans for the purchase of seeds, fertilizers,
manures, agricultural implements, livestock, digging and repair of wells and tube wells,
payment of wage, effecting permanent improvements on land, marketing of agricultural
produce, etc. Repayment of these loans is generally not difficult because the very process of
production generally creates the withdrawal for repayments.
2. Consumption loans
Farmers often require loans for consumption as well. Institutional credit agencies do not
provide loan for consumption purpose. Therefore farmers stretch their hand towards the
moneylenders.
3. Unproductive loans
Loans are taken for unproductive purposes such as litigation, marriages, social ceremonies
on birth and death of a family member, religious functions, festivals etc. Farmers take loans
from private money lenders since institutional credit agencies do not give such loans.
Sources of Agricultural Finance
This can be divided into two categories:
(i) Non-institutional sources.
(ii) Institutional sources
(i) Non-Institutional sources are the following:
(a) Moneylenders
(b) Relatives
(c) Traders
(d) Commission agents
(e) Landlords
(ii) Institutional sources:
(a) Cooperatives
(b) Scheduled Commercial Banks
(c) Regional Rural Banks (RRBs)
(a) Co operatives:
(i) Primary Agricultural Cooperative Societies (PACSs) provide short and medium term
loans.
(ii) PCARDBs (Primary Cooperative Agricultural and Rural Development Banks) provide
long term loan for agriculture.
(b) Commercial banks, including RRBs, provide both short and medium term loans for
agriculture and allied activities.
The National Bank for Agriculture and Rural Development (NABARD) is the apex
institution at the national level for agriculture credit and provides assistance to the
agenciesmentioned above. The Reserve Bank of India plays a crucial role in this sphere by
giving overall direction to rural credit and financial support to NABARD for its operations.
At the time of Independence the most important source of agricultural credit were the
moneylenders. In 1951 (the year when planning was initiated in the country)
moneylenders accounted for as much as 71.6 per cent of rural credit. This was because
there was no other source or from where the farmers could borrow money.
Hence the moneylenders exploited the poor farmers. Thus, they used to charge exorbitant
interest for their loans. The moneylenders used to manipulate their accounts and force the
farmers to sell their produce to them at low price. The government has therefore
undertaken various steps to regulate the activities of the moneylenders.
The most important move was to free the agriculturists from the clutches of the money
lenders and the expansion of institutional credit to agriculture.
The Government has helped the cooperatives in a number of ways to expand their
operations:
I. 14 major commercial banks were nationalised in 19th July, 1969.
II. 6 more banks were nationalised in 15th April, 1980.
III. In 1975 an institution was established by the government to meet the requirements of
rural credit – Regional Rural Bank (RRBs).
IV. In 12thJuly, 1982 National Bank for Agriculture and Rural Development (NABARD) was
set up.
V. India now has a wide network of rural finance institution (RFI).
As a result of this massive expansion of RFIs their participation in rural credit has
increased significantly while that of moneylenders has declined. Non- institutional sources
of agriculture credit still remain and they offer credit at high rates of interest specially in
case of unproductive purposes.
i. NABARD provides re-finance facilities to SCB, SCARDB, PACS, is PLDBs etc.
The flow of fund from NABARD to all of then-shown in the flow chart below:
Cooperative Credit Societies:
The rural co-operative credit institutions in India have been organised into short-term and
long-term structures. The short-term co-operative structure is based on three-tier
structures. At the lowest tier are the Primary Agricultural Credit Societies (PACSs). These
are organised at the village level. At the second tier and District Central Cooperative Banks
(DCCBs) organised at the district level. At the third and uppermost tier are the State Co-
operative Banks (STCBs) organised at the state level state Co-operative Banks (state level).
To cater to long-term loans long-term credit cooperatives have been set up.
These are organised at two levels and categorized into four types:
(i) The unitary structure in which State Cooperative Agricultural and Rural Development
Banks (SCARDBs) operate at the state level.
(ii) The federal structure in which Primary Cooperative Agricultural and Rural
Developments Banks (PCARDBs) operate as independent units at the primary level and
federate themselves into SCARDBS at the state level.
(iii) The mixed structure wherein both the unitary and federal types operate in one form or
another.
(iv) The integrated structure where no separate Agricultural and rural development banks
exist and the long-term credit business is undertaken by the long-term section of the StCBs
concerned.
Commercial Banks:
In fact up to 1970 the government policy was to depend entirely on the cooperative banks
as a major source of institutional credit in rural areas. Government felt that Cooperative
Bank alone cannot meet the growing demand. Therefore Government policy changed and a
number of institutions were developed to give rural credit. On 19 th July, 1969, 14 major
banks were nationalised.
On 15th April, 1980, six more banks were nationalised. In 2004, the number of total
branches had shot up to 67062, of this 32,200 in rural areas.
Regional Rural Banks:
All India Rural Credit Review Committee (1969) pointed out that over large parts of the
country small farms have been handicapped in having access to co-operative credit both
for current inputs and investment. Therefore, a need arose for the establishment of
institutional agencies. This led to first spell of nationalization of banks with greater
expectations. Though they did add to the institutional structure, they simultaneously
created some problems too.
The subject was examined by Government of India and appointed a Working Group in
1975 under the Chairmanship of Sri M. Narasimham to go into the financial assistance
rendered to the weaker sections in the rural areas. The Working Group came up with the
recommendation of setting up of rural-based institutional agencies called ‘Regional Rural
Banks’ after having identified shortcomings in the functioning of commercial banks and co-
operatives. The Government of India accepted the recommendation and RRBs came into
existence through Regional Rural Banks Ordinance on 26 September, 1975 and initially
five rural banks, sponsored by commercial banks were set up on a pilot basis in the
country on 2 October, 1975.
The purpose of introducing RRBs is to have an institutional agency with clear
understanding of rural problems and local familiarity which the co-operatives possessed
and the business outlook which the commercial banks were known for, to serve the rural
community with much more dedication.
These banks were conceived as low-cost ones to uplift the lot rural economy by financing
agriculture, trade and industry in general and small and marginal farmers, agricultural
labourers, artisans and small entrepreneurs, in particular. RRBs were expected to play a
vital role in mobilizing the savings of the small and marginal farmers, artisans and
agricultural labourers and initiate banking habit among the rural people. These institutions
were also expected to plug the gap created in extending credit to rural areas by largely
urban-oriented commercial banks and the rural co-operatives, which have the close contact
with rural areas, but fall short in terms of funds.
List of RRBs first opened in the country
S. No. Sponsor Bank RRB Headquarter
1 Syndicate Bank Prathama Bank Moradabad (UP)
2 State Bank of India Gorakhpur Gorakpur (UP)
3 United Bank of India Gaur Grameena Bank Malda (WB)
Punjab National Bhiwani

4 Haryana KshetriyaGrameena Bank
Bank (Haryana)
United Commercial Jaipur NagalurAnchalikGrameena

5 Jaipur (Rajasthan)
Bank Bank
Objectives assigned to RRBs were:
1. To develop rural economy
2. To provide credit for agriculture and allied activities
3. To encourage village industries, artisans, carpenters, craftsmen, etc.
4. To reduce dependence of weaker sections on money-lenders
5. To fill up the gap created by moratorium on borrowings from money lenders
6. To help the poor, financially for their consumption needs
7. To make backward and tribal areas economically better by opening new branches.
National Bank for Agriculture and Rural Development (NABARD):
The most important development in the field of rural credit has been the setting up of the
National Bank for Agriculture and Rural Development (NABARD) in 12thJuly 1982. It took
over from Reserve Bank of India all the functions that the latter performed in the field of
rural credit. NABARD is now the open bank for rural credit.
Functions of NABARD (1982):
The main functions of NABARD are as follows:
(1) It works as an open body to look after the credit requirement of the rural sector.
(2) It has authority to oversee the functioning of ‘the cooperative sector through its
Agricultural Credit Department.
(3) It provides short-term credit (up to 18 months) to State Cooperative Banks for seasonal
agricultural operation (crop loans), marketing of crops, purchase and distribution of
fertilizers and working capital requirements of cooperative sugar factories.
(4) It provides medium-term credit (18 months to 7 years) to State Co-operative Banks and
RRBs for agricultural purposes purchase of shares of processing societies and conversion
of short- term crop loans into medium term loans in areas affected by natural calamities.
(5) It provides medium and long-term credit (not exceeding 25 years) for investment in
agriculture under schematic lending to State Cooperative Banks, Land Development Banks,
RRBs and commercial banks.
(6) It provides long-term assistance in the form of loans to state governments (not
exceeding 20 years) for contribution to share capital of cooperative credit institutions.
(7) It has been entrusted with the responsibility of inspecting District and State
Cooperative Banks and RRBs. The inspection of State Land Development Banks and other
Federation Cooperative are undertaken on a voluntary basis.
(8) It maintains a research and development fund to be used to promote research in

agriculture and rural development so that projects and programmes can be formulated and
designed to suit the requirement of different areas.
Marketing of Important
Agricultural Commodities
UNIT 1_Agricultural
marketing_ABM502_MS_RPCAU_SABRM
Classification of Agricultural Products
• Farm Products
– Plant Products
– Animal Products
• Products from food processing sector
UNIT 1_Agricultural
Products from Plant Origin
• Food Grains
• Oilseeds
• Cotton
• Fruit and Vegetables
• Flowers
UNIT 1_Agricultural
Marketing of Food grains
• To safeguard the interest of producers and to
eliminate malpractices in the market Central
Government advised all the State
Governments to enact Marketing Legislation
to promote competitive and transparent
marketing methods.
UNIT 1_Agricultural
Government Initiatives
• Price Control- MSP
– FCI-Cereals Procurement, Govt. Regulate import and
export.
– NAFED- Pulses & Oilseeds procurement
• Wholesaling of agricultural produce was
permitted only at regulated markets.
• Model APMC Act 2003:
– Farmer market
– Direct Procurement by companies
– Contract farming
• Marketing Channels
UNIT 1_Agricultural
Oilseeds Marketing
• Groundnut and mustard are most important
oilseeds
• Safflower seeds are getting more attention
now for health reasons.
• India is the world’s largest producer of sesame
seeds (1/3 of world’s sesame seed production)
It is grown in black, brown and white seed
varieties.
UNIT 1_Agricultural
Marketing Channels of Oilseeds
• Farmer – Miller
• Farmer- Cooperative Society - Cooperative
Miller
• Farmer-village trader-miller
• Farmer-Commission agent-miller
• Farmer-Broker -Refineries -wholesaler-
retailer-consumer
• Farmer-broker-refineries-broker-commission
agent-wholesaler-retailer-consumer
UNIT 1_Agricultural
Oilseeds Marketing
• Oilcakes
• Processing
• Corporates
• India is the net importer of edible oil.
UNIT 1_Agricultural
Marketing of Cotton
In India 60 per cent of raw material for textile
industry 45 per cent in world.
India stands second in production after China.
UNIT 1_Agricultural
Cotton Corporation of India
• 1970
• Procures from domestic market and imports.
• Procures kapas in the open auction with other traders
and millers under the supervision of APMC Officials.
• Provided price support to growers & millers.
• More than 220 centres. Mainly from Gujarat, Andhra
Pradesh, Madhya Pradesh, Punjab, Haryana, Rajasthan,
Karnataka and Tamil Nadu.
• Main markets Mumbai, Coimbatore, Ahmedabad and
Kanpur.
UNIT 1_Agricultural
Market Types in Cotton
• Primary Market: Grower-Village trader
• Secondary Market: Important trade centres
through wholesalers
• Terminal Market: Cotton lint, is sold to textile
mills, exporters and traders dealing with
spinning mills or inter state trade.
UNIT 1_Agricultural
Cotton Marketing Process
• Farmer brings bales to nearest market.
• Public auction
• Role of market committee.
• Commission agents
• Farmer gets price after all the deductions of various
marketing charges
• Packing and handling
• Contamination
• Quality parameters of cotton yarn
UNIT 1_Agricultural
Marketing of Fruits & Vegetables
• India is the largest producer of fruit and
second largest producer of vegetables in the
world.
• Potato, tomato, cauliflower, cabbage
contribute to 60 per cent of vegetable
production in India.
• India is the largest producer of mango,
banana, sapota and acid lime in the world.
UNIT 1_Agricultural
F&V Characteristics
• Dominance of traders
• Low and fragmented supply chain
• High wastage (20-40 %)
• Low share of producers in Consumer’s price
and inadequacy of infrastructure
UNIT 1_Agricultural
Increased Demand
• Lower prices and availability through out the
year
• Increased incomes
• Health concern
• Supply will be enhanced due to more concern
towards production technology, innovations
and lower trade barriers.(NHM)
UNIT 1_Agricultural
Channels
• Producer – Pre-harvest contractor
• Producer-Forwarding Agent-Commission Agents-
Wholesaler-Retailer-Consumer
• Producer- Commission Agent/ Wholesaler -
Retailer -Consumer
• Producer-Government Agency-Wholesaler-
Retailer-Consumer;
• Producer- Government Agency - Processing Unit-
retailing of processed food
• Producer-Consumer
UNIT 1_Agricultural
F&V Exports
• Majorly Bangladesh, UAE, Netherlands and UK.
• Constraints are Lack of
– Exportable varieties
– PHM
– Packhouse from farm to the port
– Certification for exports
– Supply Chain
– Economies of scale
– Infrastructure for storage and transport
– Market Access
– Lack of brand image
– Short product life cycle
– Multiple Safety Standards at par with developed countries
– Technology
UNIT 1_Agricultural
Marketing of Flowers
• Area- 53,000 acre
• Jasmine, Rose, Chrysanthemum, Tuberose,
Crossandra and Aster
• 15-20 per cent industry growth
• High Domestic demand
• Main exports pitfalls looking for short term
profits and switching from one market - loss of
credibility.
• Niche export markets are Japan, USA and Europe.
UNIT 1_Agricultural
Contd.
• Traditional Flowers: Grown in large area-
marigold, rose, chrysanthemum, jasmine,
tuberose etc.
• Modern/contemporary Flowers: Grown in
small area - Gladiolus, Carnations, Aster,
Gerbera, Carnalius etc.
• Major producing states: AP, Karnataka,
Maharashtra, Tamil Nadu, Haryana, West
Bengal and Kerala.
UNIT 1_Agricultural
Problems of Floriculture Industry
• Indian floriculture industry is still in its nascent stage and depends on
foreign technology. There is requirement of huge amount of investment in
India for being technically strong and competitive.
• There is need of cold supply chain to take flowers from farm gate to
ultimate consumer especially, for foreign markets. For exports,
refrigerated facilities at airports and at shipyards is required.
• Good space in air cargo and the direct flights to importing countries is
required to boost up this industry.
• Proper market information for growers and traders about export market
trends, demands, prices, consumer preferences etc. should be provided in
a systematic manner.
• The procurement cost of flowers by exporters is very high due to dis-
economies of scale and no proper linkages between scattered producers,
processors and exporters.
• Availability of adequate finance is a problem for such a cost intensive
production process.
UNIT 1_Agricultural
Global Trade of Flowers
• Indian floriculture sector is successfully increasing its share in the
total world trade
• There has been an impressive growth in the export of cut flowers
• After economic reforms, a sharp growth has been witnessed in the
production and demand of cut flowers for exports through more
than 191 export-oriented units (EQUs) in different parts of the
country and APEDA.
• Major Flowers in World Trade –Rose, Carnation, Tulip,

Lilly, Gerbera, Orchid, Chrysanthemum etc.
• Major Exporting countries - Netherlands (dominating the

International Trade of Flowers), Columbia, Italy, Denmark, Belgium,
Canada, USA, Ecuador, Germany, Israel, Kenya, Costa Rica etc.
• Major importing countries – USA, Europe and especially

Netherlands, but Germany, U.K, France, Italy and Japan also have
significant share
UNIT 1_Agricultural
Products of Animal Origin - Facts
• Share of livestock sector in total agriculture GDP was 29 percent in
2013-14
• India produced 135 million tonnes of milk (world highest)
• 63.02 billion eggs
• 2.99 million kg wool
• 4.83 million tonnes of meat
• Total Exports from livestock sector was `254088.6 million and it was
2.2 per cent of India’s total exports.
• 121.8 MT of milk was produced in India the per capita availability
was 281 gm/day.
• Major states having high population of livestock are Rajasthan,
Jammu, Kashmir, Uttar Pradesh, Gujarat, hilly regions of North and
Eastern Himalayas. Major livestock animals in India are cows,
buffaloes, camel, goats, sheep, pigs etc
• While the production of milk is highest in India, the productivity per
animal is very low in India UNIT 1_Agricultural
Market Scenario
• Even after having largest production of milk, the
exports are negligible
• Perishability is the major constraint
• About 45 per cent of milk is consumed as liquid milk,
28 per cent as ghee, 6 percent as butter and khoa, 7
percent as curd and 2.6 per cent as milk powder and
rest in other forms viz., paneer, ice creams, baby foods,
dairy whiteners, condensed milk and malted foods etc.
• Still the major share of milk is handled by unorganised
sector as only 15 per cent of milk produced is handled
by organised sector. Indian common buyer of milk still
likes to purchase from a vendors, supplying milk in
unprocessed form at door steps.
Contd..
UNIT 1_Agricultural
• The organised dairies, mostly cooperative dairies, collect the milk
from surplus areas (rural areas) and after processing, milk and value
added products are packaged and branded and then through cold
chain are distributed to different areas according to the demand.
• Disposal of packaged milk in retail sale may be done in different
types of packaging like bottling, sealed cans, tetra packing and
aseptic paper packaging etc.
• The price of milk varies with the type of milk (caw, buffalo, goat),
demand in comparison to supply, distance between production and
consumption centres and also with the seasons.
• There is increasing demand of value added products and branded
products. Big players have entered in the market with branded milk
and milk products with attractive packaging and branding viz.,
Amul, Mother Dairy, Milkfed, and various state cooperatives.
UNIT 1_Agricultural
Dairy- Channel
• Producer – consumer
• Producer – cooperatives – distributers/
retailers – consumers
• Producer – wholesaler – retailer – consumer
• Producer – retailer – consumer
UNIT 1_Agricultural
Policy and Regulations in Milk and Milk
Products sector
• Milk production in India is regulated by ‘Milk and Milk Products
Order’ which states that there is no requirement of acquiring
permission from authority, appointed by Central Government, to
establish units handling less than 10,000 litres of liquid milk per day
or milk solids up to 500 tonnes per annum. Up to 31 March 2006,
Central Registering Authority and State Registering Authorities have
granted registration to 789 units with a combined capacity of
980.50 lakh litres per day of milk.
• Except for malted foods, full foreign equity participation
automatically approved.
• Ice cream manufacturing de-reserved from small scale sector. No
license required for setting up large-scale production facilities for
manufacture of ice cream.
• Exports of some milk based products freely allowed on satisfying
BIS norms.
UNIT 1_Agricultural
Cooperative Dairies
• Operation Flood which started in 1970, concluded its third phase in
1996.
• The story of Operation Flood revolutionised the way of life for poor
and small farmers.
• A number of dairy cooperative with three-tier structure viz. village
level primary cooperatives, district level unions and state level
federations have been set up in different parts of the country under
Operation Flood Programme. For a variety of reasons, a number of
these unions/federations have accumulated losses.
• Till 2005-06, the Department had approved 31 rehabilitation
proposals of milk unions in Madhya Pradesh, Chhattisgarh,
Karnataka, Uttar Pradesh, Haryana, Kerala, Maharashtra, Assam,
Nagaland, Punjab, West Bengal and Tamil Nadu with a total outlay
of Rs 165.34 crore.
• Presently, the National Milk Grid links 1.13 lakh village level
cooperative societies spread over 265 districts and the consumers
of 700 towns and cities.
UNIT 1_Agricultural
OPERATION FLOOD
AMUL
UNIT 1_Agricultural
Poultry Products
• Value of industry `15,000 crore providing employment to
over 3 million people
• Nutritional security
• Andhra Pradesh, Tamil Nadu, Maharashtra, Gujarat,
Madhya Pradesh, Orissa and North Eastern States are major
egg contributor states.
• Increased demand for scientifically produced and hygienic
poultry and meat products
• Exports to Bangladesh, Sri Lanka, Middle East, Japan,
Poland, USA and Denmark
• Mainly eggs, egg powder, frozen egg yolk and albumin
powder etc are exported to Europe
UNIT 1_Agricultural
Channels in Marketing of Egg
• Producer – consumer
• Producer – processor
• Producer – wholesaler – retailer – consumer
• Producer – retailer – consumer
• Producer – Cooperative marketing society –
wholesaler /- retailer -consumer
UNIT 1_Agricultural
Channels for Marketing of Poultry Meat
• Hatchery– consumers
• Hatchery – Retailers- consumers
• Hatchery – Retailers – Hotels/restaurants-consumers
• Hatchery – Local Vendors – Organised Retailers
(Grading, labeling, packing in boxes) – Consumer
• Hatchery – Organised Retailers (Grading, labeling,
packing in boxes) – Consumer
• Hatchery– Local Vendors – Organised Retailers (left
over stock) – small shopkeepers /restaurants -
Consumers
)
UNIT 1_Agricultural
Goat and Sheep related products
• According to Livestock Census 2003, there are about 61.47 million sheep
and 124.36 million goats in the country. About five million households in
the country are engaged in the rearing of small ruminants (sheep, goats
and rabbits) and other allied activities.
• Meat
Meat of goat is preferred by Indians and has good demand in the market.
The market of meat of sheep and goat is dominated by small and
unorganised shopkeepers who are butchers and also the retailers.
Consumers directly purchase the produce from these retailers. Alkabir is
the known private palyer in the marketing of Goat meat. Demand of meat
increases on specific week days and on specific festivals.
• Wool
India’s annual production of wool is about 45 million kg from a sheep
population of 52 million. India is world’s 7th largest producer of raw wool
with 4.2 per cent of total sheep population with only 1.8 per cent of
production which shows the low productivity (0.8 kg/sheep/year) of wool
in India.
UNIT 1_Agricultural
Features of wool market in India
• The wool industry in India is concentrated mainly in Punjab (40 %), Haryana (27 %)
and Rajasthan (10 %) and rest (23 %) is contributed by other states. This industry is
spread evenly in rural and urban areas and can broadly be divided into organised
and unorganised sectors.
• Wool pricing depends on quality of wool which is indicated by Staple length, fiber
length, mean fiber diameter (micro value), luster, region, colour are the major
factors which govern the wool price.
• Woolen products exported from India are RMG Wool, Woolen Yarn, fabrics and
made-up. The export of woolens from India is increasing at about growth of 20
per cent per annum.
• As the production of fine apparel grade wool is not enough in India, a large
quantity of wool is imported from Australia, New Zealand, China, Middle East and
other countries. China is the largest importer of raw wool followed by India and
Italy.
• Price and quantity is agreed between buyer and seller through the intervention of
indenting agent or directly from the importing country.
• Woollen products in India are wool tops, woollen yarns, worsted yarn, fabric-
woollen worsted, shoddy yarn, blankets, fabric, knitted goods, hand made carpets,
machine made
• Hides and skins are the other products from livestock which have good demand in
the market and especially in foreign market
UNIT 1_Agricultural
Unit II
Basic structure of agribusiness
Lecture_notes_ABM502_MS_Unit II
Structure of Agriculture
Agriculture plays a vital role in India’s economy. Over 58 per cent of the rural households depend on
agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, is one of
the largest contributors to the Gross Domestic Product (GDP).
Over the past few decades, the manufacturing and services sectors have increasingly contributed to the
growth of the economy, while the agriculture sector’s contribution has decreased from more than 50%
of GDP in the 1950s to 15.4% in 2015-16 (at constant prices).
India is the largest producer, consumer and exporter of spices and spice products. India's fruit
production has grown faster than vegetables, making it the second largest fruit producer in the world.
India's horticulture output, is estimated to be 287.3 million tonnes (MT) in 2016-17 after the first
advance estimate. It ranks third in farm and agriculture outputs. Agricultural export constitutes 10 per
cent of the country’s exports and is the fourth-largest exported principal commodity. The agro industry
in India is divided into several sub segments such as canned, dairy, processed, frozen food to fisheries,
meat, poultry, and food grains.
The Department of Agriculture and Cooperation under the Ministry of Agriculture is responsible for the
development of the agriculture sector in India. It manages several other bodies, such as the National
Dairy Development Board (NDDB), to develop other allied agricultural sectors.
India’s production of food grains has been increasing every year, and India is among the top producers
of several crops such as wheat, rice, pulses, sugarcane and cotton. It is the highest producer of milk and
second highest producer of fruits and vegetables. In 2013, India contributed 25% to the world’s pulses
production, the highest for any one country, 22% to the rice production and 13% to the wheat
production. It also accounted for about 25% of the total quantity of cotton produced, besides being the
second highest exporter of cotton for the past several years.
Lecture_notes_ABM502_MS_Unit II
Linkages among sub-sectors of the Agribusiness Sector
In developing country like India, Agribusiness system with forward and backward linkages consists of
following four major sectors
1. Agricultural Input Sector
2. Agricultural Production Sector
3. Agricultural Processing Sector
4. Agricultural Marketing Sector
These four sectors act as interrelated parts of a system in which the success of each sector depends, to a
large extent, on the proper functioning of other sectors.
1. Agricultural Input Sector
This sector deals with manufacturing and supplying the farm inputs such as feed, seed, fertilizers,
agricultural chemicals, farm equipment and machinery, credit, insurance, veterinary services, repair
services, technological services, agri-clinic services, etc. used by the production sector of Agribusiness.
All these inputs should be available to farmers in proper quantity, of good quality, at appropriate time
and at appropriate cost. Many traditional agribusiness firms have been functioning in this sector such as
Monsanto, John Deere, Jain irrigation, etc.
2. Agricultural Production Sector
This sector deals with the growing of crops and rearing of animals. Farmers are buying yield increasing
farm inputs from the market, agriculture is growing fast and agriculture production is getting
increasingly transferred to manufacturing-processing sector. This sector includes the actual production
of various agricultural commodities of food, feed, fibre; cereals, pulses, oilseeds, vegetables, fruits,
spices, condiments, milk, meat, wool, fish and so on. It must focus on crop planning, maximise
production and input use efficiency, food security, employment generation and sustainability of natural
resources. Most of the farmers, private and government organized farms are working in this sector.
3. Agricultural Processing Sector
This sector includes the entire individuals and firms that process raw agricultural commodities (e.g.,
convert wheat into flour, maida, suji; raw milk into milk products; fruits into jam, jelly, squash, etc) and
manufacture food products (eg. Bread, ice-cream, wheat flour, etc) for making these available to the
final consumer. It must focus on identifying the good market, proper return to farmer, higher consumer
satisfaction, appropriate marketing channels, low marketing cost, higher marketing efficiency, low
wastage and increase value addition. This sector is attracting India and overseas companies like ITC,
PepsiCo, HUL, Coca-Cola, Nestle, Britannia, Godrej, etc.
4. Agricultural Marketing Sector
Lecture_notes_ABM502_Linkages_subsectors_MS_unit II
This sector includes the millions of people and thousands of firms that handle agricultural products from
farm to final consumer. On one side the sector made available farm inputs to the production sector, on
the other side, the sector made available processed products to the ultimate consumer. It includes
different activities like packaging, transport, storage, warehouses, advertising, insurance, wholesale
firms and retailer outlets services, etc. Some of the famous firms engaged in this sector are AMUL,
Kellogg’s, More, etc.
Agribusiness which links input supply, farm production, agro-processing and distribution network
emerges as a viable option to resolve the problems of unemployment in rural sector. Thus, the
prospects of Agribusiness rely more on off-farm sector of agriculture viz., input supply, processing and
marketing-distribution.
However, the agricultural yield (quantity of a crop produced per unit of land) is found to be lower in the
case of most crops, as compared to other top producing countries such as China, Brazil and the United
States.
Although India ranks third in the production of rice, its yield is lower than Brazil, China and the United
States. The same trend is observed for pulses, where it is the second highest producer.
Agricultural growth has been fairly volatile over the past decade, ranging from 5.8% in 2005-06 to 0.4%
in 2009-10 and -0.2% in 2014-15. Such a variance in agricultural growth has an impact on farm incomes
as well as farmers’ ability to take credit for investing in their land holdings.
Key issues affecting agricultural productivity include the decreasing sizes of agricultural land holdings,
continued dependence on the monsoon, inadequate access to irrigation, imbalanced use of soil
nutrients resulting in loss of fertility of soil, uneven access to modern technology in different parts of the
country, lack of access to formal agricultural credit, limited procurement of food grains by government
agencies, and failure to provide remunerative prices to farmers.
Some of the recommendations made by committees and expert bodies over the years include bringing
in agricultural land leasing laws, shifting to micro-irrigation techniques to improve efficiency of water
use, improving access to quality seeds by engaging with the private sector, and introducing a national
agricultural market to allow the trading of agricultural produce online.
Agricultural productivity depends on several factors. These include the availability and quality of
agricultural inputs such as land, water, seeds and fertilizers, access to agricultural credit and crop
insurance, assurance of remunerative prices for agricultural produce, and storage and marketing
infrastructure, among others. This report provides an overview of the state of agriculture in India. It
discusses factors related to the production and post-harvest activities in agriculture.
As seen in Figure 4, the agriculture sector’s contribution to the Gross Domestic Product (GDP) decreased
from 54% in 1950-51 to 15.4% in 2015-16, while that of the services sector increased from 30% to 53%.
While the agriculture sector’s contribution to GDP has decreased over the past few decades, the
contribution of sectors such as manufacturing (employing 10.5% of the population) and services
(employing 24.4% of the population) has increased.
฀ Total production of food grains increasedfrom 51 million tonnes in 1950-51 to 252 million tonnes in
2015-16. According to the second advance estimate by the Ministry of Agriculture, food grains
production is estimated to be 272 million tonnes in 2016-17.
฀ The production of wheat and rice took offafter the green revolution in the 1960s, and as of 2015-16,
wheat and rice accounted for 78% of the food grains production in the country.
India's foodgrain output to touch new record of 284.83 million tonnes in 2017-18
India's foodgrain production is estimated to grow to an all-time high of 284.83 million tonnes in the
2017-18 crop year ending June, driven by record output in wheat, rice, coarse cereals and pulses after a
normal monsoon, according to the Agriculture Ministry.
Wheat output has been pegged at record 99.70 million tonnes, rice at Rs 112.91 million tonnes and
pulses at 25.23 million tonnes for the 2017-18 crop year, it said.
The previous record foodgrain output was 275.11 million tonnes achieved in the 2016-17 crop year. The
foodgrain basket comprises of rice, wheat, coarse cereals and pulses.
In its fourth advance estimate released today, the ministry revised upward the total foodgrain
production by 5.3 million tonnes from the previous projection of 279.51 million tonnes for the 2017-18
crop year.
"As a result of near normal rainfall during monsoon 2017 and various policy initiatives taken by the
government, the country has witnessed record foodgrain production in 2017-18," the ministry said in a
statement.
Wheat production has been revised upward by 1.06 million tonnes to record 99.70 million tonnes for
the 2017-18 crop year from its previous projection. In 2016-17, wheat output stood at 98.51 million
tonnes.
Similarly, rice output for 2017-18 has been upped by 1.39 million tonnes to record 112.91 million tonnes
from its previous estimate, higher than 109.70 million tonnes achieved in 2016-17.
Production of coarse cereals has been revised upward by 2.12 million tonnes to record 46.99 million
tonnes from its previous projection made for 2017-18 and is
Pulses production during 2017-18 is estimated at record 25.23 million tonnes, revised upward by 0.72
million tonnes. The output is higher than the previous year's output of 23.13 million tonnes.
Oilseeds output has also been revised upward to 31.31 million tonnes for 2017-18 crop year, marginally
higher than 31.28 million tonnes in the previous year.
In case of cash crops, sugarcane output has been revised upward by 21.9 million tonnes to a record
376.9 million tonnes from its previous projection made for 2017-18. The output stood at 306 million
tonnes during 2016-17.
Cotton output has been pegged at 34.89 million bales (of 170 kg each) for 2017-18 as against 32.58
million bales during 2016-17.
The ministry releases total five estimates of foodgrain production at different stages of crop growth. The
final estimate for 2017-18 will be released along with first estimate for the new 2018-19 crop year. The
kharif sowing is underway at present.
Economic reforms and Indian
Agriculture
lecturenotes_MS_ABM502_SABRM
Past agricultural situation of India
• Food grain production was 50.8 million tonnes
in 1950-51 for the population of 360 million
• In 1965-66 and 1966-67 country faced serious
drought condition and about 19 million
tonnes of food grain had to be imported to
avert starvation
• India faced a number of threats of severe
famines in 1967, 1973, 1979 and 1987 in BR,
MH, WB, GJ respectively.
Trade policy before 1990s
• During 1st half of 1950s, foreign trade was
considered to be almost irrelevant for
economic development in India
• During 1955-1975 India followed moderately
outward looking economic policy. To facilitate
agricultural exports, in 4th plan compulsory
quality control and grading under Agmark
extended
• Establishment of organizations aimed at
providing services like- Export Promotion
Councils, Commodity boards, Trade
Development Authority etc.
• During 1970s to 1980s external trade got
more prominent place
• Various committees formed who
recommended for the stability in export
policies
• G.V.K. Rao committee
• P.E. Alexander in 1977
• Abid Hussain committee in 1984
• Mid 1980s to early 1990s – main policy
objective were to ensure stability of domestic
prices of agricultural items.
• Govt. regulated agricultural exports through
export taxes, export ceilings, canalization and
export prohibitions etc.
• Economic policy came in year 1991 in order to
overcome harzardous economic problems and
political imbalances.
• New economic policy came in year 1991 is the

result of international, social and economic
changes
• In 1991 India’s foreign exchange reserve
balance was only 2.2 billion dollars.
• Inflation rate was near about 14 per cent.
• Fiscal deficit of GDP was 8.4 per cent and
current account deficit was 9.9 billion dollars
• After Economic policy, inflation rate was
decreased from 13.6 per cent in 1991-92 to
6.5 per cent in 1992-93. And fiscal deficit was
decreased by 4.9 per cent in same year
• Economic reforms include Liberalisation,
Privatisation and Globalisation
1) Remove the tariff of all goods including
consumption goods.
2) Decrease the rate of import duties and
3) Privatisation of public sector.
Key medium term objectives were:
• Broadening and simplification of export incentive
measures and the removal of restriction on
exports
• Elimination of quantitative restrictions on imports
• Substantial reduction in tariff rates
• Decanalization of exports and imports with the
exception of few items
• Moving to a foreign exchange system which is
free of allocative restrictions for trade
Agricultural Growth Since 1991
Factors that are likely to have determined agricultural
growth since 1991
• High Yield Variety Programme seeds, fertilisers,
irrigation facilities and mechanisation in
agriculture sector are the key factors
• Rice production has increased by 2.02 per cent
while wheat by 3.57 per cent from 1991 to 2011-
12
• Compound Annual Growth Rate of area,
production and productivity of pulses has
improved by 1.59 per cent, 3.72 per cent and
2.10 per cent respectively
• The production of sugarcane has increased by
seven times in 2013-14 as compared to 1999-
2000
• Key concern of agriculture sector is that the
annual growth rate of agricultural sector GDP
which is not stable
• From the productivity fronts; land productivity
and labour productivity is extremely below
the international standards
• Another concern is that the production of
pulses and nine oilseeds do not increased
despite special programme, mission and
remunerative minimum support prices
• Import dependency on chemical fertiliser is
not yet over
• Export share of agriculture in India’s total
export has increased from 8 percent in 2009-
10 to 12 percent in 2014-15
• India’s agriculture has not performed well.
Growth in the sector has been far below GDP
growth rates, turning negative in 2002-03 (-6.9%)
and rising to a modest 2.3% in 2005-06 against
GDP growth rate in that year of around 8.1%
• Rajasthan is an example of where labour

productivity is constrained by the weak linkages
to input and output markets due to limited road
connectivity and communication links
• In Punjab, employment in agriculture has
declined from 53% in 1991 to 39.4 percent in
2001. The state has 3% of India’s net sown
area, 1.5% of its farming population and
accounts for almost 20% of the country’s
wheat production.
• Growth in such an agriculturally important
state has, however, been a low 2.6%, below
the state average of 3.2%
• Agricultural growth in India was unimpressive,
agricultural commodities, in the recent past,
have accounted for almost 20% of the
country’s total exports earnings
• Some of the major agro-products exported are

coffee, tea, tobacco, cotton, and rice, with
milled rice being the most important,
accounting for over 15% of the exports in
2003-2005
Impact of Liberalization, Privatization and Globalization on Agribusiness Sector
Impact # 1. Raising the Production of Foodgrains:
India has been experiencing the increase in the production of food-grains particularly after the inception
of new agricultural strategy (i.e., Green revolution). Annual growth rate of 2.08 per cent was recorded
during seventies. Annual growth rate of 3.5 per cent in food-grains in eighties. The decade of nineties
could not maintain this pace and annual growth rate has fallen to 1.7 per cent.
Total production of foodgrains has increased from 176.4 million tonnes in 1990-91 to 211.9 million
tonnes in 2001-02. It is felt that if the country maintains 4 per cent growth rate in agricultural
production, then after meeting its domestic demand, the country can export the surplus amount of
foodgrains to the foreign countries.
Impact # 2. Increasing Trend in Horticultural Output:
The diversity of physiographic, climate and soil characteristics enables India to grow a large variety of
horticultural crops which includes fruits, vegetables, spices, cashewnut, coconut, cocoa, arecanut, root
and tuber crops, medicinal and aromatic plants etc. India is the largest producer of fruits, and second
largest producer of vegetables.
Total production of fruits has increased from 29.0 million tons in 1990-91 to 46.9 million tons in 1996-
97. Total production of vegetables has increased from 67.29 million tons in 1994-95 to 80.8 million tons
in 1997-98. India is the largest producer of cashew. Total production of cashew has increased from 3.7
lakh tones in 1991-92 to 4.3 lakh tones in 1997-98.
With the increase in the production of fruits, vegetables and other horticultural products, the value of
exports of these products has continuously been increasing. Total value of exports of fruits, vegetables
and pulses was recorded to be Rs. 1,029 crore in 1998-99 against Rs. 216 crore in 1990-91. The value of
exports of fruits and vegetables alone stand at 414 crore in 1997-98.
Thus horticultural exports of the country contributes nearly 25 per cent of the total agricultural exports.
Impact # 3. Diversification of Agriculture:
Agriculture is not only meeting the demand for food-grains but also other needs of development. In
recent years, agricultural sector has been diversified to produce commercial crops and horticultural
crops viz., fruits, vegetables, spices, cashew, arecanut, coconut and floricultural products like flowers,
orchards etc. dairy and other animal husbandry products.
The demand for these products has been increasing considerably. Thus, there is an ample scope for the
development of agricultural sector both in terms of increased production and trade.
Lecture notes_ABM502_Impact of LPG on Indian Agri business_MS_Unit II

Impact # 4. Increase in Floricultural Output:
About 31,000 hectares of land spread over Karnataka, Tamil Nadu, Andhra Pradesh and West Bengal are
under flower production. Since the inception of liberalisation, commercial farming of floricultural
activities has been increasing gradually. The demand for Indian cut flower is increasing continuously in
the international market.
Total value of exports of cut flowers has increased from Rs. 28.7 crore in 1994-95 to Rs. 60 crore in
1999-2000. Presently, India is having a wide prospect of export of floricultural products, which was
expected to be of Rs. 200 crore ending 1999-2000.
Impact # 5. Agricultural Exports:
Another important emerging trend of agriculture is the increasing volume of agricultural exports.
Agricultural exports are playing an important role in expanding economic activities along with
generating employment opportunities. The Export-Import Policy (Exim) 2002-03 has provided ample
opportunities for increasing the volume of agricultural exports.
Accordingly, the total value of agricultural and allied exports of India has increased from Rs. 6295.2 crore
in 1991-92 to Rs. 23,691 crore in 1999-2000 i.e. 18.8 per cent of country’s total exports as compared to
that of only 10.59 per cent in 1992-93.
Trade policy reforms have provided an opportunity to Indian exporters to export agricultural products to
overseas market. India has the potential to export at least 2 million tons of rice annually which of course
includes nearly 5 lakh tones of high value grain basmati rice. In 1999-2000 more than 2 million tons of
rice were exported.
In order to top the future potential, Indian exporters are required to improve their processing and
packaging facilities to meet international quality standards. Though there has been some diversification
in products exported and spread of destinations, bulk of India’s agricultural exports still conf6rms to
traditional items.
In 1999-2000 agricultural exports were valued at 6.4 billion dollars in which crop based exports coffee,
tea, rice, oil extraction, cashew, spices, cotton etc. added up to over three-fourth of all agricultural
exports. Agricultural export in country’s total export was 17-20 per cent annually during the period
1993-94 to 1999-2000.
In fact, trade policy reforms have given a good opportunity to Indian exporters to export agricultural
products to overseas market. In 1990-1991, over 2 million tons of rice has been sent to international

market. In order to tap future potential, Indian exporters are required to improve their processing and
package facilities.
Impact # 6. Food Processing:
Economic liberalisation has made ample scope for the development and expansion of food processing
industry in India. Fruits and vegetables being a perishable in nature are facing a huge loss worth Rs. 3000
crore every year. In order to prevent such loss, the National Horticulture Board is making necessary
steps for providing infra-structure and for the packaging, storage and transportation of horticultural
products. It also provides employment opportunities in export business.
The Government is also offering necessary incentives by exempting the industry from excise duty. In
order to invite foreign capital into this industry the Government has permitted 51 per cent foreign
equity partnership and also offered prompt approval of foreign technology transfer to the food
processing industry of the country.
Production of processed fruits and vegetables grew by about 13 per cent in 1994 but declined to 5.2 per
cent in 1997-98. However, the exports of processed fruits and vegetables are estimated to increased to
Rs. 889 crore in 1999-2000 as compared to Rs. 745 crore in 1997-98. Production of different variety of
milk products is estimated to have increased to 336 thousand tones in 2000 from 290 thousand tones in
1997.
Export of animal products (including milk products) was expected to increase to Rs. 1,100 crore in 1999-
2000 from Rs. 910 crore in 1997-98. Marine fish harvest experienced a 2.8 per cent growth in production
in 1998- 99 and export of marine products was expected to increase to over Rs. 5500 crore in 1999-2000
from Rs. 4,643 crore in 1997-98.
Under the New Industrial Policy of 1991, 4676 memorandum (IEMs) were filled till September 1998 in
various sub-sectors of the food processing industry, envisaging investment worth Rs. 53,490 crore.
Besides for setting of 100 per cent Export Oriented Units/Joint Ventures in various food processing
sectors, 1978 approvals with a potential investment of Rs. 18,664 crore were granted till September,
1998.
Out of total investment proposals worth Rs. 72,154 crore approved in this industry, the amount of
foreign investment is Rs. 8,940 crore. Till September 1998, 837 projects had gone into commercial
production and total foreign investment inflow in the sector till March 1998 was about Rs. 1,800 crore.
The total installed capacity of fruits and vegetables processing units in India stood at 20.8 lakh tons
during January 1999.
Impact # 7. Rising Productivity of Agricultural Resources:

Another impact of liberalisation has been felt that it boosted the productivity of agricultural resources.
Improvement in the productivity of resources is being done through better allocation of resources and
latest technology between different areas under present circumstances. Stress is laid on export oriented
policies, applying new improved technologies in food processing and marketing and giving stress on
planting crops as per geographical suitability.
Impact # 8. Developing Agriculture in Backward Areas:
In the post-Green Revolution period, application of new agricultural strategy, research and technology
was very much restricted in the production of two main crops i.e. wheat and rice. But under the
liberalisation wave, with the growing demand for agricultural exports, many new areas of agricultural
operations have become favourable and lucrative.
In backward areas, having no irrigation system, dry land farming is becoming popular. The other
activities like horticulture, floriculture, animal husbandry, fishery etc. have been encouraged.
Impact # 9. Developing New Biological Techniques:
During the period of Green revolution, increasing application of chemical fertilisers and pesticides were
encouraged extensively in order to meet the growing demand for food required to feed the rising
population. But, rising population, ever-increasing demand for food and unlimited exploitation of
natural resources have created a grave threat to the environment as well, as to the agricultural sector.
In order to save and protect the environment as well as the agricultural sector from any further damage,
increasing use of biological technology for agricultural operation has been favoured and emphasis is
being given to develop new biological technology.
Impact # 10. More Employment Opportunities, in Agricultural Sector:
As a result of Green revolution and mechanisation there is considerable fall in employment

opportunities in the rural areas. Even special employment programmes could not serve the purpose. But
increasing potentiality of the agricultural sector as emerged from the liberalisation/globalisation wave
has set up new trends in horticultural, floricultural and animal product and has created ample
opportunities and scope for employment of huge number of population. This allied sector being labour
intensive can provide better solution to the unemployment problem specially rural India.
Impact # 11. Growing Volume of Subsidies:

The volume of subsidies granted to agriculture, in respect of fertiliser, irrigation and electricity charges
etc. has been increasing in our country. Aggregate subsidies provided by the Central Government are
estimated at Rs. 22,925 crore in 1999-2000 as compared with Rs. 19,644 crore in 1997-98.
Out of these total amount of about 75 per cent is allotted in the area of fertiliser and foodgrains. Under
the present era of liberalisation, although there is a move to reduce the volume of subsidies in the
budget but political compulsion have prevented the government to undertake that move.
Impact # 12.Institutionalisation of Agricultural Credit:
The wave of liberalisation has encouraged the institutional agricultural credit. In the initial stage of post
independence period, Indian farmers were depending too much on unorganised sources of agricultural
credit, i.e. on village money lenders, landlords, traders etc. who charge exorbitantly higher rate of
interest. But with the passage flow of agricultural credit, mainly through commercial banks credit
provided by various agencies has increased from Rs. 16,494 crore in 1993-94 to Rs. 30,976 crore in 1997-
98.
In 1999-2000, it is likely to rise to Rs. 38,054 crore. Thus, the farmers are showing much interest to
collect loan from institutional sources and the recovery of agricultural advances has also increased from
56 per cent in 1993-94 to 63 per cent in 2000-01.
Thus it has been observed that the wave of liberalisation has created several favourable impacts on the
agricultural sector of the country. The emerging trends is felt in the post-liberalisation period include the
rising productivity, growing investment, diversification of the sector, application of modern techniques,
development of horticulture and floriculture, growing volume of exports and development of food
processing industry.
India can avail the opportunity to develop its agricultural and allied sectors which are mostly labour
intensive. It has provided ample scope for the modernisation and development of the agricultural
sector.

UNIT III
ABM 502
Lecture notes
unit iii agroprocessing _trends_ABM

502_Lecture notes
Agriculture is the main stay of the Indian economy as it
provides employment to 60% of the country’s work force and
livelihood security to more than 650 million people.
Presently,it contributes around 20% of India’s Gross Domestic
Product (GDP) & around 11% of total exports.
A Plan outlay of Rs.13200.00 crore was approved for the

Department of Agriculture & Cooperation (DAC) for the Tenth
Five Year Plan as against an outlay of Rs.9153.80 crore in the
Ninth Five Year Plan. This implied an increase of 44.20
percent in the plan allocation.
unit iii agroprocessing _trends_ABM 502_Lecture notes

AGRICULTURE & ALLIED
TOTAL GDP $ SECTORS
YEAR
10TH PLAN ACTUAL 10TH PLAN ACTUAL
TARGET GROWTH TARGET GROWTH
2002-03 6.8 3.8 3.5 -6.9
2003-04 7.4 8.5 3.7 10.0
2004-05 8.2 7.5 4.0 0.7
2005-06 8.8 8.4 4.2 3.9
2006-07 9.3 4.4
10TH PLAN 8.1 4.0

2002-07
Total food grains production in the country
crossed the 200 million mark for the first time in
1998-99 when it rose to 203.61 million tonnes. It
rose further to 209.80 million tonnes in 1999-
2000. Total food grains production declined
steeply to 196.81 million tonnes in 2000-01,
before it reached a high level of 212.85 million
tonnes in 2001-02.

YEAR PRODUCTION PER CAPITA NET
(MILLION TONNES) AVAILABILITY
(GRAMS PER DAY)
GROSS NET
1996-1997 199.44 174.51 503.1
1997-1998 192.26 168.23 447.0
1998-1999 203.61 178.19 465.7
1999-2000 209.80 183.58 454.4
2000-2001 196.81 172.21 416.2
2001-2002 212.85 186.24 494.1
2002-2003 174.77 152.42 437.6
2003-2004 213.19 186.78 462.7
2004-2005 198.36 173.56 422.4

 Oilseeds production in the country has fluctuated
around 20 million tonnes in recent years except in
2002-03 when it declined sharply to 14.84 million
tonnes due to the drought in 2002. In 1998-99 oilseed
production reached a record level of 24.75 million
tonnes, which further rose to 25.19 million tonnes in
2003-04. In 2004-05 the production of Oilseeds
declined to 24.35 million tonnes. The total oilseeds
production in 2005-06 (4th advance estimates) is
estimated at 27.73 million tonnes which is an all time
record. The total kharif oilseeds production in 2006-
07 is estimated at 13.24 million tonnes which is lower
than the production estimated at 16.84 million
tonnes in the previous year during the season.
 The rainfall from the southwest monsoon in 2006
was 1 % below the long period average. Among
the four homogeneous regions maximum
deficiency in rainfall from South West monsoon
was in North-east India (17%) followed by North
west India (6%) and South peninsula (5%). The
Central India received rainfall which exceeded
the long period average by 16%. Out of the 533
meteorological districts, 112 districts (22%)
received excess rainfall whereas 193 districts
(37%) received normal rainfall. The rainfall was
deficient in 195 districts (38%) while it was
scanty in 17 districts (3% ).
The net sown area in India is 140.88 million
hectares, which accounts for 42.86 percent of
the total geographical area of 328.73 million
hectares. Area sown more than once is 49.76
million hectares, which works out to 35.32
percent of the net sown area. This means that
the cropping intensity, (percentage of gross
cropped area to net sown area), in the country is
135.3 percent. The net irrigated area is 55.1
million hectares, which works out to only 39.11
percent of the net sown area. The gross irrigated
area is 76.82 million hectares, implying irrigation
intensity at 139.4 percent.
Agro processing is defined as set of techno-
economic activities, applied to all the
procedures, originating from agricultural farm,
livestock, aquaculture sources and forests for
their conservation, handling and value addition
to make them usable as food, feed, fiber, fuel
or industrial raw materials.
Agro processing is now regarded as the sunrise
sector of the Indian economy in view of its
large potential for growth and likely socio-
economic impact specifically on employment
and income generation.

1. Agriculture produce refinement equipment such as
cleaners, graders and driers for on- form
operations as well as industrial operations.
2. Processing and equipments for boiling of rice,
preparation of puffed rice and flaked rice.
3. Development of processes and equipment for
processing of pulses to produce dhal for higher
recovery and better quality.
4. Development of driers using agricultural residue,
by products and solar energy.
5. Processing and canning of meat, meat products and
fish.

Major problems faced by these units are-:
1. Low capacity utilization
2. Poor recovery of finished products
3. Low product quality
4. Unreliable assured power supply

1. Wheat Processing
Wheat Processing includes-:
a. Stone grinding by hand
b. Chakkis/gharats
c. Roller Mills-: it involves four steps-:
 Cleaning
 Tempering
 Blending
 Grinding and Separating

2. Processing of Pulses
Processing of pulses includes-:
a. Cleaning
b. Dampening
c. Tempering
d. Splitting
e. Husking

3. Processing of Oilseeds
Processing of oilseeds includes-:
a. Bullock Driven Ghani Method
b. Electric Driven Ghani Method
c. Expeller Method
d. Solvent Extraction Method

4. Processing of Fruits & Vegetables
Processing of Fruits & vegetables includes-:
 Jam
 Jellies
 Squash
 Syrup
 Pickles
 Sauces
 Frozen Vegetables
 Hydrated Vegetables

Agro based industries scenario
and their future in India
unit iii ABM 502

INTRODUCTION
INDIAN AGRICULTURE
INDUSTRY
CROPS LIVESTOCK FORESTRY FISHING
unit iii ABM 502

INTRODUCTION
• Agriculture Industry plays a vital role in India’s
economy
• India is 2nd larger producer of agriculture product.
• India accounts for 7.68 percent of total global

agricultural output.
• GDP of Industry sector is $495.62 billion and

world rank is 12.
unit iii ABM 502

INTRODUCTION
• 58 per cent of the rural households depend
on agriculture.
• Horticulture output, comprising fruits,

vegetables and spices – about 306 million
tonnes (MT) in 2017-18.
• The share of agriculture, livestock, forestry

and fishery was 15.35 per cent of the Gross
Value Added (GVA) during 2015–16 .
unit iii ABM 502

AGRICULTURE INDUSTRY
IN INDIA
unit iii ABM 502

SIZE OF AGRO INDUSTRY
• Multiple factors have worked together to facilitate
growth in the agriculture sector in India.
– Growth in household income and consumption
– Expansion in the food processing sector
– Increase in agricultural exports
unit iii ABM 502

SIZE OF AGRI INDUSTRY
Agricultural
product’s size Food Grain
Production
Pulses
24.06 MT
282.23 MT
Milk
Sugar
19.5%
186.31 MT
production
Fruits and
Spices
Vegetables
80 lakh MT
306.5 MT
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GEOGRAPHICAL DISTRIBUTION
• All Indian states play a key role in the agrarian development of
India.
• The total arable territory in India is 15,73,50,000 km square.
• Represents about 52.92% of the overall land zone of the country.
• Major Dry land farming crops are ragi, bajra, moong,

gram, and guar (fodder crops).
• Major wetland farming crops are rice, jute, and sugarcane.
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OUTPUT PER ANNUM
• Agricultural productivity = Agriculture Outputs/Agriculture Inputs
• In wheat India's average yield in 2013 of 3075 kg/ha is lower than

the world average of 3257 kg/ha
• Paddy yield close to 6000 kg/ha
• The rate of agro-GDP growth is 2 percent per annum against a

target of at least 4 percent.
unit iii ABM 502

OUTPUT PER ANNUM
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MARKET CAPITALIZATION
• Turnover of total Food Market is Rs. 250000 crores
of which value added food products is Rs. 80000
crores.
• Indian Agriculture industry contributes to 35% GDP

and employees 65% population.
• Consumer food segment have top priority among

FII’s and FDI’s.
unit iii ABM 502

Small
Medium
and
Large scale industries
unit iii ABM 502

Small
Medium
Large
unit iii ABM 502

SMALL SCALE
– Agro
Industries
Ginger Oil
Production
Dried
Flower
Business
Coconut
Oil
Production
unit iii ABM 502

MEDIUM
SCALE- Agro
Industries
Groundnut Oil
Jaggery
Groundnut
Grapes Wine Processing
Fruit
unit iii Jam
ABM 502
LARGE SCALE- Agro
Industries
Wheat Rice Sugar Cane
Spices Tea Cotton

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Poultry Industry in
India
•Fastest growing segments in Agriculture

•Production rising to 8% P.A.
•Increasing Scale of Operation
•Exports
unit iii ABM 502

Fishing Industry in
India
• Fourth largest industry in India

• Growth
• Economic Benefits
• Aquaculture
• Distribution of this Industry in different states
unit iii ABM 502

Dairy Industry
• India is “the Oyster” of the Global Dairy Indutry

• India with 134mn cows and 125mn buffaloes, has
the largest population of cattle in the world.
• Indian production has increased by 4 per cent.
• The top five milk producing nations in the world are
India ,USA, Russia, Germany and France.
unit iii ABM 502

Processed Food
Segment
unit iii ABM 502

IMPORTANCE OF
AGRICULTURE IN INDIAN
ECONOMY
unit iii ABM 502

Agricultural Development Under
the Plans
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Causes for low Agricultural
Productivity
unit iii ABM 502

Indian Agricultural Development
Retrospect and Prospect
unit iii ABM 502

Top 10 Agriculture companies in India
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Top Indian agriculture based
companies contribution in agro sector
14
12
10
2 Series1
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CASIRJ Volume 5 Issue 11 [Year - 2014] ISSN 2319 – 9202
Policies for agro-industries and Contribution of Agro-industries industry

in Generation of Income of Farmers.
Dr. Anil Dogra

Indian agriculture drew most of its inputs locally from the village and the farm. Modern inputs,
like chemical fertilizers, pesticides, tractors and other agricultural implements, pump sets, diesel,
gas and power, had little import in the overall agricultural inputs. Agro- industries were
essentially perceived as first level post- harvest processing of farm produce. Agro, village,
cottage and rural industries meant the same set of economic activities. The expressions were
interchangeable. Even when agro- industries have been assigned a special place in the successive
Five Year Plans, a good deal of confusion continues to persist re garding their coverage. It is not
very clear whether agro- industries are to denote only the activities directly related to agriculture
or the total farm output and related activities. A broad-based classification on this would help
appropriate classification of dairy farming, poultry, piggery and other farm activities. Similarly, a
clear-cut view should be taken on whether tea, coffee, rubber, spices and other plantations are to
be classified as a category separate from agricultural activity.
Under the inspiration of Mahatma Gandhi, the national struggle for India's political
independence witnessed a concomitant struggle for the preservation, protection and
encouragement of rural industries. The unequal competition from cheap mill- made products
threatened employment and livelihood of the rural artisans and craftsmen. The preference for
Khadi vis-a-vis mill cloth, and cottage and village industry products vis-a-vis the urban and mill-
made products was motivated from a realization that the experience of urban handicraft centres
might also get extended to rural non-agricultural activity and the cottage and village industries.
Gandhi put a premium on simplicity in life style and consumption. The Gandhian strategy for
Indian development was linked to enhanced utilization of the vast mass of surplus manpower and
its active involvement in production processes. The Gandhian ideology was not only economic
but also social and political. In the Gandhian idiom, cottage and village industries represent a
support structure to a life style that is more moral than economic. Villages keep the workers in
close touch with balmy open spaces and nature in all its peace and pleasantness.
International Research Journal of Commerce Arts and Science

http://www.casirj.com Page 156
The vision of agro- industries/rural industries, as projected by the political leadership during t he
pre-independence era, had some serious limitations, the most significant ones being that it did
not project itself to the likely impact of:
(i) the spread of literacy and technical education,

(ii) availability of alternative technologies,
(iii) the growth of mass media,
(iv) the changing aspirations of the people and the youth in particular, and
(v) easy availability of power and electricity.
The truth is that agro and village industries were seen in terms of production in a traditional
village and not the village of the future in a free and modern India. It was not comprehended that
occupational structure, employment of women and a variety of gainful employment
opportunities, especially in the service sectors, could grow rapidly with cheap and efficient
transport, recognition of environmental and other factors associated with large industrial
complexes, and urbanization. Agro industries, as traditionally understood, could also not
accommodate regional specialization to exploit comparative and locational advantages. It also
remained un-appreciated that techniques of production are not always independent of the socio-
economic system. Continuance with the traditional technologies could only help provide
protection to the caste system and whatever goes with its justification.
Agro- industries have also been viewed as a safety valve that needs to be built within rural areas
to absorb surplus labour and provide relief to the problem of large scale disguised
unemployment. A good many Indian official reports and other important writings make a plea
for agro- industries in the context of rural- urban migration. Absence of employment opportunities
within the village, it is suggested, is the main push factor.
Contribution Agro-industries in Generation of Income and Employme nt of Farme rs:
Impact of expansion of agro units in creation of income and opportunity for people in particular
areas where concerned units are located has been examined through taking a sample of 1080
farm households, consisting 720 diversified and 360 non-diversified farm households from the
nearby areas of different agro- units in 18 sample districts.

 Average family size of sample farm households was of 6.14 members and average age of
the owners of farms was 45.20 years.
 87 percent diversified and 2 percent un-diversified farm households owned land of below
2.5 acres which shows scarcity in availability of land with farm households has been
restricting them for initiating diversification in farming system.
 38 percent and 31 percent farmers had secondary and elementary level of education while
only 15 percent farmers mainly who owned land of below 2.5 acres were illiterate.
 96 percent farmers had agriculture as their principle occupation and its share in total
income of farm households was 72 percent. Average size of cultivated land per farm
household accounted only 3.26 acres.
 Value of output of farm produces per household was Rs 199 thousand and 77 percent of it
was sold out by the farm households.
 Value of net returns per acre together of all crops was Rs.13 thousand which varied
highest at Rs.39 thousand for vegetables/ spices to lowest at Rs. 8 thousand for cereals.
 Per hectare returns in growing different crops accounted relatively much higher for
diversified households as compared to nondiversified households accounting for Rs. 13
thousand and Rs 8 thousands respectively because the former groups were selling a larger
part of their different agricultural produces than the latter groups of farmers.
 Value of per household sale of agricultural produces was Rs 15.42 lakh which varied
between Rs. 69 lakh for commercial crops to Rs 105 for floriculture.
 Supply of a highest proportion of 35 percent agricultural produces was carried out to the
processing units followed by 32 percent to the contractors and 30 perce nt directly in the
markets.
 Commercials crops were largely being purchased by the processers while the fruits were
procured by the pre-harvest contractors from the farmers and largest proportion of
vegetables and oilseed were sold out in the markets.
 Directly selling to processers was as the most preferable arrangement for a highest
proportion of 45 percent farmers and their proportion were positively increasing
according to increase of farm sizes.
 A majority of 61 percent farmers were satisfied with their present marketing

arrangements for disposal of their produces.
 Non availability of adequate prices and inadequate demand of their produces in the
markets were the main problems farmers.
 Diversified farmers were mainly reaping greater opportunities than the nondiversified
farmers in terms of deriving higher income through supplying different agro-produces to
the processers.
Suggestions for Policy Recomme ndation
Based of the finding of present study, personal discussions held with the entrepreneurs of
different products of agro-units and general observations of the study team during survey work
the study forward following recommendations for policy action:
1. Timely supply of raw materials in require quantity should be ensured through

establishing raw material banks in specific to particular product group of industries in
areas where they are largely concentrated.
2. Development of marketing facilities in clustered of villages is necessary for realization of
better prices of farm produces and motivating farmers for adopting changing copping
system.
3. The rate of value added tax imposed by the State Government should be reduced.
4. The interference of Government Officials in different stages of operation of the units
should be strictly avoided so that the industry can operate efficiently.
5. The State Government should ensure regularity in supply of power in industrial areas.
6. The State Government should introduced policies for providing subsidised financial
incentives in the form of capital subsidy cum loan at starting of the units especially in
industrially backward districts.
7. Introduction of a scheme as entrepreneurship training and apprenticeship for IIT diploma
holders seems necessary for improving capacity building for both young generation
willing to start agro-units and skilled labours respectively.
8. The transportation subsidy on procurement of raw materials from different destinations
should be introduced for minimising the cost of production.

9. The provision of social security for all categories of workers at enterprise level should be
made mandatory to attract rural- urban migration.
10. There is a need for skill development programme for un-skilled labour from the labour
dept to increase the supply of skilled labour force.
11. Retirement benefits scheme for workers can control the movement of workers from one
to the other units as they leave parent unit after acquiring different occupation specific
basic skill and training.
12. Free hand is given to unit to remove nuisance creating workers in unit.
13. ITIs should be strengthened to impart skill formation among human resources as per the
requirement of units located in particular areas.
14. Vocational training courses in the form of apprentice scheme for skill formation among
the students of ITI should be imparted through large units.
15. Labour laws should be withdrawn on matters of removing non-productive and problem
creating labours.
16. There is a need to improve law and order situation in industrial areas.
17. In failure, sickness of unit’s govt should provide its claim out of assets available /
remained with unit to owners.
18. Multiple formalities of banks in extending loan should be reduced.
19. Technology up gradation in certain matters of production processes which cannot reduce
employment is required to make products more competitive.
References
1. Glover, D., and K. Kusterer. 1990. Small Farmers, Big Business: Contract Farming and
Rural Development. New York: St. Martin’s Press.
2. Goyal, S. K. 1994. “Policies Towards Development of Agro-industries in India”. In G. S.
Bhalla, ed., Economic Liberalization and Indian Agriculture, Chapter VII (pp. 241–286).
New Delhi: Institute for Studies in Industrial Development.
3. Gulati, A., A. Sharma, K Sharma, D. Shipra, and V. Chhabra. 1994. Export
Competitiveness of Selected Agricultural Commodities. New Delhi: National Council of
applied Economic Research. India, Central Statistical Organization. National Accounts

Statistics 1995, 1998. Ministry of Planning and Programme Implementation. New Delhi:
Government of India.
4. India, Ministry of Agriculture. Area and Production of Principal Crops in India, various
issues. New Delhi: Government of India. India, Ministry of Finance. Economic Survey,
various issue. New Delhi: Government of India.

LEGAL AND REGULATORY FRAMEWORK
Food Safety and Agri-business is an emerging dynamic area in India. There has been a lot of
activity in this area and the government has also been updating the related laws in order to
regulate the field more effectively.
After the Food Safety and Standards Act waspassed in 2006, the Ministry of Health
andFamily Welfare established an Authority calledFood Safety and Standards Authority of
India(FSSAI) in furtherance of achieving theobjectives of the Act.
As a result of the Act coming into force, variousother Acts dealing with issues relating to
foodwere repealed.Therefore, at present, it is the FSSAI that laysdown and regulates the
standards to befollowed during the manufacture, storage, export, import, sale and
distribution of food andfood items. Plus, with the Food Safety andAgribusiness sector
showing a healthy growth,the current trend is takeover of the food testinglabs by the
companies, facilitated by a mucheffective regime.
Regulatory Framework
 The Standards of Weights and MeasuresAct, 1976 and the Standards of Weights and
Measures (Packaged Commodities) Rules, 1977 (SWMA).
 The Prevention of Food Adulteration Act,1954 and the Prevention of

FoodAdulteration Rules, 1955 and its firstamendment, 2003 (PFA).
 The Fruit Products Order, 1955 (FPO)
 The Meat Food Products Order, 1973(MFPO)
 The Edible Oil Packaging Order, 1998
 Food Safety and Standard Act, 2006 (FSS Act) and corresponding Rules &
Regulation, 2011
Lecture_notes_ABM502_Unit III_Regulatory framework_MS

REGISTRATION & LICENSE
All Food Business operators in the country haveto be registered or licensed in accordance
withthe procedures laid down hereunder:
Registration of Petty Food Business (Turnover not exceeding 12 lakhs)
 All petty food business operators shallregister themselves with the

registeringauthority by submitting an application forregistration as prescribed.
 The petty food manufacturer shall followthe prescribed basic hygiene and
safetyrequirements and provide a self-attesteddeclaration of adherence to
theserequirements with the application.
 Thereafter, the registering authority willconsider the application and may
eithergrant registration or reject it with reasonsrecorded in writing or issue notice
forinspection, within 7 days of receipt of anapplication for registration.
 If the application is accepted, theregistering authority will issue a
registrationcertificate and a photo identity card, aftercompleting the process. Such
certificateshall be displayed at a prominent place atall times within the premises or
vehicle orcart or any other place where the personcarries on sale / manufacture of
food incase of petty food business.
License for food business (turnover exceeding 12 lakhs)
 No person shall commence any foodbusiness unless he possess valid license.

 Provided that any person or food businessoperator carrying on food business on
thedate of notification of latest relevantregulations, under a license, registration
orpermission, as the case may be, shall gettheir existing license converted into
thelicense / registration under the latestrelevant law by making an application tothe
licensing / registering authority aftercomplying with the prescribed
safetyrequirements, within one year ofnotification of these regulations.
 Non-compliance with the aboverequirement by a food business operatorwill attract
penalty.

 License for commencing or carrying on foodbusiness is granted by the Central
Licensing
 Authority, provided that Food Authoritymay through notification make suchchanges
or modify the list given in theSchedule I of Food Safety and Standards(Licensing and
Registration of FoodBusiness) Rules, 2011 as considerednecessary.
 License for commencing or carrying on foodbusiness, which are not covered
underSchedule 1 of Food Safety and Standards(Licensing and Registration of
FoodBusiness) Rules, 2011, shall be granted bythe concerned state / UTs
licensingauthority.
License for food subjected to treatment of irradiation
No person shall manufacture, import, sell, stockand exhibit for distribution or sale any
article offood which has been subjected to thetreatment of irradiation, except under a
licenseobtained from Department of Atomic Energyunder the Atomic Energy (Control of
Irradiationof Food) Regulations, 1996.
Prohibition on manufacture, repair or sale of weight or measure without licence
No person shall manufacture, repair or sell, oroffer, expose or possess for repair or sale,
anyweight or measure unless he holds a licence issued by the Controller under the
LegalMetrology Act, 2009, however, provided that no licence to repair shall be required by
amanufacturer for repair of his own weight ormeasure in a State other than the State
ofmanufacture of the same.
Registration of manufacturers, packers and importers
Every business entity who or which pre-packs orimports any commodity for sale,
distribution ordelivery shall obtain a registration certificatefrom the Director or the
Controller under theLegal Metrology Act, 2009.

PACKAGING AND LABELLING OF FOOD COMMODITIES
Food Safety and Standards (Packaging &Labelling) Regulations, 2011 and LegalMetrology
Packaged Commodities Rules, 2011have laid the requirements for packaging andlabelling
pre-packaged food commodities whichmust be mandatorily followed while packagingand
labelling such commodities.
FDI IN THE FOOD SAFETY AND AGRIBUSINESS
100% FDI through automatic route is permittedin the following Agricultural activities:
a) Floriculture, Horticulture, Apiculture andCultivation of Vegetables & Mushroomsunder

controlled conditions;
b) Development and production of Seeds andplanting material;
c) Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture, under

controlled conditions; and
d) Services related to agro and allied sectors.
WHO CAN AVAIL SERVICES
Business entities and companies involved in thefollowing sectors and activities can avail
ourservices:

STAKEHOLDERS IN THE ESTABLISHMENT OF ENABLING ENVIRONMENTS
Indian agriculture is faced with several challenges, as also uncommonopportunities. The

challenges in terms of climate change and landdegradation and increasing global trade
restrictions are also providingopportunities to redefine the ways we have to deal with the
production andpost-harvest processes. These include immense possibilities of applying
toolsof biotechnology and ICT in our endeavours and complimenting strengths in different
areas for achieving higher efficiencies. A new paradigm that hasemerged in the recent
years to address the problems and the potentials in aholistic manner is the ‘Public-Private
Partnership’.
The Public-Private Partnerships are viewed as the governance strategyto minimize

transaction costs and co-ordinating and enforcing relations between partners engaged in
production of goods and services. They enablean optimal policy approach to promote social
and economic development,bringing together efficiency, flexibility and competence of the
private sectorwith the accountability, long-term perspective and social interest of the
publicsector. Both the partners have mutual gains from such arrangements. Privatebenefits
from the R&D are usually company gains that stem from costreduction and improved
quality and increased quantity of sales’ products.They also relate to strategic goals such as
market penetration, improvedcompetitiveness, exploration of new markets or market
power. Public benefitsinclude a wide array of positive social, environmental and economic
effectsinfluencing livelihoods of ultimate beneficiaries. These could be consumersas also
others involved in production, processing and marketing.
In the context of Indian agriculture, we have had fruitful interactionsbetween the public-
funded institutions and private sector in several areas such as seed production, farm
implements and machinery, diseasediagnostics and vaccines, value-addition and post-
harvest processing incereals, pulses, oilseeds, fruits and vegetables, milk, meat and fish,
producttesting and evaluation. While the public-funded organizations havesignificant
research results and the ability to absorb uncertainties of payoffs,the private sector seems
to have an edge in factoring clients into designof technologies and diffusion processes.

Public-private Interactions
The private sector plays decisive roles in India’s agricultural transformation today, driving
productivity growth and creating value and jobs in supply chains “from farm to fork”. These
roles are, however, conditioned by government, which has the power to support or in
extremis prevent the private sector from functioning.
Private investment responds to changes in the business climate, which is the consequence
of many factors. They include governance and institutions, law and order, respect for
property rights, a functioning regulatory system and financial sector, and public investment
and policies of different kinds. How government manages these factors is absolutely
crucial. The choices being made are political in nature and best interpreted in historical
perspective. When it comes to implementation, there is a technocratic dimension as well.
India’s well-designed and well-intentioned policies in agriculture have sometimes not
delivered the expected results because of shortfalls in their on-the-ground implementation.
There is a strong need for appropriate regulation and well-administered enabling policies.
Regulatory reform is in many respects succeeding at the center, but not yet backed up by
coherent action in the states. Competition for private investment in food value chains
across states may prompt local measures such as tax breaks to counteract structural
effects. But there is a wider reform agenda. In agricultural marketing, for example, this
should foster agro-industrial linkages, farm productivity and off-farm employment.
Measures here include APMC Act reform, rationalization of taxes on agricultural
commodities, e-trading and disintermediation.
In addition, there would appear to be a case for public expenditure and investment reform.
Public investment in agriculture is in decline, as we have shown. This is a source of
concern, not only for farming itself, but for the broader rural economy. It is generally
surmised that public investment in infrastructure, services and public goods such as roads
and broadband connectivity also crowds in private investment.
An important reason why public investment in agriculture is declining is that it is being

displaced by rising subsidies in given budgets, in particular for fertilizer and power. These

subsidies cater to special interests and outdated policy priorities at the expense of public
goods. Since the mid-1980s, they have claimed a growing share of public expenditure in
agriculture. The public goods/subsidies imbalance is believed to interfere with the pace of
additional private investment, implying rates of agricultural development and growth
below potential. It also encourages both wasteful uses of natural resources and agronomic
choices with questionable effects on the environment and sustainability.
Where does this leave us at the end of this discussion? The private sector will continue to
drive India’s agricultural transformation. To do its job well – creating value innovatively,
competitively and profitably – it needs implicit governmental guidance and enabling
support. The government’s challenge is to supply this in the best possible way.

unit iii ABM 502 Lecture notes RPCAU
SABRM
 Rapid agril and industrial development
 Rapid expansion of opportunities for industrial
development
 Progressive reduction of social and economic
disparities
 Removal of poverty and attainment of self
reliance

SABRM
Meaning and Basic Objectives of IP
IP means rules, regulations, principles, policies and
procedures laid down by govt for regulating,
developing and controlling industrial
undertakings in the country by:
◦ Prescribing roles of public, private, joint and co-
operative sectors
◦ Indicating role of small, medium and large enterprises
◦ Incorporating fiscal, monetary policies, tariff policy and
labour policy
◦ Deciding attitude towards foreign capital and role of
MNCs

SABRM
Initially, Objectives of IP
 Achieving Socialist pattern

 Preventing undue concentration of eco. power
 Achieving eco. growth and industrial growth
 Reducing regional disparities
 Developing heavy and capital goods industry through public
sector
 Providing opportunities for gainful employment
 Faster economic growth and self sustained economy
 Protecting and growing co-operative and small scale sectors
 Poverty alleviation

SABRM
 Industrial Policy resolution 1948
 Industrial Policy resolution 1956
 Industrial Policy 1973
 Industrial Policy Statement 1980

SABRM
Stress on role of state in the development of industry
and divided industrial activities into four broad
areas:
 Exclusive monopoly of central government (atomic
energy, railway transport etc)
 Items to be undertaken only by the state (coal, iron,
aircraft etc)
 Items of basic importance planned and regulated by
the central government (Salt, automobiles, tractors,
heavy machinery, fertilizers, cement, sugar, paper
etc)
 Remaining items left for private sector

SABRM
 First FYP was completed and parliament adopted socialist
pattern of society with mixed pattern of society.
 New classification was adopted:
◦ Exclusive responsibility of state (17 industries)
◦ Progressively state owned but private sector to support efforts
of the state (12 industries)
◦ Rest for private sector
 Fair and non- discriminating treatment for private sector
 Encouragement to Small Scale Sector
 Removing regional disparities
 The need for the provision of amenities for labour
 Attitude towards foreign capital (ownership & effective
control)

SABRM
 Unemployment,
 Rural-urban disparities,
 Rate of Investment stagnated,
 Rate of growth of industrial output
stagnated to 3-4 per cent and
 Incidence of Industrial Sickness

SABRM
An extension of IP 1956 and with the objectives of
growth, social justice and self-reliance:
 State would be directly responsible for ind.
Development
 Role of public sector was further stressed. Specific
roles for public and private sector
 Initiative towards development of joint sector
 Foreign Investment in specific sectors after proper
screening with special reference to Technological
expertise, export possibilities and overall effect on
the BOP position
 Cooperatives (specifically in agriculture) and Small
Scale assigned special role.

SABRM
 Main Thrust-
◦ Preventing monopoly and concentration of economic power
◦ Maximising production of consumer goods
◦ Making industry responsive to social needs
◦ Generation of rural employment opportunities
 Priorities
◦ Development of Small Scale and Cottage industries. Reserved items for SS
increased from 180 to 500
◦ Areas for large scale sector – basic, capital goods, high tech and other
industries not in SSS
◦ Approach towards large scale – Public fund only for public or SS enterprises
◦ Expanding role of public sector as producer and supplier of essential
consumer goods
◦ Approach towards sick units – what is the cost of maintaining employment
◦ Approach towards foreign collaboration – ownership should remain in the
hands of Indian nationals and technology import only in high priority areas .
SABRM
Public sector was given importance for the reason of greater reliability,
large Investment required with longer gestation period. Government
committed for rapid and balanced industrialisation for the benefit of
common masses. Factors considered were ecological balance, mergers
and amalgamations, correcting ind. Sickness and takeovers of sick
units and foreign collaboration. Main measures were:
 Effective operational management of PSUs
 Integrating industrial devt in private sector to promote SSUs (in each
district a nucleus plant)
 Redefining Small units
◦ Tiny units- Rs 1 lakh to Rs 2 lakh
◦ SSUs - Rs 10 lakh to Rs 20 lakh
◦ Ancillary - Rs 15 lakh to Rs 25 lakh
 Promotion of industries in Rural areas
 Removal of regional disparities
 Regulation of un-authorised excess capacity
 Concession for automatic expansion (full utilisation of capacity)
 Reliefs for Industrial Sickness to be given if revival is possible.,

SABRM
Despite the impressive growth after IP 1980
statement, serious condition of fiscal deficits,
BOP Crises made India to introduce economic
reforms with following objectives:
◦ Minimising bureaucratic control of the industrial
economy
◦ Liberalising the industrial and economic activities for
integrating indian economy with world economy
◦ Abolition of MRTP for Indian Industry
◦ Streamlining role of Public sector

SABRM
 Industrial licensing
 Foreign investment
 Technology transfer and import of foreign
technology
 Public sector policy
 Policy relating to MRTP Act
 An exclusive small-sector policy

SABRM
 IL dispensed with except in 18 items
 FDI allowed up to 51 % in high priority areas
 MRTP abolished
 Automatic clearance for import of capital goods,
provided foreign exchange requirements are met
through foreign equity
 Automatic permission for foreign technology
agreements in high priority industries up to a sum of Rs
1 crore
 Foreign equity proposals need to be accompanied by
foreign technology agreement
Contd..
SABRM
 Broad-banding permitted with no additional
Investment in plant & machinery (existing & new
ind. units)
 Pre-eminent role of public sector in eight core
sectors (arms & ammunitions, mineral oils, rail
transport and mining of coal & minerals)
 Disinvestment to be offered to mutual funds,
financial institutions, general public and workers
 Chronic industrial units to be referred to BIFR

SABRM
 Excise duty on capital goods and import duties were
reduced
 CRR and SLR reduced
 Five years tax holiday to industries in backward areas
and for all power projects
 Manufacturing of readymade garments relaxed for large
industries which was reserved for Small Scale
 IPR 1993 facilitated early detection of sick units
 1993- some specific powers were granted to 100 %
export oriented units
 Industrial licensing for all bulk drugs was abolished
 Private sector and foreign investment permitted in
infrastructure and telecom

SABRM
1998-99
 Union budget substantially increased allocation for
energy, transport and communication
 Number of items removed from the products list
reserved for SSIs
 Tariff structure was revised to provide a level playing
field to domestic industry
1999-2000
 Rationalising excise duty structure by reducing the
existing 11 rates to only 3
 Tax incentives for facilitating industrial restructuring
through mergers and amalgamations

SABRM
 Tax incentives for facilitating industrial re-structuring
through mergers and amalgamations
 Removal of custom duty anomaly on steel
 Extension of technology up-gradation fund scheme
for textile industry to spinning industry
 Support to domestic industry by improving minimum
5% custom duty on the majority of zero import duty
capital projects sector
 Extending tax holidays to infrastructure and power
projects
 Giving a strong thrust to road construction by
imposing surcharge on deisel
 De-reservation of readymade garments
SABRM
 A royalty up to 5 % of domestic sales & 8 % of
export sales along with lump-sum payment for up
to 1 crore allowed to remove delays and
uncertainty between Indian firms and foreign
firms

SABRM
 SSI limits redefined (1980, 1991, 1997 and 2000)
 Credit policy 1997 : 40% of available funds of commercial banks

SSIs having investment in P&M upto 5 lakhs, 20 % to having
investment in P&M upto 5-25 lakhs and rest 40 % to others.
 A package was made to facilitate working of SSIs by setting up

export development centers, market promotion through co-op.
and other organisations, simplification of rules and regulations

SABRM
Enterprises engaged in the manufacture or production, processing or preservation
of goods as specified below:
 A micro enterprise is an enterprise where investment in plant and machinery does
not exceed Rs. 25 lakh;
 A small enterprise is an enterprise where the investment in plant and machinery is
more than Rs. 25 lakh but does not exceed Rs. 5 crore;
 A medium enterprise is an enterprise where the investment in plant and machinery
is more than Rs.5 crore but does not exceed Rs.10 crore.
In case of the above enterprises, investment in plant and machinery is the original
cost excluding land and building and the items specified by the Ministry of Small
Scale Industries.
Enterprises engaged in providing or rendering of services and whose investment in
equipment (original cost excluding land and building and furniture, fittings and
other items not directly related to the service rendered or as may be notified
under the MSMED Act, 2006 are specified below:
 A micro enterprise is an enterprise where the investment in equipment does not
exceed Rs. 10 lakh;
 A small enterprise is an enterprise where the investment in equipment is more
than Rs.10 lakh but does not exceed Rs. 2 crore;
 A medium enterprise is an enterprise where the investment in equipment is more
than Rs. 2 crore but does not exceed Rs. 5 crore.

SABRM
UNIT IV
Trends and dimensions in agribusiness environment and policy
ICT for Agriculture
One of the challenges for farmers in rural India is their lack of access to market information. This creates
an imbalance in bargaining power with urban buyers which are big companies that have the resources
and information to influence the market. Other than market information, a farmer needs to know about
weather on a day to day basis, about new technologies and various government schemes for farmer
welfare. With the use of ICT, this information asymmetry can be solved effectively.
Until now in India among various media, radio, television, literature and newspapers are certainly most
utilised by the extension workers to transfer agricultural technology to the huge illiterate and literate
segments of the rural populace. But this approach has some major drawbacks one, there is limited scope
to get feedback from farmers and second it is not demand driven. One farmer may require information
about new rice variety, but radio and newspaper may be giving information about sugarcane. These
anomalies can be effectively solved by using IT tools. Through these, we can give exact information that
a farmer might be looking for without any delay. Also it can be a two-way process using interactive tools
and farmers’ opinions and queries would reach the desired officers within seconds.
The Government is actively promoting use of ICT to reach the farmers. Some of the initiatives are
described as below:
i) KrishiVigyanKendras(KVK) form the backboneof information and technology dissemination in

India. At present, around 630 KVKs are in operation whereas several new ones are being established.
These KVKs work as a link between scientific community and the Indian farmer by demonstrating new
technology at district level. The present Government has asked KVKs to use more and more ICT tools in
their work to reach the remotest farmer. Generous funding is being provided for this.
ii) MeraGaonMera Gaurav is a scheme in whichAgri-Scientists would go to villages and

helpfarmers adopt new technologies. Again, ICT can be very effective in this. Scientists can form
whatsApp and facebook groups with youth of the villages and interact with them more frequently.
iii) The Government is working on linking all agricultural colleges of India through IT. This way
there would be more interaction among the academics so that any good technology developed
anywhere would reach other parts without much delay.
iv) Easy access to internet is a problem in India, especially in rural hinterland. In many villages
network coverage is poor. Further, not everybody can afford a laptop or smart phone in rural India. The
problem of connectivity would be largely solved by connecting all Gram Panchayats through cable
broadband under Digital India Initiative. Also Common ServiceCentresin villages will make sure that
even thepoorest have access to the affordable internet services.
Unit IV_trends in ABM_ABM502_Lecture notes_MS_RPCAU_SABRM

v) Kisan Call Centre is an expert advisory system.The farmers need to call the toll free number
1800-180-1551 to seek expert advice on different matters related to agriculture and allied sectors.
mKisan Portal
It (http://mkisan.gov.in) is an effort to provide information to the farmer at the single place. We know
that internet penetration in the countrysideis still abysmally low, therefore, mobile messaging can be
the most effective tool. So an SMS service on this portal was also launched on July 16, 2013 by the
President of India.
This mKisan SMS Portal for farmers enables all Central and State government organisations in
agriculture and allied sectors to give information/ services/advisories to farmers through SMS in their
language, preference is given to agricultural practices and location. Semi-literate and illiterate farmers
have also been targeted to be reached through voice messages.
In addition to above, various farming related apps can be downloaded from mKisan portal. E.g.-
i) KisanSuvidha- it is an omnibus mobile appdeveloped to help farmers by providing relevant

information to them quickly. This app has following information-
- information on weather of current day and next 5 days,
- market prices,
- agro advisories,
- plant protection,
- Integrated Pest Management (IPM) practices
ii) PusaKrishi: The app will provide farmers withinformation related to new varieties of crops
developed by Indian Council of Agriculture Research (ICAR), resource conserving cultivation practices as
well as farm machinery.
iii) Bhuvan Hailstorm App: A mobile app has beendeveloped to capture crop loss due to hailstorm.
Agriculture Officer will go to the field with mobile or tablet loaded with this mobile app. The captured
data will automatically be plotted to Bhuvan Portal and analysis can be done easily. This will reduce the
delays in the payment of compensation to the farmers.
iv) Crop Insurance App– It will provide all the information about government crop insurance
scheme. It can be used to calculate the Insurance Premium for notified crops based on area, coverage
amount and loan amount in case of loanee farmer.
v) AgriMarket- This mobile app can be used to get the market price of crops in the markets within
50 km of the device’s location. There is another option to get price of any market and any crop in case
person does not want to use GPS location.

vi) PashuPoshan App- With its help balanced ration isformulated while optimising the cost
considering animal profile, i.e. cattle or buffalo, age, milk production, milk fat, and feeding regime etc.
and milk producers are advised to adjust the quantity of locally available feed ingredients offered to
their animals along with mineral mixture. This app has been developed by National Dairy Development
Board (NDDB).
ICT in Dairy Sector
Emphasing on the ‘White Revolution’, in his budget speech, Union Finance Minister made an allocation
of Rs 850 crore for four programmes— PashudhanSanjeevani, Nakul SwasthyaPatra,e-PashudhanHaat,
and National Genomics Centre.
1. PashudhanSanjivani: an Animal Wellness Programme; encompassing setting up of Emergency

Help Lines, provision of Animal Health cards (‘Nakul Swasthya Patra’) along with UID
identification and a National Data Base
2. Nakul SwasthyaPatrais a ‘Animal Health Card’that can help the dairy farmer to keep a record of
his livestock, as well as ready information on the age and dates on which he should get his
animals vaccinated and inseminated. The card would keep track of the veterinarian who has
given the medicine, vaccination, artificial insemination and genetic background of the bull or
semen used.
3. E- PashudhanHaat”: an e- market portal for bovine germplasm for connecting breeders and
farmers of indigenous bovine breeds. E- PashudhanHaatwants to create an online platform to
buy and sell cattle.
4. National Genomic Centre (NGC): Establishment of National Genomic Centre for enhancing milk
production and productivity of indigenous breeds.
It is a known fact that farmers dependoninformal channels such as friends and relatives tobuy and sell
their cattle. Therefore, a need for avirtual livestock market was long felt. ‘Health Card’of an animal
integrated with e-PashudhanHaat,can help farmers in buying the desired cattle. Thiscan be associated
with PashuPosahnapp also.
Also, farmers would be able to keep thepast record of their cattle e.g. health, fertility,production, etc.
This way, many concepts of geneticsand breeding could be encouraged to develop dairysector.
Another area for IT application in dairying canbe automatic milking systems which are
computercontrolledstand-alone systems that milk the dairycattle without human labour involved.
ICT for Effective Implementation of Welfare Schemes
Every year, government spends billions onthe welfare of the poor. As around two-third ofthe total
population and large number of the poorreside in rural areas, most of these welfare schemesare

targeted at the rural populations. Use of ICTcan improve the efficacy of these schemes, plugleakages
and eradicate corruption. Some examplesare described as follows:
1. ICT will be used in Pradhan MantriFasalBimaYojanain a big way. In this, a farmer will have to
send the photo of his damaged crop to authorities on net. Then the government will also access
damage through satellite imagery of the field. After that insurance claim will be directly
transferred to farmers’ account. Thus delays and corruption in payment of claims would not be
there. This scheme has the potential to change the way farmers’ look at crop insurance.
2. The Government is investing a lot in irrigation through Pradhan MantriKrishiSinchaiYojana. IT

can be used here also for Smart Agriculture by measuring soil moisture through and then
automatically supplying water through drip irrigation.
3. Leakages in Public Distribution System can be plugged by connecting the ration shop through
internet and using biometric authentication system of beneficiary.
4. Through Direct Benefit Transfers, the government is trying to give subsidy directly in the bank
account of the beneficiary. This has effectively stopped black marketing of subsidised LPG
cylinders.
ICT in Rural Education and Skill Training
Thanks to the relentless efforts by the government and schemes like mid-day meal, India has achieved
universal enrolment at primary level. But one worrying fact is that learning outcomes of enrolled
children are very abysmal. Attention needs to be focused on this now. Using ICT tools in education can
help improve the learning among the kids e.g. through projector and computer, teachers can make
children understand complex concepts easily. But problem here would be to train the teachers in use of
ICT tools so that their attitude towards teaching may be changed.
The Government is promoting use of ICT through RashtriyaMadhyamikShikshaAbhiyan. Under this

following steps are being taken-
 The establishment of smart schools, which shall be technology demonstrators.

 Provision for engagement of an exclusive teacher for ICT, training all teachers in use of ICT.
 Development of e-Content.
 National Award for teachers using ICT in schools in the teaching learning process.
Also a project called e-Basta is conceived under Digital India Initiative to make school books accessible in
digital form ase-Booksto be read and used on tablets and laptops.
Further, ICT can be used in skilling rural youth under various Government skilling programmes e.g. Skill
India, PM Kaushal VikasYojana.

ICT for Rural Health Sector
Healthcare is the right of every individual but lack of quality infrastructure, dearth of qualified medical
functionaries, and non-access to basic medicines makes it difficult for the poor to access Medicare.
There are few Primary Health Centres in villages and many of them do not have doctors as no one wants
to be posted in remote rural areas. This can be solved effectively through Telemedicine in which a
doctor sitting in a city can interact with the patient in the remote village and prescribe medication. This
is not only cheap but also convenient and less time consuming.
Also apps like ‘MeraDoctor’ are launched by private sector which offers WhatsApp-like chat sessions
between patients and licensed doctors to answer questions.
Government has also adopted ICT in health by issuing biometric smartcards to the beneficiaries under
RastriyaSwasthyaBima Suraksha Yojana.
ICT for Marketing Needs in Rural India
ICT in rural areas will provide unique opportunities to producers of rural products,agriculture/agro-
processing products, rural handicrafts etc. to have direct access to markets. It can also be used to
promote Village and heritage tourism. Many handicrafts are made by the women in the villages which
can be sold online to outer world.
One important reform undertaken by the Government in the field of agri-marketing is e-National
Agriculture Market (e-NAM). It is a well-definedplan to integrate the mandis through internet. It
enables a farmer to sell his produce anywhere in India depending on the highest price which means a
trader in Mumbai can buy a farmer’s produce kept inmandiof Delhi.

The need for safety nets
Complementing efforts to increase agricultural productivity and employment is India’s triple innovation
system (JAM), consisting of Jan Dhan (the Prime Minister’s initiative to open universal bank accounts,
depositing Rs1000 [US$15.4] per household), Aadhaar (a unique 12-digit ID number for citizens) and
mobile phones.
Between them, these factors have provided a platform for expansion of India's public safety nets. The
Public Distribution System (PDS), the world’s largest safety net of its kind, distributes food grains and
essential commodities via a network of over 521,000 Fair Price Shops (FPSs). More recently, the Modi
government has focused on reforming PDS using new technologies. There is now far less pilfering thanks
to the digitisation of 230 million ration cards, 56% of which are strengthened with a universal ID and
Aadhaar. Several states have now installed electronic point-of-sale devices at FPSs to track sales of food
grains to cardholders on a real-time basis. A much debated policy shift - in-kind cash transfers in place of
food distribution - is also being facilitated by digital technology.
Since 2014, liquid petroleum gas (LPG) subsidies to over 176 million consumers have transferred over
Rs.400 billion ($6.2 billion) directly to beneficiaries’ bank accounts. Through GOI’s 'LPG Give It Up
Campaign', 12 million consumers voluntarily gave up their subsidies to provide greater access to LPG for
their more underprivileged neighbours. Nearly 6.3 million new LPG connections have been provided to
poor families in 2015–16, with a target of providing 50 million LPG connections over three years.
Further, the Mahatma Gandhi National Rural Employment Guarantee Scheme, (MGNREGS), the largest
in the world, guarantees up to 100 days of rural employment for those in need of employment at Rs.
100 (US$1.5)/day. Using DBTs to pay beneficiaries has reduced transfer costs, waste and corruption -
and sidestepping any possible misallocation of funds transferred from central to state to district to
panchayats for distribution.

Agricultural Pricing; policy and
methods
UNIT 4 Agricultural price policies ABM 502

MS notes
Producer Price (Agricultural Commodities)
A producer price is the average price or unit

value received by farmers in the domestic
market for a specific agricultural commodity
produced
Agricultural Price Policy is a tool to influence

the price of agricultural product.
MS notes
Objectives of Price policy
It may differ from country to country depends
upon stage of development.
Objectives include;
- To meet the domestic consumption
requirement government promotes balanced
increase in production.
- To provide price stability, meeting national
targets as set by the planners.
MS notes
• Fair and Remunerative Prices (for sugarcane)
It is the minimum price that sugar mills have to pay
to sugarcane farmers
Announced since 2009, earlier it was SMP
Buffer Stock Policy:

Govt builds up stock, release when price are rising
and to meet emergencies like droughts, crop
failures, floods and crop damages
Public Distribution system

MS notes
Issue Price: Price at which the government
supplies produce to the fair price shops and
the ration depots.
FCI release produce at the issue price

The difference between the MSP and the issue
price is subsidy

MS notes
• The government formulated price policy for agricultural
produce to secure remunerative prices for farmers to
encourage them to invest more in agricultural production.
• The 1st five year plan was concerned with ensuring that the
prices of food grains were held stable at levels within the
reach of the poor section of the community.
• 3rd five year plan states that ‘producer of food grains must get
a reasonable returns.’
• 4th plan document for the first time, besides accepting the
support price for main agricultural commodities like food
grains, sugarcane, jute and cotton also aimed at strengthening
the machinery of procurement to realize the purpose of
support price programme.

MS notes
• 7th plan emphasise that APP(Agricultural Price Policy) needs to
be concerned with maintaining scale of relative crop prices so
that supply can be brought in line with respective demand,
also market infrastructure should be adequate.
• Mainly agricultural prices have 3 functions:

- To allocate resources
- To distribute income
- To induce capital formation

MS notes
Efficient Market Structure and Price Policy
The price that the farmer gets for his agricultural

produce depends upon the organizational and
operational efficiency of the market structure.
It is no enough to have a Price

support/procurement policy for agricultural
commodities , in fact it is even more important to
develop a market structure which enables the
farmer to realise at least the MSP
MS notes
Determinants of MSP
• While recommending price policy of various
commodities under its mandate, the Commission
keeps in mind the various Terms of Reference (ToR)
given to CACP in 2009. Accordingly, it analyzes:
• Demand and supply; cost of production; price trends

in the market, both domestic and international; inter
crop price parity; terms of trade between agriculture
and non- agriculture and likely implications of MSP
on consumers of that product.

MS notes
Evaluation study on MSP by PEO
• Reference period for study – 2007 to 2011
• Study covered 14 States, 36 Districts, 72
Blocks, 144 Villages and 1440 Households
Major findings:
65% of small farmers earned 60 % of their
annual income from agriculture
81% of cultivators were aware of MSP fixed by
government but only 10% knew about MSP
before sowing season
MS notes
• Source of awareness
18% of farmers through their own efforts
7% knew from state officials at district to gram
panchayat level
11% were aware from FCI officials
34% received from knowledgeable persons such
as village headman, Sarpanches, Village school
teachers and gram sewaks

MS notes
Mode of Payment
• 32% through cash
• 40% by cheques
• 27% from bank deposits
• Time period towards price received by farmers

range from single day to one month (about
51% received it after 1 week and 5% received
after one month)
MS notes
Suggestions by committee
• Improved procurement facilities such as drying
yards, weighing bridges etc.
• Small and marginal farmers can be provided with

some exemption in Fair Average Quality (FAQ) to
provide them with a source of income
• Procurement center should be at village level

itself to overcome transportation cost

MS notes
Government of India has been procuring foodgrains ever since
the beginning of the First Five Year Plan.
Year (Duration) Procurement of Food grains (Qty in

million tones)
1952 3.48
1965 4.03
1970 6.67
1971 8.85
Note: During seventies, procurement of food grains averaged at 10 million tones (8.7
per centof total food grains production) and ranged between a low of 5.7 million tones
in 1974 to a high of 13.8 million tones in 1979
1985-90 17
1990-95 23
1995-2000 25

MS notes
Year Wheat (April- March) Rice(October- Total (Million tones)
September)
2001-02 20.63 22.13 42.76
2002-03 19.05 16.42 35.47
2003-04 15.80 22.83 38.63
2004-05 16.80 24.68 41.48
2005-06 14.79 27.66 42.15
2006-07 9.23 25.11 34.34
2007-08 11.13 28.74 39.87
2008-09 22.69 34.10 56.79
2009-10 25.38 32.03 57.41
2010-11 22.51 34.10 56.71
2011-12 28.34 35.03 63.37
2012-13 38.15 34.02 72.17
2013-14 25.09 31.10 56.19
2014-15 28.02 21 49.02
Source: Economic survey: VariousUNIT
issues and Agricultural
4 Agricultural price policiesStatistics
ABM 502 at a glance
MS notes
• State wise procurement indicates that, Punjab and Haryana
continue to be the leading states, contributing 67 per cent
during 2013-14. MP has also increased its share in wheat
procurement during the current decade.
• The foodgrains production is estimated at an all-time high of

272 million tonnes in 2016-17, with kharif foodgrains
production at 137.5 million tones, wheat procurement
reached 23 million tonnes (July 2016).
• Thus, the country is likely to maintain a comfortable position

in terms of food stocks.

MS notes
• Procurement of wheat is nearly 30 percent of marketed
surplus and most of the procurement (90 percent) is done in
Punjab, Haryana and Madhya Pradesh.
• In the absence of procurement, market prices would have

been much lower and thus all the farmers are indirectly
benefited from procurement.
• However, there is a need to increase procurement of wheat in

other states, such as Uttar Pradesh (the largest producer),
Rajasthan and Bihar.

MS notes
• An examination of factors that influence the size of
procurement of foodgrains reveals that variations in
production, as also the relationship between procurement
prices and open market prices, generally affect the size of
procurement of rice and wheat.
• The responsibility for the procurement of foodgrains has been

entrusted by the government to the FCI, cooperative
marketing societies and Civil Supplies Departments.
• It is very difficult to procure foodgrains up to the targeted

quantity during the short marketing season.

MS notes
In many years, the targeted quantity could not be procured because farmers
were reluctant to sell to government agencies, various reasons are:
i. Farmers preferred to sell foodgrains to traders to fulfill their

debt obligations.
ii. Traders and consumers purchased directly from farmers at a
price higher than the procurement price, which reduced the
quantity of market arrivals
iii. Farmers faced a number of difficulties when they sold
foodgrains to government agency, such as delayed payment,
payment by cheque instead of cash; delay in the market for
their turn to deliver ad weigh the produce; rejection of the
produce under the pretext of poor quality, and so on
iv. Farmers had to travel long distances to reach the purchasing
centres
MS notes
• Food grains distribution has stopped from year 2017-
18 and replaced by direct cash transfer so that
people can use the cash to buy goods of their choice
from open market, may lead to private entrants.
Dismantling Public Distribution System for foreign

players ?
• According to information provided by Ministry of

Consumer Affairs, Food and Public Distribution in Lok
Sabha on July 25, 2017 all the ration shops in
Chandigarh and Puducherry have been closed.
MS notes
Non Price Recommendation for Agricultural crops for
the marketing season 2017-18
1. Focus on improving crop yields

Reduction in the yield gap alone can provide
an additional production of about 3.5 million
tonnes of pulses and 4-8 million tonnes of
oilseeds. A special programme on ‘Bridging
the Yield Gap’ with effective participation of
farmers, researchers and extension agencies
need to be implemented.

MS notes
2. Push towards Pulses and Oil seeds: Too much
dependence on imports in case of edible oils.
Edible oil imports at 14.6 million tonnes in
2015-16 account for nearly 70 percent of total
consumption in the country.
National Mission on Oilseeds and Oil Palm

MS notes
3. Effective procurement operations: The efforts
of decentralized procurement must continue
and extended to eastern Uttar Pradesh, Bihar,
West Bengal and Assam, where market prices
fall below MSP.
4. Review stock limits and EXIM Policy for

pulses

MS notes
5. Soil Health Management and Fertilizer Usage:
There is a need to promote balanced use of primary
nutrients and address deficiency of secondary and
micronutrients.
CACP recommends increase in urea prices and higher

subsidy on P & K fertilisers to promote balanced use of
fertiliser nutrients without putting any additional
burden on farmers as well as on subsidy.
Soil Health Card based recommendations of

nutrients/fertilizers requirements will help farmers to
improve productivity by promoting appropriate use of
nutrients.

MS notes
6. Managing Risks: The Pradhan Mantri Fasal
Bima Yojana (PMFBY)
7. Market Reforms and Infrastructure

Development: This is essential for effective
functioning of e-NAM and other market
development schemes. Also, efforts should be
made for promotion of practices of product
grading, sorting and dissemination of real time
price and market information to farmers.

MS notes
8. Agricultural wages and share of human labour
in the cost of cultivation are rising and
therefore, farm mechanization through grants
and institutional credit for purchase of farm
machines and their access to small and
marginal farmers on custom hiring basis
should be promoted. E.g. EM3 Agri services

MS notes
9. Water and fertilizers are two critical factors
affecting crop yields. Farmers can also be
incentivized for using water saving irrigation
practices. Fertilizer use during the last three
years has been stable but is likely to increase
in 2016-17 with normal rains.
Use of organic manure, crop residues and

green manuring and promotion of
biofertilizers should get high priority in
agricultural development programmes.

MS notes
10. Small and fragmented size of holding. Model Contract
Farming Act 2018
11. Role of States in decentralized procurement:
To improve farmers’ access to markets, reduce market risks
and encourage farmers to grow these crops.
Also, the facilities for cooperatives and FPOs involved in

procurement of paddy and wheat in some states like Bihar
and Madhya Pradesh should be strengthened.
The states have larger role in strengthening technology transfer

system and therefore efforts should be intensified to bridge
the yield gap in pulses and bring green revolution in eastern
India.

MS notes
Price Support Scheme for farmers
• Niti Aayog has worked towards the mechanism for

implementation of MSP (9 March, 2018) for different
agricultural crops.
• However, procurement by Central and State agencies

is limited to rice, wheat and some other course
cereals. Government also procures limited quantity
of oil seed, pulses from NAFED, SFAC and some other
agencies.

MS notes
MIS (Market Intervention Scheme) is
implemented in case of prices falling below
the threshold level in perishable crops which
are not covered under the MSP policy.

MS notes
3 options/concepts were discussed:
1. MAS (Market Assurance Scheme):
Proposes procurement by States and
compensation of losses up to certain extent of
MSP after the procurement and price realization
out of sale of the procured produce.
Center will compensate states for any losses due
to procurement, capped at 30% of the
procurement cost.
States which are in favour of MAS include, Bihar,

Gujarat, Haryana, Jharkhand, Karnataka,
Rajasthan, UK, TN.
MS notes
2. Price Deficiency Procurement Scheme (PDPS)
• Under this scheme, if the sale price is below a

modal price then the farmers may be
compensated to the difference between MSP and
actual price subject to a ceiling which may not
exceed 25% of the MSP.
• No compensation would be due if modal price in

neighboring States is above the MSP. Madhya
Pradesh has already gone for PDPS. Odisha,
Telangana and Chattisgarh have given their nod
for this scheme.
MS notes
Modal Prices
• Modal prices are average market prices for a
particular commodity over a two month
period in a state and neighboring states where
the crop is grown and traded.

MS notes
Example
• if MSP for soybean is Rs. 3050 per quintal and modal
rate is Rs. 2700 per quintal. Now, if farmer sell the
crop at Rs. 2800 per quintal in mandi (wholesale
market), government will pay out Rs. 250 (Rs.
3050(MSP) – 2800 (selling Price)) for ever quintal
sold directly to farmers bank account. However, if the
crop is sold at Rs. 2600 per quintal, state will transfer
only Rs. 350 per quintal (difference between MSP
and modal price).

MS notes
Case of Madhya Pradesh
• The Madhya Pradesh government had announced
that the Bhavantar Bhavantar Bhugtan Yojana
would be implemented for 90 days beginning
October 20, 2018.
• Under which Rs. 500 per quintal reimbursement

to soyabean and maize farmers under the
Bhavantar (price differential) scheme will be
provided if the mandi prices fall below their
respective MSPs.
MS notes
• There are 27.98 lakh farmers in Madhya
Pradesh registered for different price support
schemes. The state has received the Centre’s
approval to undertake price support scheme
(PSS) for groundnut, sesame, niger and moong
crops while soyabean and maize crops will be
under Bhavantar to get the benefit of MSP.

MS notes
• It has been observed by the CACP that under
BBY, the cost incurred by the Government of
Madhya Pradesh is significantly lower (17.85
percent of what was incurred on procurement
at MSP last year), so it can be rolled to PAN
India.

MS notes
3. Private Procurement and Stockist Scheme
• It relates to procurement by private

entrepreneurs at MSP and Government
providing some policy and tax incentives and a
commission to such private entities which may
be decided on the basis of transparent criteria
and bidding for the empanelment of private
players by the State Government to do the
procurement operations.

MS notes
Contd.
• Private procurement option offered great promise as
it reduces the fiscal implications for the government,
involves private entities as partners in agriculture
marketing and improves the competition in the
market.
• The Governments liabilities for storage and post

procurement management and disposal are also
avoided. However, all the three options may not be
implemented for the same crop.

MS notes
• Government stated that more than one options
may be adopted by the States depending upon
their conditions.
• As per news on 12th September 2018, Economic

times; Union Cabinet approves new crop
procurement policy amounting Rs. 15053 crore.
It was announced in July shortly after the
government announced the biggest hike in MSP
for 22 crops.

MS notes
Salient features of new crop procurement
policy
• State governments will be given an option to
choose multiple schemes to protect farmers
when prices fall below the MSP.
• A new scheme 'Price Deficiency Payment

(PDP)' has been framed on the lines of
Madhya Pradesh government's Bhavantar
Bhugtan Yojana (BBY) to protect oilseeds
farmers only.

MS notes
• Under the PDP, the government will pay to
farmers the difference between the MSP and
monthly average price of oilseeds quoted in
wholesale market. This would be
implemented for up to 25 per cent of the
oilseeds production in a state.

MS notes
• Besides this, the states are given option to
rope in private players for oilseeds
procurement on a pilot basis.
• Both PDP and private players' participation

will be exclusively for oilseeds because the
government wants to bring down the
country's import dependence on cooking oils.

MS notes
Policies related to procurement and agricultural prices
Government of India has been procuring food grains ever since the beginning of the First Five Year Plan.
Year (Duration) Procurement of Food grains (Qty in million tones)

1952 3.48
1965 4.03
1970 6.67
1971 8.85
Note: During seventies, procurement of food grains averaged at 10 million tones (8.7 per centof total
food grains production) and ranged between a low of 5.7 million tones in 1974 to a high of 13.8 million
tones in 1979
1985-90 17
1990-95 23
1995-2000 25
Year Wheat (April- March) Rice(October- September) Total (Million tones)

2001-02 20.63 22.13 42.76
2002-03 19.05 16.42 35.47
2003-04 15.80 22.83 38.63
2004-05 16.80 24.68 41.48
2005-06 14.79 27.66 42.15
2006-07 9.23 25.11 34.34
2007-08 11.13 28.74 39.87
2008-09 22.69 34.10 56.79
2009-10 25.38 32.03 57.41
2010-11 22.51 34.10 56.71
2011-12 28.34 35.03 63.37
2012-13 38.15 34.02 72.17
2013-14 25.09 31.10 56.19
2014-15 28.02 21 49.02
Source: Economic survey: Various issues and Agricultural Statistics at a glance
State wise procurement indicates that, Punjab and Haryana continue to be the leading states,
contributing 67 per cent during 2013-14. MP has also increased its share in wheat procurement during
the current decade.
The foodgrains production is estimated at an all-time high of 272 million tonnes in 2016-17, with kharif
foodgrains production at 137.5 million tones, wheat procurement reached 23 million tonnes (July 2016).
Thus, the country is likely to maintain a comfortable position in terms of food stocks. Procurement of
wheat is nearly 30 percent of marketed surplus and most of the procurement (90 percent) is done in
Punjab, Haryana and Madhya Pradesh. In the absence of procurement, market prices would have been
Unit 4_ABM 502_lecture_notes

much lower and thus all the farmers are indirectly benefited from procurement. However, there is a
need to increase procurement of wheat in other states, such as Uttar Pradesh (the largest producer),
Rajasthan and Bihar.
An examination of factors that influence the size of procurement of foodgrains reveals that variations in
production, as also the relationship between procurement prices and open market prices, generally
affect the size of procurement of rice and wheat.
The responsibility for the procurement of foodgrains has been entrusted by the government to the FCI,
cooperative marketing societies and Civil Supplies Departments. These agencies procure the targeted
quantity of foodgrains through their own networks. It is very difficult to procure foodgrains up to the
targeted quantity during the short marketing season. In many years, the targeted quantity could not be
procured because farmers were reluctant to sell to government agencies. The targets could not be
achieved because of the following reasons:
i. Farmers preferred to sell foodgrains to traders to fulfill their debt obligations.
ii. Traders and consumers purchased directly from farmers at a price higher than the procurement price,
which reduced the quantity of market arrivals
iii. Farmers faced a number of difficulties when they sold foodgrains to government agency, such as
delayed payment, payment by cheque instead of cash; delay in the market for their turn to deliver ad
weigh the produce; rejection of the produce under the pretext of poor quality, and so on
iv. Farmers had to travel long distances to reach the purchasing centres
Food grains distribution has stopped from year 2017-18 and replaced by direct cash transfer so that
people can use the cash to buy goods of their choice from open market, which may lead to corporate
clutches.
In India the move towards dismantling the Public Distribution System to reduce the subsidies provided
to the farmers under food security act has already begun. According to information provided by Ministry
of Consumer Affairs, Food and Public Distribution in Lok Sabha on july 25, 2017 all the ration shops in
Chandigarh and Puducherry have been closed.
Non Price Recommendation for kharif crops for the marketing season 2017-18
1. Focus on improving crop yields: Reduction in the yield gap alone can provide an additional
production of about 3.5 million tonnes of pulses and 4-8 million tonnes of oilseeds. A special programme
on ‘Bridging the Yield Gap’ with effective participation of farmers, researchers and extension agencies
need to be implemented.

2. Push towards Pulses and Oil seeds: Too much dependence on imports in case of edible oils. Edible oil
imports at 14.6 million tonnes in 2015-16 account for nearly 70 percent of total consumption in the
country.
3. Effective procurement operations: The efforts of decentralized procurement must continue and
extended to eastern Uttar Pradesh, Bihar, West Bengal and Assam, where market prices fall below MSP.
4. Review stock limits and EXIM Policy for pulses
5. Soil Health Management and Fertilizer Usage: There is a need to promote balanced use of primary
nutrients and address deficiency of secondary and micronutrients. The Commission recommends
increase in urea prices and higher subsidy on P and K fertilisers to promote balanced use of fertiliser
nutrients without putting any additional burden on farmers as well as on subsidy. Soil Health Card based
recommendations of nutrients/fertilizers requirements will help farmers to improve productivity by
promoting appropriate use of nutrients.
6. Managing Risks: The Pradhan Mantri Fasal Bima Yojana (PMFBY)
7. Market Reforms and Infrastructure Development: This is essential for effective functioning of e-NAM
and other market development schemes. Also, efforts should be made for promotion of practices of
product grading, sorting and dissemination of real time price and market information to farmers.
8. Agricultural wages and share of human labour in the cost of cultivation are rising and therefore, the
Commission is of the view that farm mechanization through grants and institutional credit for purchase
of farm machines and their access to small and marginal farmers on custom hiring basis should be
promoted. E.g. EM3 Agri services
9. Water and fertilizers are two critical factors affecting crop yields. Farmers can also be incentivized for
using water saving irrigation practices. Fertilizer use during the last three years has been stable but is
likely to increase in 2016-17 with normal rains. However, measures to promote balanced use of fertilizer
nutrients, use of organic manure, crop residues and green manuring and promotion of biofertilizers
should get high priority in agricultural development programmes.
10. Small and fragmented size of holding. Model Contract Farming Act 2018
11. Role of States in decentralized procurement: In the states where reach of central agencies is limited
should be evolved to improve farmers’ access to markets, reduce market risks and encourage farmers to
grow these crops. Also, the facilities for cooperatives and FPOs involved in procurement of paddy and
wheat in some states like Bihar and Madhya Pradesh should be strengthened. The states have larger
role in strengthening technology transfer system and therefore efforts should be intensified to bridge
the yield gap in pulses and bring green revolution in eastern India.

MSP
Determinants of MSP
While recommending price policy of various commodities under its mandate, the Commission keeps in
mind the various Terms of Reference (ToR) given to CACP in 2009. Accordingly, it analyzes:
Demand and supply; cost of production; price trends in the market, both domestic and international;
inter crop price parity; terms of trade between agriculture and non- agriculture and likely implications of
MSP on consumers of that product.
Price Support Scheme for farmers
Niti Aayog has worked towards the mechanism for implementation of MSP (9 March, 2018) for different
agricultural crops. MSP for 24 agricultural commodities of Kharif and Rabi are announced b government
based on the recommendation of CACP. However, procurement by Central and State agencies is limited
to rice, wheat and some other course cereals. Government also procures limited quantity of oil seed,
pulses from NAFED, SFAC and some other agencies.
MIS (Market Intervention Scheme) is implemented in case of prices falling below the threshold level in
perishable crops which are not covered under the MSP policy.
3 options/concepts were discussed:
1. MAS (Market Assurance Scheme): Proposes procurement by States and compensation of losses upto
certain extent of MSP after the procurement and price realization out of sale of the procured produce.
States which are in favour of MAS include, Bihar, Gujarat, Haryana, Jharkhand, Karnataka, Rajasthan, UK,
TN
2. Price Deficiency Procurement Scheme (PDPS): Under this scheme, if the sale price is below a modal
price then the farmers may be compensated to the difference between MSP and actual price subject to
a ceiling which may not exceed 25% of the MSP. No compensation would be due if modal price in
neighboring States is above the MSP. Madhya Pradesh has already gone for PDPS. Odisha, Telangana
and Chattisgarh have given their nod for this scheme.
The Madhya Pradesh government had announced that the Bhavantar Bhavantar Bhugtan Yojana would
be implemented for 90 days beginning October 20. Under which Rs. 500 per quintal reimbursement to
soyabean and maize farmers under the Bhavantar (price differential) scheme will be provided if the
mandi prices fall below their respective MSPs. There are 27.98 lakh farmers in Madhya Pradesh
registered for different price support schemes. The state has received the Centre’s approval to
undertake price support scheme (PSS) for groundnut, sesame, niger and moong crops while soyabean
and maize crops will be under Bhavantar to get the benefit of MSP. It has been observed by the CACP

that under BBY, the cost incurred by the Government of Madhya Pradesh is significantly lower (17.85
percent of what was incurred on procurement at MSP last year), so it can be rolled to PAN India.
Modal prices are average market prices for a particular commodity over a two month period in a state
and neighboring states where the crop is grown and traded. e.g. if MSP for soybean is Rs. 3050 per
quintal and modal rate is Rs. 2700 per quintal. Now, if farmer sell the crop at Rs. 2800 per quintal in
mandi (wholesale market), government will pay out Rs. 250 (Rs. 3050(MSP) – 2800 (selling Price)) for
ever quintal sold directly to farmers bank account. However, if the crop is sold at Rs. 2600 per quintal,
state will transfer only Rs. 350 per quintal (difference between MSP and modal price).
3. Private Procurement and Stockist Scheme: relates to procurement by private entrepreneurs at MSP
and Government providing some policy and tax incentives and a commission to such private entities
which may be decided on the basis of transparent criteria and bidding for the empanelment of private
players by the State Government to do the procurement operations.
This option offered great promise as it reduces the fiscal implications for the government, involves
private entities as partners in agriculture marketing and improves the competition in the market. The
Governments liabilities for storage and post procurement management and disposal are also avoided.
However, all the three options may not be implemented for the same crop.
Government stated that more than one options may be adopted by the States depending upon their
conditions.
As per news on 12th September 2018, Economic times; Union Cabinet approves new crop procurement
policy amounting Rs. 15053 crore. It was announced in July shortly after the government announced
the biggest hike in MSP for 22 crops.
Salient features:
State governments will be given an option to choose multiple schemes to protect farmers when prices
fall below the MSP.
A new scheme 'Price Deficiency Payment (PDP)' has been framed on the lines of Madhya Pradesh
government's Bhavantar Bhugtan Yojana (BBY) to protect oilseeds farmers only.
Under the PDP, the government will pay to farmers the difference between the MSP and monthly
average price of oilseeds quoted in wholesale market. This would be implemented for up to 25 per cent
of the oilseeds production in a state.
Besides this, the states are given option to rope in private players for oilseeds procurement on a pilot
basis. Both PDP and private players' participation will be exclusively for oilseeds because the
government wants to bring down the country's import dependence on cooking oils.

1
APMC MODEL ACT-2003
unit V ABM 502 Lecture notes Agricultural

marketing policies
2
INITIATIVES OF MARKETING REFORMS

 Amendments in APMC Acts suggested by Expert Committee on
Market Reforms constituted by the Ministry of Agriculture (Report
in June, 2001)
 Expert Committee recommendations discussed in the National

Conference of State Agriculture Marketing Ministers on 27.09.2002
 Committee headed by Additional Secretary (AM), GOI including

State Representatives set up to draft a Model Law for Agri-
Marketing
 Model APMC Act finalized on 09.09.2003 by the Committee and

circulated to States by Central Government
marketing policies
3
SALIENT FEATURES OF MODEL ACT FOR STATE

APMC ACT-2003
 Legal person, grower and local authorities permitted to establish new market in
new area
 No compulsion on grower to sell their produce through existing regulate market
 Establishment of direct purchases centers, consumer/farmer market for direct
sale
 Promotion of public-private partnership in the management and development of
agricultural market
 A separate constitution for separate market for commodities like onion, fruits,
vegetables and flowers

Contd..
marketing policies
4
 A separate chapter to regulate and promote contract farming, arrangements

in the country.
 Prohibition of commission agency in any transaction of agricultural

commodities with the producers
 Market committee to promote contract farming, direct marketing and

farmer consumer markets
 State marketing board to promote standardization, grading, quality

certification, market led extension and trading of farmers and market
functionaries in marketing related areas
 Constitution of State Marketing Standard Bureau for promotion of grading

standardization and quality certification of agricultural produce.

marketing policies
5
IMPACT OF APMC AMENDMENT

 Amendments to the APMC would make the present marketing system more
effective and efficient by removing unnecessary restrictions.
 Promotion of Agricultural Markets’ in private/cooperative sector will

encourage private sector to make massive investments required for
development of alternative marketing infrastructure and supporting services.
 Giant corporations can now set up private markets, not regulated by the market
committee.
 The early APMC Acts restricted the farmer from entering into direct contract
with any processor/ manufacturer as the produce was required to be canalized
through regulated market. In the changed scenario, the producer should be free
to enter into forward contract whether inside or outside the regulated market.
marketing policies

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School of Agribusiness and Rural Management

MBA (Agri Business Management), semester II

Course title: Agribusiness Environment and Policy

Course code: ABM 502 Credit units: 2+0

Instructor: Dr. Mohit Sharma

Agribusiness is a broad theme and its importance in present context cannot be

 To provide a learning exposure to students about the environment where Agri

 To enable student to understand policy environment, public - private policy

 To enable students to appreciate the range of possible government agribusiness

Course description_ABM 502_Mohit Sharma_SABRM_RPCAU_Pusa

 Class participation/individual and group assignments/projects

Mid- Term 30%

End – Term 50%

2. Class Assignments/Term paper/Group projects: Students will be asked for

Guidelines for writing the paper are as follows:

A good policy paper will have the following parts:

Course description_ABM 502_Mohit Sharma_SABRM_RPCAU_Pusa

Some possible policy paper topics:

Homework assignments will be assigned regularly. Homework assignments are

Course description: Provided in hard copy

Unit Topics Assessment criteria

 The Agribusiness Book, by Mukesh Pandey and Deepali Tiwari

Learning outcomes of the course:

- Various linkages of agribusiness in academic, industry and public sector

Other Important Information

1. Late assignments may not be accepted.

Course description_ABM 502_Mohit Sharma_SABRM_RPCAU_Pusa

Course description_ABM 502_Mohit Sharma_SABRM_RPCAU_Pusa

ABM 502_MS_UNIT 1_RPCAU_SABRM

About 2.4% of world’s geography, 4% water

While it needs to sustain 17% population and

ABM 502_MS_UNIT 1_RPCAU_SABRM

• More than 570 million farms, majority small

ABM 502_MS_UNIT 1_RPCAU_SABRM

• Lets define Agribusiness !

ABM 502_MS_UNIT 1_RPCAU_SABRM

ABM 502_MS_UNIT 1_RPCAU_SABRM

“Agribusiness is the sum total of all operations

It is a sensitive business due to climatic factors,

ABM 502_MS_UNIT 1_RPCAU_SABRM

• Simultaneous to the mechanization, has been

ABM 502_MS_UNIT 1_RPCAU_SABRM

• Development of commercial facilities for

• Industrial revolution, textile industry, shifting

ABM 502_MS_UNIT 1_RPCAU_SABRM

• In 1957, agriculture employed about 12% of

• Simultaneous with these improvements, has

ABM 502_MS_UNIT 1_RPCAU_SABRM

Farmers started purchasing equipments from

ABM 502_MS_UNIT 1_RPCAU_SABRM

• It is a product of a complex of evolutionary

ABM 502_MS_UNIT 1_RPCAU_SABRM

ABM 502_MS_UNIT 1_RPCAU_SABRM

• Do we need to change our food system?

• Why do we need to change?

ABM 502_MS_UNIT 1_RPCAU_SABRM

• Will you be able to consume the food in same

ABM 502_MS_UNIT 1_RPCAU_SABRM

• 794 million people suffer from hunger &

• 2 billion people do not have access to vitamins

• There is less diversity of food. 75% of food

ABM 502_MS_UNIT 1_RPCAU_SABRM

ABM 502_MS_UNIT 1_RPCAU_SABRM