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Agricultural Marketing

Concept and importance

Price fixation in open market
Perfect and imperfect competition
Types of markets
Characteristics of agricultural produce
Functions & functionaries
Agencies involved including Govt.
Co-operative marketing
Government monopoly – Cotton monopoly
Marketing channels
Marketing of Cotton
Marketing of Banana
Costs, margins and price spread
Marketable and marketed surpluses
Export of Onion from India
Export of cut flowers from India
Storage and warehousing
Linking warehousing and marketing credit
Regulated markets

Agricultural marketing is one of the important branches of agricultural economics.

Farmers have one commodity or the other in surplus. This surplus has to be disposed off
or sold so as to earn some money to satisfy other needs, which cannot be satisfied on
the farm or in the village. Thus, agricultural marketing has two-fold objective
i) Sale of surplus commodities and
ii) Buy other commodities to satisfy family needs.

In modern commercial agriculture, the surpluses with farmers are steadily rising so also
their family needs are changing with the change in lifestyle. Therefore, agricultural
marketing has assumed important place. Traditionally, market is place or building where
buying or selling of goods takes place. But in modern times with fast and long distance
communication facilities like telephone becoming available, market is no more restricted
to particular place only, but it has become wider and has assumed regional, national or
even international status. Buying and selling is finalized on telephones only from distant
places. Thus the concept of market has radically changed.

Marketable Surpluses

The concept of marketable surpluse is very important for the development of markets.
Marketable surplus is different in different commodities. Marketable surplus is a surplus
which is available for sale after meeting i) family needs ii) seed requirement iii) kind
wages iv) gifts to relatives and friends etc. In the case of foodgrains surpluses are
generally low. They vary from zero (with small and marginal farmers) to 70-80 percent
with large farmers and in surplus areas. In general marketable surpluses in foodgrains
are in the range of 45 to 50%. In cash crops and in those commodities which are raw
materials of industry, surpluses are 80-100 %. In fruits and vegetables, which are grown
on commercial scale, surpluses are above 90%. Thus, for the commodities which have
large surpluses markets have to be well-organized and efficient ones.

Market functions

Agriculture marketing comprises of all the operations involved in the movement of

produce from the farm till it reaches the ultimate consumer. Several functions are
involved in this process.

They are as follows :

1.Buying and assembling.

2.Transporting and loading/unloading.

Functionaries :

The above functions are carried out by various functionaries which are as follows :

5.Weigh men.

Following agencies carry out marketing (buying and selling) at various stages :

1.Village/Itinerant merchant.
2.Wholesaler in assembling market.
3.Commission agent or Dalal.
4.Preharvest contractor (in fruit crops).
5.Wholesaler in consuming markets.

Types of markets

1.Wholesale markets.
i) In producing area.
ii) In consuming area.
2.Retail market in consuming area.
3.Daily Mandis and weekly markets in rural areas Producers selling directly to local
4.Annual and occasional fairs.

Perfect and imperfect Markets

As per definition, agricultural markets should be perfectly competitive markets as there

are large number of buyers and sellers. But these markets are not really perfectly
competitive. The traders as buyers are generally educated, have full knowledge of
market-practices (demand, supply, prices, etc.) and are organizationally strong. This is
not the case with farmers-sellers. They are mostly ignorant, weak and unorganized.
When the prices are fixed in the open market, the farmers do not get the reasonable and
correct prices as they sell their produce under forced or distress situation. Therefore
these markets are imperfect markets.

Methods of sale

Following methods of fixing prices are observed in various markets

1.Open auction.
2.Closed tender.
3.Under cover or Hatter system.
4.Private agreement.
5.Quoting on sample.
6.Dara sale.

First method i.e. open auction, is most popular and is followed in regulated markets as
prices are fixed in the presence of all concern.

Channels of marketing

Private traders.
1. Government Channel
Producer - Govt. Department - consumer.
2. Co-operative channel Producer>co-operatives->consumer.
3. Private channel
village merchant->wholesaler-> commission agent (Dalal) -> Retailer-> consumer.

In some fruit crops, in addition to the above, there is preharvest contractor who takes
fruit gardens while fruits are still on the trees.

In private channel, there are many intermediaries, which result into high costs and
market margins. Therefore, the commodities become costly for the final consumer and
this reduces the producer’s share in consumer’s prices. This is a traditional channel and
is quite popular with the farmers. Nearly 60 to 70% agricultural produce is sold through
this channel.

The co-operative channel is quite weak in the country. In Maharashtra, this channel is
used partially in important fruit crops like grapes, pomogranate, banana, ber, orange
along with private channel. It is also used in milk in Maharashtra, Gujrathi etc. along
with Govt. and private channels.

Government channel is used mainly for foodgrains like rice, wheat and sugar. In some
essential commodities, when the prices are unduly high or low the Govt. enters into
market to buy the commodities and sell them to protect the interests of both-producer
and consumer. The examples are onion, edible oils etc. Government channel operates
with the co-operative or private channels. In Maharashtra, Govt. channel operates in the
marketing of milk along with co-operative and private channels.

The channels of marketing is an important aspect of agricultural marketing affecting the

prices paid by consumers and shares of them received by the producer. The shorter the
channel, lesser the market costs and cheaper the commodity to the consumer. When the
channel is long with more intermediaries, prices are more and producer’s is less. The
channels of marketing and price for different commodities has been the main focus of
research in agricultural marketing. The channel which provides commodities at cheaper
price to consumer and also ensures greater share to producer is considered as the most
efficient channel Several studies have been carried out in India on this topic for different
commodities and in different regions and the results are of mixed nature due to local
socio-economic conditions and infrastructure facilities.

Normally producer’s shares in different commodity groups are as follows

1.Food grains- 55 to 65%

2.Other commodities- 60 to 70%
3.Fruits- 30 to 40%
4.Vegetables- 40 to 50%

Concept and Importance

The study of agricultural marketing comprises all the operations, and the agencies
conducting them, involved in the movement of farm-produced foods, raw materials
and their derivatives, such as textiles, from the farms to the final consumers, and the
effects of such operations on farmers, middlemen and consumers. Agricultural
marketing is the study of all the activities, agencies and policies involved in the
procurement of farm inputs by the farmers and the movement of agricultural products
from the farms to the consumers. The agricultural marketing system is a link between
the farm and the non-farm sectors. It involves all the aspects of market structure or
system, both functional and institutional, based on technical and economics
considerations, and includes pre and post-harvest operations, assembling, grading,
storage, transportation and distribution. A dynamic and growing, agricultural sector
requires fertilisers, pesticides, farm equipments, machinery, diesel, electricity and
repair services which are produced and supplied by the industry and non-farm
enterprises. The expansion in the size of farm output stimulates forward linkages by
providing surpluses or food and natural fibres which require transportation, storage,
milling or processing, packaging and retailing to the consumers.


Agricultural marketing plays an important role not only in stimulating production and
consumption, but in accelerating the pace of economic development. The agriculture
marketing system plays a dual role in economic development in countries whose
resources are primarily agricultural. Increasing demands for money with which to
purchase other goods leads to increasing sensitivity to relative prices on the part of
the producers, and specialization in the cultivation of those crops on which the returns
are the greatest, subject to socio-cultural, ecological and economic constraints. It is
the marketing system that transmits the crucial price signals.

Agricultural Marketing is one of the manifold problems, which have direct bearing
upon the prosperity of the cultivators, as India is an agricultural country and about
70% of its population depends on agriculture.

Most of the total cultivated area (about 76%) is to under food grains and pulses.
Approximately 33% of the output of food grains, pulses and hearly all of the
productions of cash crops like cotton, sugarcane, oilseeds etc. are marketed as
they remain surplus after meeting the consumption needs of the farmers.
Development of technology, quick means of communication and transportation has
introduced specialization in agriculture.

3 Agriculture supplies raw materials to various industries and therefore, marketing of

such commercial crops like cotton, sugarcane, oilseeds etc. assumes greater
With the introduction of green revolution agricultural production in general and
food grains in particularly has substantially increased. Agriculture once looked as a
subsistance sector is slowly changing to a surplus and business proposition.

5 The interaction among producers, market functionaries, consumers and

government that determine the cost of marketing and sharing of this cost among
the various participants.
6 The producer, middleman and consumer look upon the marketing process from
their own individual point of view. The producer is primarily concerned with selling
his products.
7 Any increase in the efficiency of the marketing process, which results in lower
costs of distribution at lower prices to consumers, really brings about an increase
in the national income.
A reduction in the cost of marketing is a direct benefit to the society.

9 Marketing process brings a new varieties, qualities and beneficial goods to

consumers and therefore, marketing acts as a line between production and
10 Scientific, systematic marketing stabilizes the price level.
11 An improved marketing system will stimulate the growth of number of agrobased
industries mainly in the field of processing.
A marketing system can become a direct source of new technical knowledge and
induce farmers to adopt upto date scientific methods of cultivation.

Marketing is therefore, playing an important role in the economic development and

stability of a country.

Price Fixation and Open Market

Price Fixation

Another method of intervention in the market mechanism has been the announcement of
different administered prices viz., minimum support prices, statutory minimum prices,
procurement prices and issue prices. These prices are announced for different
agricultural crops by the govt. of India on the recommendations of Commission for
Agricultural Costs and Prices. (CACP).

Aspects while recommending the price

 The need for incentives to farmers for the adoption of improved technology and
maximization of production.
 The need for ensuring a rational utilization of land and other production
 The likely effect of the price policy on the rest of the economy.

The Commission has been recommending two sets of administered prices viz., minimum
support prices and procurement prices.

Minimum Support Price

This is the price fixed by the Govt. to protect the producer – farmers against excessive
fall in price during bumper production years. In case the market price for the commodity
falls below the announced minimum price due to bumper production and glut in the
market, govt. agencies purchase the entire quantity offered by the farmers at the
announced minimum price. Minimum support prices for different agricultural crops viz.,
Foodgrains, oilseeds, fibre crops, sugarcane and tobacco are announced by the govt. of
India before the start of the sowing season of the crop.

Procurement prices

Procurement price of a commodity refers to the price at which govt. procures the
commodity from producers/manufactures for maintaining the buffer stock or the public
distribution system. These prices are announced by the govt. of India on the
recommendations of the Commission for Agricultural Costs and Prices before the harvest
season of the crop. At these announced prices, govt. procures the foodgrains (wheat,
paddy and coarse grains) in the needed quantity either for maintaining the buffer stock
or for the distribution through fair price shops. Procurement prices are fixed generally at
a level, which is somewhat higher than the level of minimum support prices but lower
than the prevailing market prices. The procurement prices are lower in relation to the
actual market prices and as such farmers and traders are not willing to sell their stocks
voluntarily to the govt. In such circumstances, the govt. procures food grains at the
announced procurement prices either by imposing a levy on the farmers, or on the
traders or through other methods.

Procurement prices are announced before the sowing season. As a result, the
procurement price itself become the support price at which the govt. purchased all the
foodgrains offered for sale. Procurement prices also become the minimum support prices
because the govt. was bound to purchase the foodgrains offered by the producers for

Open Market

Under this system arhatia or broker invites bids for the produce of the highest bidder is
sold the produce. It is better than any other system as sale is by an open auction. The
buyers and sellers know clearly the price quoted and leaves no room for being cheated.
The system ensures fair dealing to the parties and secures a premium for superior


 Phar System

By this method, one bid is given for all the lots in a particular shop and all the lots are
sold at that price

 Random bid System

By this method, the commission agent invites a few buyers when the produce is brought
to his shop for sale. All the prospective buyers are not informed. As a result, the
competition is poor.

 Roster Bid System

Bidding starts from a point in the market at a notified time about which the prospective
buyers are given information in advance. The bidding party after the auction of the
produce at one shop, moves to the next in a clock-wise or anti-clockwise direction till the
auction of the produce at all shops is over, or the scheduled auction time expires. On the
following day, the auction starts from the next point, and so on. The auction is
supervised by the auction clerk or the person nominated by the market committee.


 The seller is able to follow the bidding easily.

 The auction serves as meetings place for the supply of and demand for goods.
 It disposes of the market supply promptly.
 A wide variety of goods are available to buyers for selection.
 Reduces the number of salesmen needed in the process.
 The buyers of small lots are not put to a disadvantage against the buyers of large
 The payment of the price of the good is made immediately after the sale if an
auction has been completed.

 An open auction is very time-consuming process because of the variation in the
quality of the various lots.
 In big market centres, especially in the peak marketing season, the time allotted
for auction is short.
 In an open auction, buyers sometimes join hands. Active participation in it is then
 The auction leads to a "buyers market", for buyers have full information about
the supply of, and demand for, the product.

Perfect and Imperfect Competition

There are various dimensions of a market. Any market may be classified on the basis of
these dimensions. These dimension can be taken as criteria for classification.

On the basis of free intercourse or degree of competition

Perfect markets

Imperfect markets

Perfect Markets

A market is said to be perfect, when all the potential sellers and buyers are promptly
aware of the prices at which transaction takes place. Any buyer can purchase from any

The principle underlying a perfect market expects that there must be a uniform price for
any one standardized commodity at a particular time at any one place. Secondly, there
should not be restriction on the movement of a commodity and thirdly, there must be a
good number of buyers and sellers.

Imperfect Markets

Imperfect markets are where, some buyers or sellers or both are not aware of the offers
made by others. Restrictions for movement of goods exist and different price, rule in the
market for the same at a particular time.

 Monopoly market

It is a market situation, wherein there is only one seller of a commodity.

 Duopoly market

It has two sellers of a commodity in the market.

 Oligopoly market

In this market there are more than two but still a few sellers of commodity.

 Monopolistic competition

A large number of sellers deal in heterogeneous and differentiated form a commodity.

Types of markets

Meaning of market

Markets means a open place or large building where actual buying and selling takes

The market may extend to a locality, village town, region or a country according to the
demand of a commodity. Market includes both place and region in which buyers and
sellers are in free intercourse with one another.

Marketing includes those business activities that direct the flow of goods and services
from producer to consumer.

Types of agricultural markets in India and their classification

Market for agricultural produce may broadly be divided into three categories

1. Wholesale market
2. Retail market
3. Fairs

1. Wholesale markets: These markets are subdivided into

I Primary wholesale markets: These markets are periodically held, either ones or
twice a week. Agricultural produce comes from neighboring villages. These markets
deal in the sale of fruits, vegetables, foodgrains, all household requisites etc. for
e.g. Village market

II Secondary wholesale market: These are also known as mandis. These are situated
generally at district or taluka headquaters. Small merchants purchase from primary
wholesale market and sale in this markets. Some cultivators directly sell their
produce in these markets. Each market comprises area with a 10-20 miles radius.
For e.g. District and taluka market.

III Terminal markets: These are the markets in which the produce is either finally
dispose off , direct to consumer or processors or assemble for shipment to foreign
countries. These markets are the parts where warehouses and storages are
available/ cover a wide area, may be state. For e.g.

Bombay terminal market.

1. Retail markets: These markets are spread all over the city or town subject to
municipal control.
They generally deal in all types of produce and serve the needs of the city people as
well as of the surrounding villages. Particular type of market is located in particular
locality. Cloth market is one locality and grain, vegetable are in different localities.
There is direct selling to consumer.
2. Fairs:
These are held on religious occasions, at pilgrim centre. These markets deal in
livestock, agricultural produce etc. for e.g. Magh Mela at Allahabad. There are
various dimensions of markets. Any market may be classified on the basis of this

I. On the basis of free intercourse or degree of competition

a. Perfect market: A market said to be perfect, when all potential sellers and buyers
are promptly aware of the prices at which transaction takes place, any buyers can
purchase from any sellers. The principle underlying a perfect market expects that
there must be a uniform price for any one standardized commodity at a particular
time at any place, there should not be restriction on the movement of a commodity,
there must be a good number of buyers and sellers.

b. Imperfect market: A market is said to be imperfect where, some buyers or sellers or

both are not aware of the prices at which transactions takes place. There is
restriction for movement of goods.

Imperfect markets are

a. Monopoly market: There is only one seller of the commodity

b. Duopoly market: It has two sellers of a commodity.
c. Oligopoly market: There are more than two but a still a few sellers of commodity
d. Monopolistic competition: A large number of sellers will deal in heterogenous and
differentiated form of a commodity

II. On the basis of time:

a. Very short period markets: These are for few hours and are mostly for highly
perishable commodities like fruits, vegetables, fish, milk, etc.
b. Short period market: In these markets commodities are perishable and can be
traded for some time. This commodities are like foodgrains and oilseeds.
c. Long period markets: Time span available is long to adjust supply to meet demand
even by managing production. These markets can be for machinery and
manufactured goods

III On the basis of nature of commodities (Type of goods transacted):

i.. Commodity markets
ii. Produce exchange- commodities are produced and not manufactured. Generally one
market in one commodity. e.g. cotton exchange Mumbai.

l Manufactured goods markets: These are markets of manufacture and semi

manufactured goods. For e.g. Leather exchange of Kanpur
l precious stones. These are highly specialized and well organized markets of world
for e.g. bullion market of Mumbai

Capital markets :

Money markets: Broad term include a number of agencies providing a finance to

business. These are at large trading centers like Mumbai, London

Foreign exchange market: It is international market and largely concerned with

export and import trade of countries.

Stock exchange : This is market for investments stocks bonds debentures shares
are purchased and sold in different parts of the countries for e.g Calcutta and
Madras stock exchange

IV On the basis of area of coverage:

1 Village Markets: Buying and selling activities are confined among buyers and sellers
of the village or nearby villages mostly for perishable a commodities.

2 Regional markets: (District/ Sate) Buyers and sellers for among commodity are
drawn large area than the local markets in India there generally exist for food

3 National Markets: Buyers and sellers are at National level e,g. Durable goods such
as Jute, Tea.

4 World Markets: Buyers and sellers drawn from the world biggest markets form area
point of view and exist for commodities having world wide demand e.g., Coffee,
Gold, silver.

when the village economy was more or less self sufficient, the marketing of agricultural
produce presented no difficulty, as the farmer sold his produce direct to the consumer on
a cash or barter basis. Agricultural marketing consists of all the functions and services
used in moving the commodities from the producer to the final consumer. It includes not
only the physical movement to the place where the product is wanted but also putting it
into the form and amount is desired and having it ready at the time it is wanted.

Marketing functions: In modern marketing, the agricultural produce has to undergo a

series of transfers or exchanges from one hand to another before it finally reaches the
consumer. This is achieved through three important marketing functions namely

a. Assembling (Concentration)– Concentration pertains to the operations concerned

with the assembly and transport of produce from the field to a common assembling
area or the market.
b. Preparation for consumption( processing) – The produce may be sold, as
obtained from the field, or may be cleaned, graded, processed and packed either by
the farmer or village merchant before it is taken to the market. Some of the
processing is necessary for the conservation of quality.
c. Distribution (Dispersion)– It involves the operations of whole selling and retailing
as various points. By a series of indispensable adjustments and equalizing functions, it
is the task of distribution system o match the available supplies with the existing

The essential functions of agricultural marketing may be describe as follows:

1 Assembling:

Collection of produce for sale in mandis or larger markets is called Assembling.

Assembling is of two types:

i. Bringing together of smaller amounts of produce for greater convenience and

economy in buying, transporting or processing.
ii. Assembling occurs in the distribution of finished products. Wholesaler buy from
many processor to have on hand the commodities wanted by retailers to supply
the consumers.

2.Grading and Standardization :

Grading is the sorting out of the commodities into different groups on the basis of size,
variety, taste, quality, colour etc. Such separation may or may not conform to
established standards. Whereas standardization fixes the grades and does not allow
them vary from season to season and year to year. Grading and standardization are
used interchangeably.
Advantages of Grading and standardization

a. Uniformity between markets is provided

b. Products of similar grade can be stored in bulk
c. Market values are better understood
d. Commodities can be bought and sold without previous examination

Standards provide a basis for market reporting and advertising

3.Processing :

Processing is the conversion of farm produce into more consumable form. E.g.
conversion of wheat into floors, preparation of butter, ghee from milk, hulling of paddy
into rice etc. Processing imparts form utility

a. Surplus produce may be conserved

b. Reduces the work in home


Physical movement of produce from the place of production to the final consumer is
called transportation. Transportation creates place utility. Transportation takes place
through different means like road, rail, air, and water.
5.Storage :

Storage is the holding of produce from time of production until needed by the
consumers. Storing creates time utility. Storage helps to spread out market supply.
Some products are stored for short period whereas fresh fruits, vegetables require cold


Packaging is the packing or covering the product in such sizes and pattern as to be
most Marketable. The objectives of packaging are

a. to facilitate the handling of product

b. to reduce the storage and marketing cost
c. to prevent loss by deterioration and rob
d. to make products more attractive


It relates to dispersing, retailing and marketing of produce. Distribution bridges the

gap between the wholesalers and large number of consumers.

Marketing functionaries (Agencies)

The transfer of produce or goods takes place through a chain of middlemen or

functionaries (agencies).

In a primary market, the main functionaries are the producer, the village, or itinerary
merchant, pre harvest contractors, commission agents, transport agents etc.

In the secondary market all the functionaries of primary market are involved and also
the processing and manufacturing agents are the additional functionaries. Financing
agents, such as shroffs, banks and co-operatives also take part.

In the terminal or export market, the commercial analyst and shipping agent also get
involved in the transfer of goods.

The functionaries have their own setup. They may be individuals, partners or co-
operatives who may buy and sell on ready and future basis, at a price determined by
forces of demand and supply. Each functionary renders some service in the process of
marketing and also earns a varying margin of profit for himself and at same time bears
risks involve in the process.

Agencies Involved Including Government

The peculiar characteristics of agricultural produce such as small and scattered

production, seasonality and persihability of products, transportation and communication
etc. requires a large number of intermediaries between the producer and the ultimate
consumer. All the agencies more or less participate in assembling and distribution of
agricultural products.

Sometimes, agricultural commodities directly pass from producers to consumers. But in

indirect marketing agricultural commodities generally move from producers to
consumers through intermediaries or middlemen. The number of intermediaries may
vary from one to many.


 Producers

Most farmers or producers, perform one or more marketing functions. They sell the
surplus either in the village or in the market. Some farmers, especially the large ones,
assemble the produce of small farmers, transport it to the nearby market, sell it here
and make a profit.

 Middlemen

Middlemen are those individuals or business concerns which specialize in performing the
various marketing functions and rendering such services as are involved in the
marketing of goods.


Wholeselling is the one ion of goods is the wholesale dealers. Wholeselling is the one
that covers activities of all individuals or businessmen, which sell to or negotiate sales
with customers, who buy for resale or industrial use. His position is that of an
intermediary between manufacturer and retailer.

Wholesalers are classified as

I. Local wholesalers, who deliver their purchases to local retailer.

II. Provincial wholesalers some time called as distributor selling to the retailers of a
particular district or a state and
III. National wholesalers located at a strategic place and distribute goods all over the


He is the last link in chain of middleman, who sells directly to consumer. He takes title to
goods, sells and sets up business usually amidst the consumer's groups. He buys his
requirement usually from the wholesalers. Retailers in producing areas may have direct
contact with producers and buys goods from them for resale.

Co-operative Marketing Societies

Main function is that of commission agency i.e.

 Selling the produce of member's.

 They also undertake outright purchases.
 Provide storage facilities for storage and grading and
 Save cultivators from exploitation by traders and help farmers in getting fair price
for their produce.
 Performing functions of processing of raw produce.

Pucca Arhatias

He is the real purchase in the wholesale market on his own behalf of acting for some
businessmen, firms in consuming markets. Big mills (rice, oils, cotton etc.) play as their
agent and order him to purchase certain quantity within a given range of price. When
pucca arhatia trades on his own, he dispose of his produce brought by him through
dealers in different parts of country.

Katcha Arhatia

He also advances money to the cultivators and village banias on the condition that the
produce will be disposed off through him alone and hence charges a very nominal rate of
interest on the money advanced. Katcha arhatia charges commission for services
rendered by him. Important link between the village cultivator or traders on the one

Village Merchants

He is an important agency in the collection of produce and more so when the mando is
situated at a considerable distance from the village. He advances from his shop either on
credit or for exchange of foodgrain or so price given for cultivator's produce. The
quantities of agril. Produce so collected are either disposed off in the mandi or retained
for resale in the village in the processed forms, such as rice, flour, oil etc.

Intinerant Traders

They are small merchants, who move from village to village and buy the produce from
cultivator's house. They give a lower price than selling in the nearby market and in
setting transportation take into consideration, the factors such as cost of transportation,
market charges and profit margin.

Transport Agency

This agency assists in the movement of the produce from one market to another e.g.
railways, trucks, bullock carts, camel carts, tractor trolleys.

Communication Agency

It gives information about the prices prevailing, and quantity available and transactions
e.g. post, telephone, telegraph, newspapers, radio.

Advertising Agency

It enables prospective buyers to know the quality of the product and decide about the
purchase of commodities e.g. newspapers, radio, television, cinema slides.


They put produce for auction and bidding by the buyers.

Government Agencies / Institutions

In addition to individuals, corporate, co-operative and government institutions are
operating in the field of agricultural marketing. Some important institutions are :-

 The State Trading Corporation (STC)

I. To make available supplies of essential commodities to consumers at reasonable

prices on a regular basis;
II. To ensure a fair prices of the produce to the farmers so that there may be an
adequate incentive to increase production;
III. To minimize violent price fluctuations occurring as a result of seasonal variations
in supply and demand;
IV. To arrange for the supply of such inputs as fertilizers and insecticides so that the
tempo of increased production is maintained;
V. To undertake the procurement and maintenance of buffer stock, and their
distribution, whenever and wherever necessary;
VI. To arrange for storage, transportation, packaging and processing;
VII. To check hoarding, black-marketing and profiteering.

 The Food Corporation of India (FCI)

I. To procure a sizable portion of marketable surplus of foodgrains and other

agricultural commodities at incentive prices from the farmers on behalf of the
Central and State Governments;
II. To make timely releases of the stocks through the public distribution system (fair
price shops and controlled items shops)
III. To minimize seasonal price fluctuations and inter-regional price variations in
agricultural commodities
IV. To build up a sizable buffer stock of foodgrains.

 The National Agricultural Co-Operative Marketing Federation (NAFED)

 Cotton Corporation India (CCI)
 All India cotton co-operative federation limited
 Jute corporation of India (JCI)
 National dairy development board (NDDB)
 National oilseeds and vegetable oils development (NOVOD) board
 Tobacco board
 Agricultural processed products and export development agency (APEDA)
 Marine products export development agency (MPEDA)
 The directorate of marketing and inspection,
 Government of India
 State level agricultural marketing departments and agricultural marketing boards
 State and lower level co-operative marketing societies
 Fair price shops
 Consumers co-operative stores, milk unions

Direct Marketing with Consumers

Farmer’s market is an innovative scheme introduced by the Government of Tamil Nadu,

to help the farmers at large. It is the first of its kind in whole India. Such a market was
first started in Madurai on 14.10.1999. As on date, six such market centres are in
existence and the State Government proposes to establish totally 100 farmers markets
in the important centres covering the whole State.

Mode of Operation:

The farmer’s market provides the place for the growers of vegetables and fruits to sell
their produce directly to the people without recourse to the middlemen. These markets
are mainly started to establish a direct link between the farmers and the consumers.
There will be no place for the middlemen to the consumers. When the goods are routed
through middlemen, the farmers are not getting remunerative prices for their produce.
Likewise, as the middlemen at wholesale and retail levels add their respective margins in
the sale prices, the goods are sold at higher prices to the consumers. By eliminating the
middlemen, this scheme aims at benefiting both the farmers as well as the consumers.

The market place is established in the important centres to help the farmers living in and
around that centre. Every market has 80 to 100 small shops or sheds. Each farmer is
allotted a shop to sell his produce. The State Government appoints the marketing
Committee to regulate the marketing Centre. The committee will also have farmers as its
representatives. This Committee identifies the farmers and gives them a permit card.
Such farmers alone are being allotted the shops to market their produce. The farmers
need not pay any rent or Commission for selling their goods at the market. Farmers can
transport their produce to the marketing centres free of cost using State Transport
Corporation Buses.

The market is open for the public from 7.00 A.M.to 7.00 P.M.daily. As and when the
farmers bring their produce to the market, the committee will fix the prices for the same.
The same price will be ruling for that particular commodity for the whole day. The prices
are fixed for different commodities on the basis of previous day prices of that commodity
in the wholesale market.

Benefits to the farmers:

1. In a short period of one month, since farmers’ market came into existence, it was
found that the income of the farmers, who are using the farmers market, has
doubled. This is made possible, as the farmers need not spend any amount
towards handling and marketing their produce.
2. The rise in the farm income of the farmers is also due to the direct marketing of
their produce to the consumers. Wherever middlemen play their role in
distributing the farm produce, the farmers do not get remunerative prices. The
middlemen of a particular area usually form a cartel and accordingly fix low prices
for the agricultural goods. But, the scheme of farmers market enables the
farmers to realise just prices for their produce by eliminating all types of

As the sale at the farmers market is only for cash, the farmers are getting money
immediately. This is absent when they sell their produce to the middlemen. Most of the
traders make delayed payments to the farmers.

Co-operative Marketing Society

When producers of agricultural commodities or any other product form a society with an
objective of carrying out marketing of their produce, such society is called as co-
operative marketing society. The need for co-operative marketing arose due to many
defects observed and experienced in the private and open marketing system. Those are

1. Several malpractices prevail in the marketing of agricultural produce. For

example, arbitrary deductions from the produce, manipulation of weights and
measures and cheating the farmers, collusion between the broker and the buyer
while fixing the prices, delay in payment of amounts due to farmers, etc. The
result is the farmers are indebted to trader - moneylender. In such circumstances
co-operative marketing society can largely help the farmers reduce the
malpractices and offer honest and correct services.
2. There exists a chain of intermediaries between the producer and the final
consumer. They include village merchant, itinerant trader, wholesaler,
commission agent, pre-harvest contractor and retailer. They take their own
margins for the services, they render. But these margins are generally ex-
orbitant, making the commodities costly for the consumers and reducing the
producer's share in the consumer's price. A co-operative marketing society can
eliminate some or all of the intermediaries and can reach to the consumers and
establish direct trade relations with them. This will make commodities cheaper to
the consumers and also ensure good quality of produce to them because much of
the handling is avoided.
3. There are some services such as transport, storage, financing, grading, packing,
loading/unloading which are carried out by some private functionaries who charge
high rates for these services. A co-operative marketing society performs these
services efficiently and at cheaper rates.
4. A co-operative marketing society provides market finance to farmers and ensures
better returns to their produce. Besides marketing society can act as an agent of
credit co-operative society and help to recover loans advanced by credit societies.
At present, most of the financial needs of the farmers are fulfilled by trader -
moneylenders at very high rates of interest and with the condition that they will
sell their produce through them. This can be avoided, if there is co-operative
marketing society.


Under the system of co-operative marketing whole responsibility of marketing is taken

up by the farmers themselves, organized on co-operative basis. The area of operation of
marketing society is usually fixed with reference to local conditions - area based or
commodity based. The commodity-based societies related to grapes, oranges, banana,
pomegranate, etc. have wider jurisdiction covering the major areas growing each crop.
There are societies at the producer's level and they federate at state or national level to
deal with bigger markets including foreign markets for export of their produce.

Membership :

Membership of a co-operative marketing society is open to individual farmer who

produces the crop for which the society is formed. Other co-operative societies in the
area can also become institutional members.


The sources of fund of the society are as under:

1. Share capital
2. Deposits.
3. Loans from higher financial institutions including NABARD.
4. Grants or subsides from the Govt. for godowns, etc.
5. Reserve funds.

The marketing societies require short-term, medium-term and long-term capital

1. Short-term capital is needed for financial advances to members for production,

packing, transport, etc. to meet contingent expenses.
2. Medium- term capital is required for purchasing motor trucks, etc.
3. Long-term loan is required for installation of machinery, construction of building
for godown, storage, etc.

Functions :

1. To arrange for the sale of members produce to the best possible advantage.
2. To undertake activities in connection with grading, pooling and procurement of
produce of the members.
3. To provide storage facilitates to their members by renting or owning the godowns
and thereby facilitate to grant advances against pledge of produce.
4. To protect members from all types of malpractices eliminates the middleman in
the chain of marketing.
5. Co-operative marketing society ensures grading, etc. and supply of good quality
material to consumers.
6. It teaches business methods to farmers and serves them as agency for supply
market information.
7. The society is able to stabilize prices over a long period by adjusting the supply
with the demand.
8. Marketing societies are also encouraged to undertake export trade so that they
can give better prices to their members.

Weak Co-op. Marketing :

Although, many advantages are envisaged in the co-operative marketing the structure
has remained relatively weak as compared to credit co-operatives. There are only about
1000 marketing societies as against 20,000 credit societies in Maharashtra. The
marketing is more difficult involving many technical and commercial aspects. Marketing
of perishable is still more different. Arranging quick transport, arranging storage to avoid
losses, to keep watch on demand - supply position to ensure good prices to members
are all matters need for good marketing. For want of these managerial aspects, desired
number of co-operative marketing societies have not come up and those which were
started could not succeed. Several marketing surveys/studies at farmer's levels have
revealed that among several marketing channels, co-operative channel has offered
greater share of consumer's prices to the producers. Whichever, marketing is
unorganized, farmer - producers have expressed that marketing co-operative societies
should be formed. This was particularly reported in the cases of marketing of

Few Successes:

Inspite of the difficulties encountered in the marketing of perishables like fruits,

vegetables, milk, etc. there are few examples of good success.
1. Maha-grape - co-operative federation marketing grapes in Maharashtra.
2. Co-operatives marketing pomegranate.
3. Co-operatives marketing banana in Jalgaon district.
4. Vegetables co-operatives in Thane District.
5. Milk co-operatives in Maharashtra and Gujarat.
6. Co-operative cotton marketing societies.

Marketing Channels
I. Meaning: Farmers producing agricultural produce are scattered in Knowledge
remote villages while consumers are in semi-urban and urban (Agricultural
areas. This produce has to reach consumers for its final use and Marketing)
consumption. There are different agencies and functionaries
through which this produce passes and reaches the consumer. A
market channel or channel of distribution is therefore defined as
a path traced in the direct or indirect transfer of title of a product
as it moves from a producer to an ultimate consumer or industrial
user. Thus, a channel of distribution of a product is the route
taken by the ownership of goods as they move from the producer
to the consumer or industrial user.
II. Factors affecting channels: There are several channels of
distribution depending upon type of produce or commodity. Each
commodity group has slightly different channel. The factors are :
1. Perishable nature of produce .e.g. fruits, vegetables,
flowers, milk, meat, etc.
2. Bulk and weight–cotton, fodders are bulky but light in
3. Storage facilities.
4. Weak or strong marketing agency.
5. Distance between producer and consumer. Whether local
market or distant market.

I. Types of Market Channels:

Some of the typical marketing channels for different product
groups are given below:

A. Channels of rice:
i. Producer–miller->consumer (village sale)
ii. Producer–miller->retailer–consumer (local sale)
iii. Producer–wholesaler->miller–retailer–consumer
iv. Producer–miller–cum-wholesaler-retailer-consumer
v. Producer–village merchant–miller–retailer–consumer
vi. Producer–govt. procurement–miller–retailer–consumer
B. Channel of other foodgrains:
i. Producer – consumer (village sale)
ii. Producer–village merchant–consumer (local sale)
iii. Producer–wholesaler-cum-commission agent retailer–
iv. Producer–primary wholesaler–secondary wholesaler–
retailer– Consumer
v. Producer–Primary wholesaler–miller–consumer (Bakers).
vi. Producer->govt.procurement–retailer–consumer.
vii. Producer–government–miller–retailer–consumer.
C. Channels of cotton:
i. Producer–village merchant–wholesaler or ginning factory–
wholesaler in lint–textile mill (consumer)
ii. Producer–Primary wholesaler–ginning factory–secondary
wholesaler–consumer (Textile mill)
iii. Producer– Trader– ginning factory– wholesaler in lint–
consumer (Textile mill)
iv. Producer–govt. agency–ginning factory–consumer (Textile
v. Producer–Trader–ginning factory–wholesaler–retailer–
consumer (non-textile use).
D. Channels of Vegetables:
i. Producers–consumer (village sale)
ii. Producer–retailer–consumer (local sale)
iii. Producer–Trader–commission agent–retailer–consumer.
iv. Producer–commission agent–retailer–consumer
v. Producer–primary wholesaler–secondary wholesaler–
retailer– consumer (distant market).
E. Channels of Fruits:
i. Producer–consumer (village sale)
ii. Producer–Trader–consumer (local sale)
iii. Producer–pre-harvest contractor–retailer–consumer
iv. Producer–commission agent–retailer–consumer.
v. Producer–pre-harvest contractor–commission agent–
vi. Producer–commission agent–secondary wholesaler–
retailer–consumer (distant market).

These channels have great influence on marketing costs such as

transport, commission charges, etc. and market margins received by
the intermediaries such as trader, commission agent, wholesaler and
retailer. Finally this decides the price to be paid by the consumer and
share of it received by the farmer producer. That channel is considered
as good or efficient which makes the produce available to the consumer
at the cheapest price also ensures the highest share to the producer.

Marketing of Cotton

Cotton is an important cash crop providing raw material to textile industry. There are
many other uses of cotton. Marketing of Cotton is open type in the Country except in
Maharashtra, where there is State Monopoly Purchase. There is also a Semi-Govt.
agency operating in cotton marketing alongwith private traders. The important states
growing cotton are Gujarat, Maharashtra, Andhra Pradesh, Karnataka, etc. The result of
study of cotton marketing in Andhra Pradesh are summarized here.

I. Channels: Following seven channels of marketing were identified.

Channel I – Producer – Commission Agent – Consumer.

Channel II – Producer – Village Merchant – Commission Agent Consumer.
Channel III – Producer – Trader – Miller –Consumer.
Channel IV – Producer – Trader – CCI- Miller – Consumer.
Channel V – Producer – CCI – Miller – Consumer
Channel VI – Producer – Miller – Consumer.
Channel VII – Producer – Village Merchant – Miller –Consumer.

Thus five intermediaries viz. Village merchant, traders, commission agent, CCI (
Cotton Corporation of India) and Miller are operating in cotton marketing in
different channels.

II. Market Costs : Marketing costs incurred by different agencies/functionaries

channelwise are given below in Table 1.

It is seen that, on an average, the total marketing cost was at Rs.52.75 per
quintal. Among various components, transportation cost was the highest (Rs.
28.00) followed by commission (Rs.14.00) and the market fee (Rs. 11.82)

III. Producer’s Share: Producer’s Share in consumer’s price is the measure of

marketing efficiency. The Producer’s Shares are given in Table 2.

Channels I to IV were commonly used by the majority of cotton growers and producer’s
shares were 85 to 87%. In Channel IV, although CCI was involved, the produce was sold
to it by traders and not be farmers. Therefore, producer’s share in this channel was quite
low. But in channel V, producer’s delivered their cotton directly to CCI and hence they
got the highest price and also the highest share. In channel VI, since the producers
supplied their cotton directly to the Miller eliminating the intermediaries, they got better
price and greater share. CCI is a Public Corporation established for the benefit of
farmers. Therefore, selling cotton to CCI directly is definitely beneficial to cotton

Marketing of Coconut

I. Tender Nuts (Maharashtra)

1. Coconut is one of the important plantation crops in India. It is mainly in Kerala,

Karnataka, Tamil Nadu, Coastal Andhra Pradesh, Coastal Orissa, Coastal
Maharashtra (Konkan), etc. Coconut is harvested as matured nut as well as
tender nut (shahali) for water in it. Main produce is the matured nut for its copra
production for many commercial uses including coconut oil. Tender nuts have also
become very popular in town and city for the water content in it. Coconut water
has become digestive properties as well as medicinal value. Production and
marketing tender nuts has become a commercial activity. In Maharashtra,
coconut is grown in coastal part of Thane district is very near to the Mumbai city.
A field survey in this district indicated that of the total production, 70% is
harvested as tender nut and 30% as matured nuts. In the case of matured nuts,
34% were consumed at home while 66% were sold (marketed surplus). On the
other hand, in the case of tender nuts, only 5% were consumed at home and
95% were sold. This revealed that there is very high proportion of marked
surplus in tender nut.

2. Marketing channels: Following four channels of marketing tender nuts were identified.

I. Producer – co-operative society – wholesaler – retailer – consumer

II. Producer – co-operative society –retailer – consumer
III. Producer – retailer – consumer
IV. Producer – wholesaler – retailer – consumer
3. Price Spread: Market costs margins and price spread under four channels are given in
table below: -

Sr. Particulars I II III IV

No (%) (%) (%) (%)
1. Marketing 13.25 10.00 6.67 12.63
2 Market 30.50 27.50 38.67 33.42
3 Producer’s 56.25 62.50 54.66 53.95
100.00 100.00 100.00 100.00

The producer’s share was more in channels II & I where co-operative society was one of
the agencies. But the share was maximum in Channel II (62.5%) where wholesaler was
eliminated and the co-operative society sold nuts directly to the retailer.

II. Matured Nuts: (Tamil Nadu)

1. Season: Main marketing season is in the months of March, April and May when 50
– 55% nuts are marketed. In fact, every after two months, new flower flushes
are given out and hence some nuts are available for marketing throughout the
year. But the period from March to May is the main season.
2. Agencies and Channels: There are three main agencies involved in the marketing
of nuts.

i. local or village trader

ii. commission agent – cum – wholesaler
iii. Retailer

Local trader is the most important agency or intermediary through whom 73 to 98 per
cent nuts in different villages pass. The next is the wholesaler through whom 20 to 26
per cent nuts are marketed. The commission agents only act as contact person between
producers and other agencies. But very little produce is sold through the commission
agents. The reasons for selling nuts through a particular agency are as under: -

Sr. No. Reason Farmers (%)

1 Immediate sales 71
2 High cost of transport 61
3 Better price 54
4 Correct counting of nuts 39
5 Traditional terms/relations 25
6 Absence of unauthorised deductions 18
7 Lack of own transport facilities 7

Thus, first four reasons are the most important for choosing a particular agency for
selling nuts.

1. Storage: The nuts harvested during the peak season are subjected to a maximum
storage period of 2-3 months. There was increase in the value or sale-price due
to storage to the extent of 37 to 45 per cent. The storage of nuts during glut
season has two advantages.
i. Creation of time utility.
ii. Creation of form utility.

The storage of nuts enhances the quality of nuts for oil purposes, thus increasing their
sale value. The practice of storing nuts was more common among large producers who
had larger quantities of nuts. The cost of storage was about 21 to 24 per cent.

Following were the reasons for not storing the nuts by other farmers.

Sr. No. Reason Farmers (%)

1 Labour scarcity 68
2 Need for immediate cash 61
3 Small production 54
4 Chances of the ft 46
5 High cost of storage 39
6 No convention/not accustomed 18
7 Lack of time 14

Thus, first four reasons are very pertinent for non-storage of nuts particularly by the
small farmers who have small produce to sell.

Marketing of Banana

Banana is said to be a common man's fruit, because there is large area under banana in
India, its per hectare yield is also the highest (30 - 35 MT/ha) of all the fruits. Therefore
its production is large and the prices are within the reach of common people. Total area
under banana is 3.70 lakh ha, next to Mango. Among the States, Maharashtra
contributes the maximum area of about 90,000 ha. In Maharashtra, area under banana
is concentrated in Jalgaon district with nearly 60% area in that district.

Other districts growing banana are Parbhani, Nanded and Thane. Banana fruits from
Jalgaon area are marketed in most parts of India, particularly in the north. In Tamil
Nadu, banana is grown in Cauvery delta area.

Banana is a very perishable fruit and hence its marketing faces many problems such as
chain of middlemen, transport, storage, etc. In local or short distance marketing number
of intermediaries is small (one or two) but in long distance marketing commission agents
and wholesalers are involved in addition to co-operative society.

Few findings of surveys on marketing of banana are presented here.

Marketing of Banana:

Jalgaon (Maharashtra):

In the marketing of banana in Jalgaon district three channels were identified.

Channel I Producer - co-operative fruit sale society -

commission agent - wholesaler - retailer –
Channel Producer - Group sale agency commission agent -
II wholesaler - retailer – consumer
Channel Producer – Private agency - commission agent -
III wholesaler - Retailer – consumer.

Marketing costs, margins and price spread

Particulars Channels
Marketing costs 82.89 84.46 91.0
Marketing margins 282.26 282.86 287.58
Producer's share 32.57 32.47 31.31

All these indicators indicate comparatively greater economic as well as operational

efficiency of the marketing mechanism of channel I i.e. Co-operative Fruit Sale Society
over remaining ones. However, it is suggested that the producer's share in consumer's
rupee in Channel I can further be increased if the co-operative Fruit Sale Society directly
deals with the markets in terminal markets rather than selling the produce to the
commission agent.

Jalgaon & Sangli: (Maharashtra):

The major proportion of produce was marketed through two marketing channels

I Producer - co-op. Society - retailer - consumer

II Producer - wholesaler - retailer - consumer

The producer's share was 34.53% and 31.05% for member and non-member producer's
respectively. The members of producer's co-operative association could therefore derive
relatively higher profit margins.

Parbhani (Maharashtra)

Channel I

Producer - co-op. Society - wholesaler

Retailer - consumer

Comm.to society 8%

Comm. To wholesaler 5%

Shares of expenditure on

i. Cultivation 65.6%

ii. Transportation 19.30%

iii. Commission 15.10% 100.00

Nanded (Maharashtra)
1. Producer - wholesaler - Retailer - cons
2. Producer - co-operative society - commission agent -cum-wholesaler-

Retailer - consumer

Cost of marketing through

i. Co-op. Society Rs.58.37%

ii. Private 61.59

Producer's share through

i. Co-op. 51.65%

ii. Private 48.37%

Cauvery Delta (Tamilnadu)

The practice of opting pre-harvest contractors at the time of 50per cent maturity of the
crop is commonly followed by majority ((88%) of the growers. The prime reason stated
by the farmers was that the pre-harvest contractors give advance payments before
harvest of the bananas to meet their immediate needs for production, consumption and
social activities. Other reasons were

i. High fluctuations in prices (400%)

ii. High winds during monsoon causing damage to the plants.
iii. Absence of institutional credit.
iv. Absence of crop insurance
v. Small production and uneconomic quantities available for marketing
vi. Long association with contractors.
vii. Price discrimination in the markets.
viii. High marketing costs.


Following constraints were observed

i. Non-institutional agencies and undesirable market practices in the markets.

ii. Deduction of 2 bunches for every 100 bunches as Profit bunches.
iii. Combining two small bunches as one bunch during counting for price fixing.
iv. Non-harvest of small size bunches.
v. Delay in payment of balance amount after harvest
vi. Violation of contracts i.e. abandoning the harvest if there is slump in prices.
vii. Non-availability of institutional agency for banana which is highly perishable.
viii. Non-availability of any viable storage preservation methods.
ix. Non-existing institutional marketing agency like regulated market, co-
op.marketing or producer's association.

i. Setting up banana based agro-processing industry.
ii. Marketing banana through regulated markets.
iii. Bringing co-operative marketing as new channel in the existing channels which
will increase producer's share in the consumer's rupee

Marketing Harichhal Banana in Gorakhpur (U.P)

1. Produce - Retailer - consumer channel for the sale of Harichhal banana was more
profitable compared to other systems of sale.
2. For increasing marketing efficiency, grower should develop co-operative system
of transport.
3. Storage facility should be developed on co-operative lines, so that the farmers
will be protected from stress sale.
4. Weights and measures should be standardized.
5. Market information should be communicated to the growers regarding prices of

Marketing of flowers in India

Flowers are very intimately associated with the social and religious activities in India. In
social life, flowers are offered to welcome, to felicite and to greet friends or relatives and
guests in functions. Flowers are needed in all the religious ceremonies functions
including marriages. Garlands and wreaths are offered on dead bodies of martyars and
very important persons (VIPs) and national heroes as a gratitude for the work done and
sacrifice made by them. Flower is a taken of love and tenderness. They are wanted due
to various attractive colours and fragrance. Flowers are also used for extracting essential
oils, which are used in perfumes. Many flowers have medicinal values and hence are
used in Ayurveda. In India, large number of flowers are grown in different parts
according to soils and climate and also likings and preferences of the people for specific
type of flowers. Important flowers are rose, marigold, chrysanthemum, jasmine, lily,
tuberose, aster, zinia, carnation, gladiolus, galardia etc. Flowers are tender and hence
highly perishable. They are generally used in fresh form but they have very short shelf
life. This poses great problems in their marketing, particularly lone distance marketing.
Therefore, flower cultivation is concentrated in the hinterland of big cities like Mumbai,
Pune, Bangalore, Mysore, Chennai, Calcutta, Delhi etc. But with the development of
quick transport vehicles and refrigerated or insulated vans, flowers are transported to
distant markets including foreign markets. For successful marketing of flowers, well-
developed markets and well-organised marketing system is necessary. In the marketing
of flowers the aspects involved are –

1. Channels of marketing,

2. Costs and margins and price spread and

3. Producer’s share in consumer’s rupee.


In Haryana, in the marketing of roses three channels were observed.

Channel I - Producer – Commission agent - Retailer – Consumer (in Delhi market)

Channel II - Producer - Retailer – Consumer

Channel III - Producer - Consumer (Local market)

Since Delhi is a big market, 65% flowers were sold through Channel I and remaining
32% and 3% were sold through Channels II and Channels III. Thus the local market sale
was only 3%. Marketing costs, margins and producer’s share in consumer’s rupee is
given below for roses sold after making garlands-

Sr. Particulars Channel I Channel II

No. Rs/Q. % Rs/Q. %
1. Producer’s share 1465 51.72 1504 53.09
2. Marketing costs 657 22.91 - -
3. Commission charges 99 3.74 622 21.95
4. Retailer’s margin 612 21.61 707 24.94
5. Consumer’s price 2833 100.00 2833 100.00

Price spread of marketing roses in loose form

Sr. Particulars Channel I Channel II

No. Rs/Q. % Rs/Q. %
1. Producer’s share 1465 73.08 1504 77.17
2. Marketing costs 245 12.24 208 18.66
3. Commission agent’s margin 99 4.91 - -
4. Retailer’s margin 196 9.77 238 12.21
5. Consumer’s price 2005 100.00 1950 100.00

There was increase in value of roses when sod in the form of garlands as shown below: -

A. Price of roses sold in the form of garlands (Rs/Kg.) 2832.50

B. Price of roses sold in loose form (Rs/Kg.) 2005.00

Addition – Rs/Kg. 827.50

Percentage (%) 41.27

Thus, there was increase in the value of roses by 41.27% when sold in the form of
garlands. But the producer’s share was reduced from 73% to 52% indicating that the
producer was not benefited by increase in value.


In Kerala, cultivation of orchids has now assumed commercial status. In the marketing
of orchids, there existed two main agencies. (1) Local buyers and (2) Distant market
florists, indicating two Channels.

Channel I - Producer – Local buyer – Consumer

Channel II - Producer - Wholesaler - Retailer – Consumer

The cost of marketing worked out to Rs. 3.00 per spike. In this transport cost was the
major (73%) followed by packing (27%), Marketing orchids in the distant markets was
more remunerative with B.C. ratio of 2 than local (field) sale.


In the marketing of gladiolus as cut flowers in Karnataka, two channels were observed.

Channel I - Producer – Wholesaler – Retailer – Consumer

Channel II - Producer – Contractor – Retailer – Consumer

Channel I was more important with 84% produce passing through this channel than
channel II with 16%produce passing through it. The comparison of returns from market
sale and contract sale are shown below (Rs. Per 100 dozen)

Sr. Particulars Cannel I Channel II

No. (Market sale) (Contract sale)
1. Gross returns 4000 3000
2. Additional costs
I) Transport 13.02 -
ii) Personnel 19.08 -
iii) Packing 8.91 -
iv) Market fee 0.78 -
Sub Total 42.39 -
3. Net returns (1-2) 3957.61 3000
4. B.C.ratio 23.59 -

This showed that it is more remunerative to sell flowers in the market where the forces
of demand and supply are more clear and price determination is competitive and open or


In the marketing of Jasmine in Karnataka, following channel was observed.

Channel – Producer – Trader-cum-commission agent – Retailer – Consumer

The marketing cost was Rs. 6.61 per kg. Which was over 15% of the value of flowers
sold by the farmers (Rs.44 per kg). Producers share was as low as 41%. The trader-
cum-commission agent and retailers margins were 6.02% and 45.78% respectively.
About 85% farmers opined that the commission charges were very high.


In the marketing of marigold following three channels were identified.

Channel I - Producer – Commission agent – Retailer – Consumer

Channel II - Producer – Retailer – Consumer

Channel III - Producer – Consumer

Nearly 99% flowers were sold through channels I and II. The flowers were sold in two
ways (1) in loose form and (2) in the form of garlands. The garlands were prepared at
the retailer’s level. When flowers were sold after making garlands, the producer’s share
in the consumer’s rupee was 22.63% and 23.70% respectively in Channels I and II.
These shares were quite high at 72% and 75% respectively in Channels I and II when
flowers were sold in loose form. This was due to the fact that in the process of making
garlands, the retailer incurred substantial cost in the form of skilled labour, which
resulted into increase in the value of flowers, and hence he shared greater margin.


Consumer quality present survey for gladioli flowers showed that

i. among the four floral attributes such as colour, variety, floral arrangement and
price, the consumer’s in general placed priority for variety (i.e. hybrid) followed
by colour (i.e.pink),
ii. women also showed greater inclination to variety (hybrid). Even youngsters
preferred variety as the most important attribute,
iii. highly educated consumer’s had also strong preference for hybrid varieties.
iv. Among the three market segments the major segment exhibited strong favour
towards variety. This segment was highly conspicuous as it was dominated by
women who were mostly youngsters, highly educated and relatively well off.
However, the relative importance attached to different attributes varied across
the market segments.

In general, marketing of flowers is not well developed and well organised. There is no
improved packing. Flowers like marigold are packed in gunny bags. Transport and
commission charges (10-15%) are the main items of costs. Cold chain system of
transport is not yet followed for flowers, which are sold in domestic markets. Therefore,
long distant marketing (beyond 500 km) is not possible. However, floriculture is
emerging as a commercial proposition in recent years due to export of some selected
flower types and varieties. Production of export oriented flowers in green houses/poly
houses is a recent technological adoption in India, which has given impetus to exports.
But there is urgent need to improve packing system, quality of flowers (grading), quick
and refrigerated transport and organisation with minimum intermediaries. Floriculture
crops require intensive cultivation and have high income potential. Therefore, they
generate good employment in rural area. An acre of land under flower cultivation can
support a family of 5-6 members. It can fetch annual income of Rs. 30,000/- if much
valued flowers like roses, carnations, gladiolus and orchids are grown.

Marketable and Marketed Surpluses


Every agricultural commodity is, in fact, produced for sale in the market to earn some
cash income and thereby meet many other family requirements which are not satisfied
on the farm. Even foodgrains which are grown by the farmers are not merely meant for
satisfying his own family requirements but are also meant for satisfying the needs of
non-farming population in the towns and cities. But of course, the surplus available for
sale varies from farmer to farmer for various reasons. This is also true for other food
crops like edible oilseeds, fruits, vegetables, milk, eggs,etc. All the produce of these
crops is not available for sale because some quantities are retained for seed purpose,
home consumption, gifts to friends and relatives and some quantities are lost due to
spoilage, etc. Thus, two concepts viz. "marketable surplus" and "marketed surplus" have
been coined to ascertain the quantity of produce available for marketing and the
quantity actually marketed. The quantities are estimated as mentioned below:-

1. Production on a farm.
2. Utilization.
a. Seed purpose.
b. Home consumption.
c. Gifts to friends and relatives.
d. Kind wages to labour. Total ( a to d)

3. Marketable surplus (1 - 2)
a. Losses due to spoilage
b. Marketed surplus(3-4)

Cash crop or commercial crop:

The larger the quantity actually marketed, greater the cash income to a farmer.
Accordingly, crops also came to be known as cash crops, which earn more cash income
to the farmers. The marketable or marketed surpluses depend upon type of crop i.e.
foodgrain, other food crop or non-food crop. In the case of foodgrain and other food
crops, the surpluses are generally less on small and marginal farms and their proportions
very widely according to the size of holding and other related factors. But in the case of
non-food crops viz. Cotton, sugarcane, etc. which are used as raw material in agro-
based industry, almost all the production is available for sale except small quantities
kept for seed. In these crops, marketable surpluses are nearly 100 per cent. Such crops
are called as cash crops or commercial crops. On the same analogy, even food crops
with large marketable surpluses (say above 50%), can be regarded as cash or
commercial crops.

As a result of the development of these two concepts, the studies regarding marketable
and marketed surpluses have aroused interest in the minds of researchers in Agricultural
Marketing with a view to identify or categories certain crops as cash crops or commercial

Identification of certain crops as commercial or cash crops has many policy implications
from the point of view of development of good organized markets and other
infrastructure facilities such as roads, storage’s (including cold storage’s for perishables),
communication, market information, banking services, etc.

Marketable and marketed surpluses of some commodities are given in the table.
Following inferences emerge from this table:

1. Marketable surplus for foodgrains, particularly in a deficit state are low and such
crops may not be considered as commercial crops in that area. But in Punjab,
wheat which is a foodgrain crop is a commercial crop as its marketable surplus is
around 85%.
2. All fruit crops are definitely commercial crops because their marketable surpluses
are above 96%.
3. Similarly, vegetables are also commercial crops, which is evident from their
marketable surpluses being above 96% and marketed surpluses above 85%.
4. Special mention needs to be made about milk. Some 25-30 years back, dairy
activity was just carried out as subsidiary to crop production to meet the family
requirement of milk and no surplus. But after the development of new high
yielding cow and buffalo breeds, improvement in feeding and management
practices of milk animals, certain of marketing facilities through Govt. Milk
Schemes and Producer’s Co-operatives, the milk production has increased very
rapidly. It has spread in the rural area and it has now become an important
commercial activity as can be seen from the marketable surpluses ranging from
77% to 92% with the farmers. On some farms, where number of crossbred cows
or pure buffaloes is more than 5, dairy has become main enterprise surpassing
crop production. Diary has assumed a commercial status providing regular cash
income to farmers and employment to his family.

Some oil seed crops like groundnut, sunflower, safflower, soyabean, castor and other
crops like cotton and sugarcane are also recognized as commercial crops as the
marketable surpluses in them are almost 100% and therefore they are cash crops for the
farmers. In addition, there are some crops, which are grown in small pockets, but they
have large marketable surpluses and hence they are cash crops for farmers in those
areas. Examples are –
Red chilli, turmeric, tobacco, minor fruits, etc.


Marketable and marketed surpluses of some commodities.

S. Commodity State Marketable Marketed

No. surplus surplus %
1 Maize Himachal Pradesh - 36.37
2 Paddy Himachal Pradesh - 14.19
3 Wheat Himachal Pradesh - 24.23
4 Wheat Punjab
a. Small & Punjab 76.63 -
marginal farms
b. Medium farms Punjab 80.63 -
c. Large farms Punjab 89.20 -
Average Punjab 85.52 -
5 Fruits
a. Mango Punjab 96.40 -
b. Grapes Punjab 96.60 -
c. Citrus Punjab 98.00 -
d. Mango Maharashtra 98.00 -
6 Vegetables
a. Tomato Himachal Pradesh 98.00 94.50
b. Cauliflower` Himachal Pradesh 96.33 94.40
c. Cabbage Himachal Pradesh 95.66 93.00
d. Brinjal Himachal Pradesh 96.60 94.39
e. Peas Himachal Pradesh 89.25 84.80
f. Potato Amritsar-Punjab 78.78 -
Jalandhar-Punjab 83.65 -
Moga–Punjab 91.69 -
7 a. Milk Jalgaon,Maharashtra, 77.41 -
b. Milk Western Maharashtra 91.88 -
Konkan Maharashtra 91.66 -

Export Of Onion from India

Onion is the largest vegetable produced and consumed not only in India but also in the
world. Although, it is classified as vegetable, it has special qualities, which add to taste
and flavour to food and hence it is mainly used in India cuisine and culinary
preparations. In addition to its use in cuisine, it is also relished in raw form with meals.
Onion is consumed by all classes of people-poor and rich and hence assumes a place of
essential item. Onion possess very good nutritive and medicinal values- the nutritive
ingredients of onion are as follows (Quantities per 100 gm):

1 Water (%) 86.60 gm.

2 Carbohydrates 11.00 gm.
3 Proteins 1.20 gm.
4 Fats 0.10 gm.
5 Minerals 0.40 gm.
6 Calcium 0.18 gm.
7 Phosphorus 0.05 gm.
8 Iron 0.07 gm.
9 Vitamin B1 120
10 Vitamin C 11
11 Nicotinic acid 0.4 mili gm.
12 Ribo flavin 10
13 Calorific value 51

Onion has both glucose (reducing sugar) and sucrose (non-reducing sugar). The special
quality of onion is its smell (flavour) on account of which it is commonly used in food and
masala preparations. The pungent taste of onion is due to volatile oil Allyl Propyl
Disulphide present in it.

There are hundreds of varieties of Onion grown in the world. According to colour, there
are red, white and yellow types. Red and white varieties are grown in India. Although,
onion is consumed in all the countries of the world, it is cultivated only in some
countries. Hence it has export market and export value. Area under onion cultivation in
the world is about 20 lakh hectares. India has the largest area of about 4 lakh ha. (20%)
followed by China about 3 lakh ha. But the production is the highest in China (48 lakh
MT) as against India (44 lakh MT) due to higher productivity in China (16 MT/ha than
India 14 MT/ha). In India, of the four lakh hectares of area under onion, the maximum
area of about 95,000 ha (about 24%) is in Maharashtra. Other important states are
Karnataka, Orissa, U.P., Andhra Pradesh, Rajasthan, M.P., Tamil Nadu, Bihar and

Trends of Exports

Figures of domestic production exports and shares of exports for the last 10 years are
given in Table 1. During the last 10 years, onion production has increased with some
ups and down. Onion production is known for its fluctuations for some reasons,
particularly in Maharashtra State, which is the largest producer. By and large, there is
increase in production with annual growth rate of 3.59%. However exports have
increased of faster rate with annual growth rate of 7.64%. The share of exports has also
increased from about 7% in 1988-89 to about 14% in 1997-98. Onion is a pride item of
agricultural exports earning valuable foreign exchange to the country. Of the total fresh
vegetable exports 67% share is of onion. The value exports has increased from Rs.
162.56 crores in 1992-93 has to Rs. 295 crores in 1997-98. However there was some
decline in exports to Rs. 176 crores in 1998-99 due to reduction in production in the
previous year (1997-98).

Table 1

Share of exports in domestic production of Onion

Year Domestic Production Exports Share of exports

(Lakh MT) (Lakh MT) in production
1988-89 32.24 2.14 6.64
1989-90 29.83 2.27 7.67
1990-91 38.44 2.40 6.25
1991-92 35.85 3.71 10.35
1992-93 35.90 2.72 7.57
1993-94 36.16 4.01 11.09
1994-95 38.83 4.97 12.80
1995-96 39.89 4.34 10.88
1996-97 44.28 5.13 11.58
1997-98 31.66* 4.47 14.12*
Compound 3.59 7.64 -
growth rate (%)

* Production of onion was hampered due to heavy and untimely rains in

Maharashtra in this year.

Direction of Trade

Onion is exported from India to in all 38 countries in varying quantities. Export to major
countries is given in Table 2 along with quantities, value and unit value or price per kg.
Fourteen countries shown in the table were seen as important importing countries.
Maximum quantity (23.30%) was imported by U.A.E. followed by Malaysia (22.16%), Sri
Lanka (16.06%), Bangladesh (11.76%) and Singapore (9.02%). These five countries
together imported nearly 83% onions. Total quantity exported in the year 1998-99 was
215.69 thousand tonnes valued at Rs. 176.05 crores. Regarding unit value, the highest
price was offered by Singapore (Rs. 11.35 per kg) and the lowest by Pakistan (Rs. 6.18
per kg). The overall average price received was Rs. 8.16 per kg. Most of the importing
countries are Asian countries and hence prices offered are relatively low.

Varieties Exported

Onions of four sizes are exported

Big size - 4 to 6 cm. Diameter

Medium - 3 to 4 cm. Diameter

Small - 2 to 3 cm. Diameter

Podisu - 2.5 to 3.5 cm. Diameter

The varieties of different sizes exported are:

Big - Pusa Red, Agrifound Light Red, N-2-4-1 Agrifound Dark Red, N-53, Nasik Local,
Bellary Red, etc.

Small – Agrifound Rose, Bangalore Rose, Podisa, Multore, Nattu etc.

Nearly 90-92% of onion exported is of big size.

Table 2

Exports of onion from India – Direction of trade (1998-99)

Country Quantity Value Unit Value

(000 MT) % Rs. In Crores % Rs/Kg
U.A.E 51.337 23.80 38.98 22.14 7.59
Malaysia 47.793 22.16 42.68 24.24 8.93
Sri Lanka 34.636 16.06 27.10 15.39 7.82
Bangladesh 25.448 11.76 15.88 9.02 6.24
Singapore 19.451 9.02 22.07 12.54 11.35
Saudi Arabia 10.942 5.07 7.84 4.45 7.17
Pakistan 7.898 3.66 4.88 2.77 6.18
Mauritius 5.420 2.51 4.69 2.66 8.65
Kuwait 2.480 1.15 1.94 1.10 7.82
Reunion 1.897 0.88 2.14 1.22 11.28
Oman 1.419 0.66 0.94 0.53 6.62
Qatar 1.410 0.65 0.99 0.56 7.02
Baharin 1.403 0.65 1.37 0.78 9.76
Indonesia 1.120 0.52 1.04 0.59 9.28
Other 24 countries 3.040 1.41 3.51 1.99 11.55
Total 215.694 100.00 176.05 100.00 8.16

Export of cut flowers from India

World trade

Floriculture is an important and upcoming trade with potential both in domestic as well
as export markets. The world over, the flowers have gained an important place in one’s
life be it for religious purposes or personal decoration. The global floriculture industry
with an investment of about US$ 40 billion is growing at an annual rate of 10 to 12 %.
The USA, Japan, Western Europe and the major markets for the flowers. Besides,
Eastern Europe, South Korea, Thailand and Indonesia are also coming up as large
consuming countries. In the producing countries Netherlands alone enjoys 56% followed
by Columbia 11%. Among the floriculture products major share is of "Cutflowers".

Total import/export trade of cutflowers in the world is estimated at US $ 4100 million.

Main importing and exporting countries are given in Table 1 and 2 respectively in value
terms. Of the US $ 3716.8 millions of imports, the share of Germany was the highest
(30.3%) followed by USA (16.8%), UK (9.7%), France (9.7%) and Netherlands (8.4%).
These five countries together shared nearly 75% imports. Netherlands which exports
large amount of flowers also imports cutflowers. Regarding exports (Table 2)
Netherlands had the maximum share of US $ 2102.2 million (56.5%) followed by
Columbia (14.1%), Israel (4.2%) together constituting nearly 75% of world’s export. In
fact, the share of Netherlands in the total exports has come down from 64% in 1991 to
56.5% in 1995. This is due to increasing shares of exports from developing countries like
Columbia, Kenya, Ecuador, Thailand, Zimbabwe etc. India has also appeared in the world
cutflower trade with about 0.3% share of exports.

Floriculture exports from India:

Floriculture is a very broad group consisting wide range of products such as flowers,
cutflowers, flowering and ornamental plants, bulbs, tubers, corms, rhizomes, chicory,
orchids, mosses etc. For export purposes, all floriculture products are grouped into four
categories, which are given in Table 3 along with their qualities and values for the year
1998-99. It is seen that cutflowers in the largest group sharing nearly 72% value of
floriculture exports. This is followed by a group of foliage, branches mosses and plant
parts (17.16%), group of rooted cuttings, slips, mushroom spawn (9.92%) and the last
bulbs, tubes, tuberous roots, rhizomes, chicory etc. (1.05%). Thus the cutflowers - fresh
and dried dominate floriculture export trade of India.

Cutflowers exports

The cutflowers are exported in two forms:

a. Fresh form for bouquets and ornamental purposes.

b. Dried, dyed, bleached etc. for other purposes.

The information of export of fresh cutflowers in respect of quantities values and the
countries to which exported is given in Table 4 for the 1998-99. Total quantity exported
was 2722 MT valued at Rs.25.12 crores. The biggest export market was Japan importing
19.65% cutflower followed by USA 10.44%, Germany (7.96%), UK (7.40%), Australia
(5.43%) and Netherlands (4.67%). The fresh cutflowers are exported to 54 countries,
but nearly 68% are exported to 10 countries shown in the table. Unit value revealed that
the highest price was paid by Netherlands (Rs.376.62/kg), followed by Japan
(Rs.155.92/kg) and Singapore (Rs.141.49/kg). The overall average price received was
Rs.92.26/kg. The price offered by USA was quite low (Rs. 51.33/kg). Information of
export of other cutflowers is given in Table 5. The quality of cutflowers exported was
8295 MT valued at Rs.51.04 crores. They were exported to in all 55 countries but the
major export markets were USA sharing 35.25% exports followed by Japan (27.98%),
Netherlands (9.50%), Germany (5.41%), U.K (4.91%) and so on. These five countries
shared about 83% of total exports. Thus, the exports to different countries are unevenly
spread. Unit values or prices received varied from Rs.26/kg by Japan to Rs.137.38 by
Germany. The overall average unit value received was Rs.61.52/kg. There was a very
wide difference in the prices received from different importing countries. Although USA
and Japan imported largest quantities, they offered low prices.

Table 1

Main import markets of cutflowers by value 1995

(Value million US $ [CIF])

Important markets Value %

Total world imports of which 3716.8 100
Germany 1124.9 30.3
USA 622.8 16.8
United Kingdom 360.0 9.7
France 358.9 9.7
Netherlands 310.4 8.4
Japan 216.1 5.8
Switzerland 168.7 4.5
Italy 118.9 3.2
Belgium 95.8 2.6
Denmark 63.0 1.7
Canada 49.6 1.3
Other 15 countries 227.07 6.1

Table 2

Main exporting countries of cutflowers by value 1995

(Value US million dollars)

Exporting countries Value %

Total world exports of which 3716.8 100
Netherlands 2102.2 56. 5
Columbia 525.0 14.1
Israel 158.7 4.2
Kenya 103.5 2.7
Ecuador 102.2 2.7
Italy 92.3 2.4
Thailand 80.5 2.1
Spain 60.0 1.6
Zimbabwe 51.9 1.3
France 39.6 1.1
New Zealand 37.1 1.0
Other 13 countries 364.0 9.8

Table 3

Export of floriculture products from India (1998-99)

Product group Quality Value

Rs. in crore %
Bulbs, tubers, tuberous root corms, 1889.69 1.11 1.05
rhizomes chicory dormant, growing, (000 No.)
in flower etc.
Other live plants incl. Rooted 2971.96 10.51 9.92
cuttings, slips, mushroom spawn, etc. (MT)
Cutflowers flower bulbs, suitable 11017.78 76.16 71.87
for bouquets/orna-mental purposes (MT)
-fresh, dried, dyed, bleached, impregnated
Foliage, branches, other plants 3076.19 18.18 17.16
parts, mosses for bouquets/orna (MT)
-mental purposes – Fresh, dried,
dyed, bleached etc.
Total (000 No.) 1889.69 105.96 100.00
(MT) 17865.93

Table 4

Export of fresh cutflowers from India- direction of trade (1998-99)

Country Quantity Value Unit value

MT %
Rs. in crore Rs/kg
Japan 535 19.65 8.34 155.92
USA 284 10.44 1.46 51.33
German Fed. Rep 217 7.96 1.38 63.87
UK 202 7.40 1.40 69.32
Australia 148 5.43 1.52 102.95
Netherlands 127 4.67 4.78 376.62
UAE 121 4.46 1.00 82.28
Singapore 116 4.25 1.64 141.49
Italy 53 1.96 0.47 87.23
Denmark 45 1.64 0.23 51.75
Other 44 countries 875 32.14 2.90 33.15
Total 2722 100.0 25.12 92.26

Table 5

Export of other cutflowers- direction of trade (1998-99)

Country Quantity Value Unit value

MT %
Rs. in crores Rs/kg
USA 2924 35.25 12.74 43.57
Japan 2321 27.98 6.03 26.00
Netherlands 788 9.50 9.68 122.84
German Fed. Rep 449 5.41 6.16 137.38
UK 407 4.91 2.69 66.00
Sri Lanka 246 2.97 0.76 31.05
Italy 167 2.01 2.07 124.06
France 164 1.98 1.80 110.29
Spain 125 1.51 1.08 86.33
Other 46 countries 704 8.49 8.03 114.06
Total 8295 100.00 51.04 61.52

Storage and Warehousing

Storage is an important marketing function, which involves holding and preserving goods
from the time they ae produced until they are needed for consumption.


 The storage of goods, therefore, from the time of production to the time of
consumption, ensures a continuous flow of goods in the market.

 Storage protects the quality of perishable and semi-perishable products from


 Some of the goods e.g., woolen garments, have a seasonal demand. To cope with
this demand, production on a continuous basis and storage become necessary;

 It helps in the stabilization of prices by adjusting demand and supply;

 Storage is necessary for some period for performance of other marketing

 Storage provides employment and income through price advantages.


Underground Storage Structures

Underground storage structures are dugout structures similar to a well with sides
plastered with cowdung. They may also be lined with stones or sand and cement. They
may be circular or rectangular in shape. The capacity varies with the size of the


 Underground storage structures are safer from threats from various external
sources of damage, such as theft, rain or wind.
 The underground storage space can temporarily be utilized for some other
purposes with minor adjustments; and
 The underground storage structures are easier to fill up owing to the factor of

Surface storage structures

Foodgrains in a ground surface structure can be stored in two ways - bag storage or bulk

I. Bag storage

 Each bag contains a definite quantity, which can be bought, sold or dispatched
without difficulty;
 Bags are easier to load or unload.
 It is easier to keep separate lots with identification marks on the bags.
 The bags which are identified as infested on inspection can be removed and
treated easily; and
 The problem of the sweating of grains does not arise because the surface of the
bag is exposed to the atmospheres.
I. Bulk or loose storage


 The exposed peripheral surface area per unit weight of grain is less.
Consequently, the danger of damage from external sources is reduced; and
 Pest infestation is less because of almost airtight conditions in the deeper layers.
 The government of India has made efforts to promote improved storage facilities
at the farm level.

Improved grain storage structures

I. For small-scale storage

 PAU bin

This is a galvanized metal iron structure. It s capacity ranges from 1.5 to 15 quintals.
Designed by Punjab Agricultural University.

 Pussa bin

This is a storage structure is made of mud or bricks with a polythene film embedded
within the walls.

 Hapur Tekka

It is a cylindrical rubberised cloth structure supported by bamboo poles on a metal tube

base, and has a small hole in the bottom through which grain can be removed.

I. For large scale storage

 CAP Storage (Cover and Plinth)

It involves the construction of brick pillars to a height of 14" from the ground, with
grooves into which wooden crates are fixed for the stacking of bags of foodgrains. The
structure can be fabricated in less than 3 weeks. It is an economical way of storage on a
large scale.

 Silos

In these structures, the grains in bulk are unloaded on the conveyor belts and, through
mechanical operations, are carried to the storage structure. The storage capacity of each
of these silos is around 25,000 tonnes.


Warehouses are scientific storage structures especially constructed for the protection of
the quantity and quality of stored products.


 Scientific storage
The product is protected against quantitative and qualitative losses by the use of such
methods of preservation as are necessary.

 Financing

Warehouses meet the financial needs of the person who stores the product. Nationalized
banks advance credit on the security of the warehouse receipt issued for the stored
products to the extent of 75 to 80% of their value.

 Price Stabilization

Warehouses help in price stabilization of agricultural commodities by checking the

tendency to making post-harvest sales among the farmers.

 Market Intelligence

Warehouses also offer the facility of market information to persons who hold their
produce in them.

Working of Warehouses

 Acts: - The warehouses (CWC and SWCs) work under the respective Warehousing
Acts passed by the Central or State Govt.

 Eligibility: - Any person may store notified commodities in a warehouse on

agreeing to pay the specified charges.

 Warehouse Receipt (Warrant): - This is receipt/warrant issued by the warehouse

manager/owner to the person storing his produce with them. This receipt
mentions the name and location of the warehouse, the date of issue, a
description of the commodities, including the grade, weight and approximate
value of the produce based on the present prices.
 Use of Chemicals: - The produce accepted at the warehouse is preserved
scientifically and protected against rodents, insects and pests and other
infestations. Periodical dusting and fumigation are done at the cost of the
warehouse in order to preserve the goods.

 Financing - The warehouse receipt serves as a collateral security for the purpose
of getting credit.

 Delivery of produce: - The warehouse receipt has to be surrendered to the

warehouse owner before the withdrawal of the goods. The holder may take
delivery of a part of the total produce stored after paying the storage charges.

Types of warehouse

1. On the basis of Ownership

a. Private warehouses: These are owned by individuals, large business houses or

wholesalers for the storage of their own stocks. They also store the products of
b. Public warehouses: These are the warehouses, which are owned by the govt. and
are meant for the storage of goods.
c. Bonded warehouses: These warehouses are specially constructed at a seaport or
an airport and accept imported goods for storage till the payment of customs by
the importer of goods. These warehouses are licensed by the govt. for this
purpose. The goods stored in this warehouse are bonded goods. Following
services are rendered by bonded warehouses:

i. The importer of goods is saved from the botheration of paying customs duty all at
one time because he can take delivery of the goods in parts.
ii. The operation necessary for the maintenance of the quality of goods - spraying
and dusting, are done regularly.
iii. Entrepot trade (re-export of imported goods) becomes possible.

2. On the basis of Type of Commodities Stored

a. General Warehouses: These are ordinary warehouses used for storage of most of
foodgrains, fertilizers, etc.
b. Special Commodity Warehouses: These are warehouses, which are specially
constructed for the storage of specific commodities like cotton, tobacco, wool and
petroleum products.
c. Refrigerated Warehouses: These are warehouses in which temperature is
maintained as per requirements and are meant for such perishable commodities
as vegetables, fruits, fish, eggs and meat.

Warehousing in India

Central warehousing corporation (CWC)

This corporation was established as a statutory body in New Delhi on 2nd March 1957.
The Central Warehousing Corporation provides safe and reliable storage facilities for
about 120 agricultural and industrial commodities.


 To acquire and build godowns and warehouses at suitable places in India.

 To run warehouses for the storage of agricultural produce, seeds, fertilizers and
notified commodities for individuals, co-operatives and other institutions,
 To act as an agent of the govt. for the purchase, sale, storage and distribution of
the above commodities.
 To arrange facilities for the transport of above commodities.
 To subscribe to the share capital of state Warehousing corporations and
 To carry out such other functions as may be prescribed under the Act.

 The Central Warehousing Corporation is running air-conditioned godowns at

Calcutta, Bombay and Delhi, and provides cold storage facilities at Hyderabad.
 Special storage facilities have been provided by the Central Warehousing
Corporation for the preservation of hygroscopic and fragile commodities.
 The corporation has also evolved techniques for the storage of spices, coffee,
seeds and other commodities.

State Warehousing Corporations (SWCs)

Separate warehousing corporations were also set up in different States of the Indian
Union. The areas of operation of the State Warehousing Corporations are centres of
district importance. The total share capital of the State Warehousing Corporations is
contributed equally by the concerned State Govt. and the Central Warehousing

Food corporation of India

Apart from CWC and SWCs, the Food Corporation of India has also created storage
facilities. The Food Corporation of India is the single largest agency which ahs a capacity
of 26.62 million tonnes.

Linking Warehousing and Marketing Credit

The Warehousing Corporations Act came into operation on 18 th March 1962. The Act
defines the specific functions and the area of operations of Central and State
Warehousing Corporations. It enlarged the list of the number of commodities meant for

National Co-Operative Development and Warehousing

This was set up on 1st September 1956.

 To provide funds to warehousing corporations and the State Governments for

financing co-operative societies for the purchase of agricultural produce on behalf
of the Central Government.
 To advance loans and grants to State Governments for financing co-operative
societies engaged in the marketing, processing or storage of agricultural produce,
including contributions to the share capital of these institutions,
 To subscribe to the share capital of the Central Warehousing Corporation and
advance loans to State Warehousing Corporations and the Central Warehousing
 To plan and promote programmes through co-operative societies for the supply of
inputs for the development of agriculture; and
 To administer the National Warehousing Development Fund.

Central Warehousing Corporation

This Corporation was established as a statutory body in New Delhi on 2nd March 1957.
The central Warehousing Corporation provides safe and reliable storage facilities for
about 120 agricultural and industrial commodities.


 To acquire and build godown and warehouses at suitable places in India;

 To run warehouses for the storage of agricultural produce, seeds, fertilizers and
notified commodities for individuals, co-operatives and other institutions;
 To act as an agent of the government for the purchase, sale, storage and
distribution of the above commodities;
 To arrange facilities for the transport of above commodities;
 To subscribe to the share capital of State Warehousing Corporation; and advance
loans to State;
 The Central Warehousing Corporation is running air-conditioned godowns at
Calcutta, Bombay and Delhi, and provides cold storage facilities at Hyderabad.
Special storage facilities have been provided by the Central Warehousing
Corporation for the preservation of hygroscopic and fragile commodities.

State Warehousing Corporations

Separate warehousing corporations were also set up in different States of the Indian
Union. The area of operation of the State Warehousing Corporations are centers of
district importance. The total share capital of the State Warehousing Corporations is
contributed equally by the concerned State Governments and the Central Warehousing
Corporation. The warehouses (CWC and SWCs) work under the respective Warehousing
Acts passed by the Central and State Governments.


Credit is that form of confidence reposed in a person, which enables him to obtain from
another the temporary use of thing of value. Productive credit is that which is
employed to create something materially valuable. Consumptive credit is the one,
which is used for meeting the family needs and social obligations.

Agricultural Purpose

 Short term credit

Credit needs in this case are for periods of less than 15 months for the purpose of
cultivation or for meeting domestic expenses such short period loans are normally repaid
after the harvest. The requirement is for purchase of seeds, manures, fodder, payment
of wages, revenue, expenses on irrigation, hire charges of equipment's.

 Medium term credit

Finances are required for medium periods varying between 15 months and 5 years. The
funds are required for purchase of cattle, making some improvements on land, buying
implements repairs to machinery, farm house, laying orchards etc.

 Long term credit

These are needed for purchase and reclamation of land, construction of wells, repay old
debts, permanent improvements on land, purchase of costly agricultural machinery viz.
tractor, development of irrigation sources etc. these loans are for long period of more
than 5 years.

 Non farm business purposes

In this case the short term credit is taken for repair of production equipments, transport
equipments and furniture etc. and long term loan; is required for purchase, construction,
addition and repair to building for non farm business, purchase of transport equipment
and other capital expenditure on non farm business.

 Family expenditure

Here short-term loans are required for purchase, construction, addition and repair to
building for non farm business, domestic utensils, clothings, medical, grossery
educational and other family expenses. Long term loans are taken for purchase,
construction and repairs of residential houses and expenditure on marriage, other
ceremonies, litigations etc.
 Other purposes

These include purchase of buildings, ornaments, shares and debentures of companies,

co-operatives, payment of old debts and so on.

 Chattel and collacteral credit

The credit is given on the security of farmers livestock, crops or warehouse receipts,
while the letter on the security of other kinds of movable property such as shares,
bonds, government securities and insurance policies.

 Personal credit

Which is advanced on the promissory or personal notes of the farmer with or without
security of a third party such type of credit is based on the security of character of the
borrower and take into account the honesty and hard working nature of the borrower,
his craning capacity and past record, repaying capacity of the borrower.