2011

SCMHRD
Kurien George Sneha Verma Harichandana Madira Kiranmayee Jilludimudi - 2011C03 - 2011C21 - 2011C25 - 2011C37

[INNOVATION

SYSTEM RYTHU BAZAAR A FEASIBILITY STUDY

A feasibility study on the applicability of the model of Rythu Bazaar in the Suburbs of Pune by documenting responses of farmers with small land holdings from a few nearby villages.

ABSTRACT Innovation has been existent since birth of mankind and has been the driving force for growth of civilizations and better life. Innovation systems that facilitate innovation are existent in all spheres of life, be it agriculture, manufacturing, medicine or technology. One such innovation system called Raithu Bazaar, a agricultural innovation system, is the focus of our study. The model aims to benefit farmers and consumers by eliminating middlemen and providing access to fresh produce to consumers. Having been successful in AP, we wanted to study the feasibility of this model in villages around Pune. The significance of our study is to unearth the factors that affect/promote the feasibility of implementation of this model in villages around Pune. Keywords: Raithu Bazaar, Innovation, Model Implementation, Singhgad village, Maan village

INTRODUCTION The traditional way of selling the produce has been through middlemen (Dalari) and other intermediaries. This method of selling resulted in very low profits to the farmers as compared to the margins of the distributors and retailers. In order to enhance the farmers income by preventing intermediaries and distress selling, a model called Raithu Bazaar was developed. The Raithu Bazaar model revolves around the farmer and aims at making the farmer the seller of his own produce. The infrastructure required for the farmer to come and sell his produce is provided by the government. These facilities include dedicated bus for farmers to travel at subsidised rate, shops to sell, basic amenities etc. The farmer is allotted a stall in the mandi and the price is fixed such that it is above the wholesale price but below the retail price. The customers also find it cheaper to purchase from such mandis. The net difference goes as profit to the farmer. Another advantage of Raithu Bazaar is that it prevents hoarding of vegetables and crops by dealers. This prevents price rise and artificial scarcity in the market. Such a model has been successfully implemented in states like Andhra Pradesh and Tamil Nadu. Through this paper, we have tried to understand the factors/policies that helped in the success of this model in those states and understand is this model is feasible in Maharashtra. We have conducted our study in villages around Pune to understand the feasibility of the model.

LITERATURE REVIEW: INNOVATION SYSTEM - A NATIONAL AND REGIONAL PERSPECTIVE Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society.[1] Innovation as a process can be managed by a framework called INNOVATION SYSTEM. Innovation systems are country, region and/or industry specific elements which support development and

successful marketing of new products and services. It comprises of national institutions, legislation, government policies (state & central), availability of financial resources, R&D base, skills, social and cultural factors.[2] An Innovation System slowly builds up capabilities in generating and selecting new ideas, testing whether the ideas will work, and facilitating their spread. It helps policymakers pinpoint mismatches within the system andidentify leverage points for enhancing innovative performance and overall competitiveness.[3] It focuses on the importance of the local. It is unique to each nation/region because they "learn" in different ways, i.e. generation of knowledge, transfer and diffusion of ideas and information, development of skills and capacities do not happen through the same mechanisms in various nations/regions. [2] Innovation will be a capability, and a source of competitive advantage if an innovation system is built that can be managed and which will work in the long run [2]. Innovation Systems are classified as national and regional innovation systems. National system of innovation consists of "the national institutions, their incentives structures and their competences, that determine the rate and direction of technological learning (or the volume and composition of change-generating activities) in a country".[4] A NIS is the institutional setting that shapes the development and diffusion of new technologies and products within a country. It includes universities and laboratories(institutions of Government research),entrepreneurs and corporations (firms conducting R&D and bringing products to market), funding sources for government and firm based innovation, relevant government policies to scientific and economic activity.[5] These elements influence each other and also depend on each other to function. National Innovation Systems face challenges like weak interconnections between their different elements, underdeveloped market of innovation intermediaries, lack of long term industrial policy aimed at producing competitive products, insufficient motivation of R&D personnel, lack of experience in management of innovations etc.[6] A regional system innovation system encourages the rapid diffusion of knowledge, skills and best practices within a geographical area. [7] The concept of regional innovation system is a good tool to generate an effective national innovation system, as it can effectively create different sectoral innovation systems in different regions by maintaining information flow from central to regional governments and gathering cooperation from the central/local governments to build the national economy from the grassroots level.[8] Increasing intensity of international competition, apparent shortcomings of traditional national models and policies and the emergence of successful clusters of firms lead to rise in popularity of the concept of regional innovation system. In such a system, firm activities are based to a large degree on localized resources, innovation is embedded in social relationships which develop over a period of time and

withthe presence of geographical concentration and proximity, innovation occurs more easily. [2]Three types of regions exist i.e. geographically defined, culturally defined and firm-based.[2]. Regional Innovation system was implemented using the principles of Direct Agricultural Marketing aided by the states of Punjab and Andhra Pradesh in the models of ApniMandi and Rythu Bazaarrespectively. These models used the basic framework based on the Agricultural Produce Market Committees (APMC Act). The model of Rythu Bazaar in Andhra Pradesh is further being discussed. Andhra Pradesh is the second largest producer of fruits, vegetables and flowers in the country. The predominantly grown fruit crops are mango, banana, cashew nut, sapota, guava and pomegranate. Brinjals, ladys finger, onions, tomatoes, beans and gourds are the major vegetables produced in the State. [10] Rythu Bazars showcase one of the most successful models of direct marketing of agricultural produce in the country. The first Rythu Bazar was established in 1999 in Hyderabad. They provide facilities to farmers for selling their produce directly to consumers under a proper administrative system and government protection. Today there are 106 Rythu Bazars operating in 23 districts of Andhra Pradesh. Its uniqueness lies in the kind of support it has received from the government. While some other Indian states also have farmer markets, very often their smooth functioning is jeopardised because of political compulsions and resultant withdrawal of government support. Rythu Bazars have been operating for over a decade and have adapted to changing times in terms of up gradation of facilities. They have found acceptability amongst both farmers and consumers.[9] Regulated Market Yards for fruits and vegetables are functioning only at few centers in the State. The marketing system for fruits and vegetables is in the hands of middlemen. The farmer's share in the consumer's rupee is estimated to be just 40 paise. In addition the estimated losses in handling of vegetables in the traditional channel of marketing are about 30 to 35%. Large numbers of small farmers are unable to effectively bargain for a better price in the wholesale markets. Inefficiencies in wholesale markets result in a long chain of intermediaries, multiple handling, and loss in quality and increase the gap between producer and consumer prices. Intermediaries and system inefficiencies consume a disproportionate share of consumer prices. Large number of small retailers, each handling small quantities, create high overheads leading to high margins on produce [10] Objective of the Study The objective of this research paper is to study the possibility of applying the model of Rythu Bazaar in the suburbs of Pune of Maharastra by understanding the current scenario and identifying the absence/presence of factors conducive to the success of this concept. Further analysis shall include the relevant government policies, cost benefit analysis and reasons for the failure of similar agricultural market yards in other states, if any.

APMC or Mandis are official markets set up at a specific location to trade a set of agricultural commodities. APMC laws were created to ensure good prices for the farmers through open auction system,but on the contrary, it has created monopolistic scenario ie only Government can create APMCs, private mandis are not allowed. Only APMC license-holders can buy from farmers, end users cannot buy from the farmers directly. [source: http://www.slideshare.net/karkarhitesh/comparative-evaluation-of-participantssatisfaction-perception-in-castor-trade-nsel-viz-a-viz-apmc]. Farmers cannot sell produce outside the APMC mechanism. This makes them vulnerable to traders' and marketing agents' pricemanipulations.[source: http://en.wikipedia.org/wiki/Agricultural_produce_market_committee] FACTORS THAT LED TO THE EMERGENCE OF RAITHU BAZAAR: This model would help eliminate the middlemen and arrange facilities for the farmers to sell their produce directly to the consumers at reasonable rates fixed every day. Small farmers are unable to effectively bargain for better price in the wholesale market. Inefficiencies in the wholesale markets results in a long chain of intermediaries, multiple handling, loss of quality and increase in the gap between the producer and consumer prices. On account of the scheme both the farmers and the consumers are benefited. [b] The model helps in providing vegetables at reasonable rates fixed every day. The model helps in curbing malpractices in weightments as weighing machines are provided by Government officials. Fresh produce everyday helps in meeting the satisfaction level of the consumers through the direct sale of agricultural commodity by the farmers to the consumers. [c] This is ensured by minimizing the cost of inputs apart from that needed for agricultural produce. The farmer seller need not pay rent of the shop allotted to them or commission for selling their goods at the market. Transportation facilities provided by the government help them to commute to Raithu bazaar free of cost and realize more profits. [e] FEATURES OF RYTHU BAZAAR: The price are fixed by the Estate Officer in consultation with the additional Marketing Officer who observes the wholesale process and fixes the price 25% above the wholesale price. Key players are Estate Officer, Farmers, Guards and Sweepers. Estate Officer, who reports to The joint collector and Additional Marketing Officer, maintains records like Price list Register, arrival Register, attendance register and Cash book register.Identification Cards are issued to farmers by the Mandal Revenue Officer and village revenue Officer to prevent non-farmers, like dealers, from selling in the Bazaars. Through Raithu bazaar model, the producers/farmers are supplied properly calibrated weighing scales with weights for selling their produce. All these facilities are provided to the farmers and customers free of cost. The Estate Office is equipped with all the latest facilities like telephone, fax, computer with Internet facility etc. [d]

Villages It is desirable to identify the farmers from a cluster of 10-15 predominantly vegetable growing villages to enable provision of horticulture services, inputs and transportation arrangements to the Rythu Bazars effectively. Location/market place for Rythu Bazaar in Pune Rythu Bazars are located on Government lands identified by the District Collectors. The location shall have to be convenient both for the farmers and consumers. The criteria for opening of new Rythu Bazars are the availability of atleast one acre of land in strategic locations, and identification of 250 vegetable growing farmers including 10 groups.[source : http://market.ap.nic.in/npage/rbz.htm]. Based on these factors, we feel that Aundh[tentative one] is the best place to implement this model. SET UP Required infrastructure is provided in all Rythu Bazars with funds of Agricultural Market Committees. The temporary structures in Rythu Bazars are replaced by semi permanent structures to provide adequate protection against sun/rain to the producers and the users alike. Rythu Bazaar has arrangements for sheds, drinking water supply, sanitation facilities, parking slots, arrangements for removal of garbage and weighing scales. Farmers are identified by a team consisting of MRO, Horticultural officers and agricultural officers. Identity cards are issued that contains details such as name of the farmer, address, extent of land and vegetables grown etc. This practice prevents middlemen from selling in the market. Shops are allotted on First come First Serve basis. The farmers may not be able to sell all the varieties of the vegetables. In order to attract customers, it is necessary to provide varieties of produce. This need is met by self-help groups who sell only those which are not grown in the district. The self help groups are identified and only those are permitted to sell in Rythu bazaar. Transportation arrangements are made in consultation with state government buses which are dedicated to and fro of the farmers. Prices are fixed through a committee of farmers and the Estate officer. The involvement of farmers in fixation of price prevents the exploitation of farmers. The Estate officer gets wholesale and retails price and fixes the price 25% above the wholesale rates and 25% less than the local retail price. These prices are displayed prominently at strategic locations in Rythu Bazaar.

To ensure adequate participation of farmers and to motivate farmers to reap the benefits of Rythu Bazaar, Horticultural Consultant visits Rythu bazaar and assess the daily requirement of vegetables. He provides pre/post consultancy to the identified farmers and guide the farmers in production of off-season vegetables. He also organises training to vegetable growers. He also provides timely supply of quality seeds to farmers at subsidised rates. [source: http://market.ap.nic.in/npage/rbz.htm] BENEFITS: Have to add profits that goes to farmers..(quantitative terms)

CHALLENGES IN IMPLEMENTATION: Rythu Bazars face a major problem in terms of lack of coordination among farmers. Conflicts develop among farmers while selling their produce and selecting stalls in the morning; these affect smooth functioning of the market. [f]The farmers at some rythu bazaars and vegetable sellers at the market face drinking water problem. Unhygienic conditions also prevail in the market. [g] Lack of adequate parking facilities, setting up of stalls by hawkers and new vegetable markets mushrooming inside colonies provide stiff competition to the Rythu Bazaars. [h].According to a survey conducted, 63% of the respondents of the study of raithu bazaar felt very bad about the parking facility and other amenities at the Rythu Bazaar. [i] Majority of consumers felt the location of Rythu Bazaar is not conducive [i] . It was found from the survey that most of the respondents felt the convenience of the location Rythu Bazaar was Poor (70%), followed by Good (19%). [j]Lack of storage facilties to preserve unsold vegetables of the previous day affects the quality of the vegetables.There is 75 per cent direct or indirect participation of middlemen in the bazars and dealers of the stalls have not been renewing their licenses. This, in fact, goes against the rythu bazar norms that stipulate that 75 per cent of the space be given to farmers with the rest being made available for self-help groups. This forces many farmers who come all the way from villages to lose out on the opportunity. Many such middlemen come via groups like Development of Women and Child in Rural Areas (DWCRA), Chief Ministers Empowerment of Youth (CMEY), Prime Ministers RojgarYojana (PMRY). [k] Further, Individual farmers cannot sell their goods on a daily basis at the bazar as they do not produce vegetables all through the year. Thus it is difficult to allot stalls to them. Further, they do not grow all kinds of vegetables that the customers seek. Eg.Capsicum and Agra potatoes in the summer season.[k]Traffic related problems are a common trend outside the premises. It being situated abutting a major thoroughfare. RTC buses ferrying farmers and vegetable stocks stop right in front of the Rythu Bazaar leading to narrow road space for other road users. [l]The consumers expressed disapproval over many things like inconvenient entrance, high prices on Sundays and festivals, availability of fewer varieties, lack of quality vegetables during evening hours and not much difference between Rythu Bazar prices and local market rates.The traditional markets, Santalu , Haat etc have an impact on sales in rythu bazaars. Some people

find it more convenient to buy vegetables and other provisions in Santalu rather than at Rythu bazars. [m]

RESEARCH METHODOLGY The study covers both the primary and secondary data. The data was collected by interview method by using structured questionnaire. For the purpose of the study, the data has been collected at villages around Pune (Maan and Singhad). Data has been collected from a cross section of farmers having large as well as small holdings and officer. Sources of data collection The data was collected from web portals and research papers on the web, news paper articles and documents from agricultural offices. Primary data was collected by scheduling interview to the farmers. Sampling Technique Universe: Pune District Sampling Unit:farmers of Singhgad and Hinjewadi village Sampling design: Convenience sampling method was adopted

Findings: 1. In Maan village, there is no problem of water/irrigation. The nearby river ensures a throughout-the-year water supply. Moreover, people use their own water (form bore wells) for irrigation. 2. In Maan village, there is no electricity problem either because the region is industrialized. However, no subsidies are given on power. 3. Normally nationalized banks provide the loans. Villagers have very low awareness of the loan schemes because of lack of marketing. The ones who go to banks to take loans find it very cumbersome. Banks do not give them the complete information because of which they have to go repeatedly. One respondent stated that he faced expenses up to 1500 in trying to open an account. 4. No cold storage facilities are present in the villages. The farmers set aside a part of their produce for their own consumption and sell the rest. In Maan village, the unsold vegetables are fed to the cattle or sold directly in the village. In Singhad farm, individual produce was less because of small land holdings. The produce was sufficient only for local consumption. The main source of revenue was from tourists.

5. In Singhad village, the bus facilities were good but very expensive.. However, In Maan village, this facility lacked. However, 6-seater vehicles run on a sharing-basis. Some people use their own vehicles. Most of them go to Pimpri market. The villagers do not prefer to sell their produce directly because they do not have the time to sit there all day long. 6. Earlier, the government provided subsidies (on electricity) and cattle loans but this is not prevalent anymore. 7. Government provides no back up for the losses. If the produce gets damaged, the farmers have to bear with the losses. In Maan village, certain farmers have insurance cover for their crops. They get information on insurance from the local bodies. 8. In Maan village, the villagers sold their produce to middlemen in Pimpri, sugarcane to the distillery in Kasarsai and groundnut to oil mills. On an average, these people deal with 2-3 agents. However, in Singhad village, due to the small size of the produce and high transportation costs, the farmers did not find it feasible to sell in the city. Few of them sold rice directly to the tourists visiting the fort. 9. Based on their experience, a few farmers were of the opinion that such a model will not work because they had lost faith in the government. 10. In Maan village, vegetables form a major chunk of the net produce. However, they do not use pesticide or any other chemicals for protecting the vegetables from infestation. Cooling sheds are made for storage and to facilitate ventilation (which prevents rotting or spreading of infection). 11. SharadPawar declared this region as a Green Zone. A conflict of land acquisition happened in the past. The farmers protested against this and the government has since then, given them the right to construction on their land ie. only the farmers can use the land for construction purposes. They can make houses but not commercial building on this land. 12. The following data was given by a farmer in Maan village about the rates. From this, it follows that farmers are aware of the difference in costs. Rice: If the produce is sold before harvesting, the per kg revenue drops to Rs.1200-1300/quintal. Vegetable Price in village (Rs.) Price in market (Rs.) Brinjal 6-8 20 Onion 5-6 10 Potato 6-7 10 Wheat 15-20

Conclusion: The farmers were positive about the proposal, provided that cheap dedicated transportation along with the infrastructure was made available to them.The implementation of the model will require sufficient involvement from the side of the government, in the form of subsidies, loans etc. Government must adopt suitable awareness campaigns to invite greater participation of the farmers to avail of the schemes.Government must also build more storage facilities so as to reduce the wastage of produce.

Questionnaire used: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. What is your name? How many people are there in your family? What crops do you grow? How much land do you have? How do you sell? To whom do you sell? What is the price you get for your produce? Are you aware of the market price? If your produce is perishable how do you try to save it or stock it? Would you be willing to sell produce via this model by coming to the city if govt would introduce these measures to help you? Does the Government provide you with subsidies or Insurance for damages to crops? Are you aware of the various loans schemes offered by the government? How well connected is your village with the city? Do you face any problems related to Irrigation? Does the government give you any subsidy on irrigation? Does your village face problems related to power cuts? Do you get any subsidy on electricity?

BIBLOGRAPHY [1] Wikipedia:http://en.wikipedia.org/wiki/Innovation *2+ Regional Innovation Systems: A Critical review by Doloreux and Parto [3+ National Innovation Systems, OECD [4+ National Systems of Innovation under Strain: The Internationalization of Corporate R & D, Patel and Pavitt, 1994 *5+ Indian Innovation System: Perspective and Challenges, Ashwani Gupta and P K Dutta. [6+Russias National System of Innovation: Strengths and Weaknesses, by Tatiana Khvatova. [7] Wikipedia: http://en.wikipedia.org/wiki/Regional_innovation_system [8+ Building a national innovation system through regional innovation systems, by S Chung, ISSN: 01664972 [9+Direct agricultural marketing: Rythu Bazar in Andhra Pradesh, by One World Foundation India [10]http://market.ap.nic.in/npage/rbz.htm [11+National Innovation system and Macroeconomic Policies: Brazil and India in comparative Performance, published in 2007 by United Nations. [12+National Innovation System: The system Approach in Historical Perspective, by Benoit Godin

[a] Indus Journal of Management & Social Sciences, 3(1):52-63 (Spring 2009) http://indus.edu.pk/journal.php Consumer Satisfaction and Preferences By R. Saibaba and S. Vadde 54 link : http://www.indus.edu.pk/journals/5-Consumer%20Satisfaction%20and%20Preferences.pdf [b] http://agmarknet.nic.in/amrscheme/rythu_bazarmodel.htm [c] http://agmarknet.nic.in/amrscheme/rythu_bazarmodel.htm [d] http://agmarknet.nic.in/amrscheme/rythu_bazarmodel.htm [e] UzhavarSandhais A boon or bane for rural empowerment in Tamil Nadu, Prof Dr. M H Salim, hariSundar G, Anoop Das] , link -- http://dspace.iimk.ac.in/bitstream/2259/456/1/RM159.pdf [f] ryhtu_edited_final.pdf [g] http://www.hindu.com/2007/04/18/stories/2007041812910500.htm [h] http://articles.timesofindia.indiatimes.com/2003-10-19/hyderabad/27205272_1_bazars-farmersand-consumers-colonies [i] http://ideas.repec.org/a/iih/journl/v3y2009i1p52-63.html [j] http://www.indus.edu.pk/journals/5-Consumer%20Satisfaction%20and%20Preferences.pdf [k] http://ibnlive.in.com/news/middlemen-rule-at-rythu-bazars/161890-60-121.html [l] http://www.thehindu.com/todays-paper/tp-features/tp-downtown/article796103.ece [m]http://www.thehindubusinessline.in/2004/01/08/stories/2004010801701700.htm