Agribusiness and Rural Marketing

AGRIBUSINESS AND RURAL MARKETING

Mandeep Pujara Project Director AGRICULTURE TECHNOLOGY MANAGEMNET AGENCY

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ATMA

Topics to be covered Definition, Scope of Rural Marketing Concepts, Components of Rural Markets Classification of Rural Markets Rural Vs Urban Markets Concept of agri-business Components of agri-business Agri-business in India – issues

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Definition

According to the National Commission on Agriculture – “Rural Marketing is a process which starts with a decision to produce a saleable farm commodity and it involves all the aspects of market structure or system, both functional and institutional, based on technical and economic considerations, and includes pre and post harvest operations , assembling, grading, storage, transportation and distribution.

According to Thomsen – “the study of Rural Marketing comprises of all the operations, and the agencies conducting them, involved in the movement of farm produced food, raw materials and their derivatives, such as textiles, from the farms to the final consumers, and the effects of such operations on producers, middlemen and consumers.

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Rural marketing has also been defined as the process of developing, pricing, promoting, distributing rural-specific goods and services leading to exchange between urban and rural markets, which satisfies consumer demand and also achieves organisational objectives.

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Rural

Urban

Urban Rural

1. Agricultural products (Food grains etc.)

2. Oil seeds, Cotton, Tobacco, Sugar, Cane etc.

3. Handicrafts and Rural Industry Products

1. Small Agricultural Tools.

2. Household earthen items, wooden items etc.

Not concerned

1. Consumables and consumer durables.

2. Agricultural inputs like seeds, fertilizers, pesticides, tractors etc.

3. Services like Health, education, Market information etc.

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Census Record

Rural Population in India : 64.8% Rural nail polish market : Rs 270 million against

Rs 81 million. Rural market for lipstick : Rs 250 million against

Rs 131 million. Rural market for face cream : 1099 tonnes

against 426 tonnes. Shampoo market ; 2257 tonnes against 718

tonnes. Mosquito Repellant Market : Rs 173 million

against Rs 79 million.

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Scope of Rural Marketing

The difference in rural and urban sector is due to vast difference in:• Income level• Expenditure capacity• Taste and preferences• Educational level• Social, Cultural and environmental

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Following Service areas have great potential in rural markets:

1. Agricultural consultancy:Rural customers require proper consultancy services about the best methods, timings and seasons, technology, tools, prices and best markets for selling their farming products.

2. Banking, microfinance and loan facilities:The rural market has huge potential for banking services for providing following facilities at affordable prices:• Agricultural loans• Educational loans• Housing loans• Savings accounts and safe deposits• Automobile loans• Personal loans

3. Healthcare:The availability and location of these services is of great concern as most of the areas either do not have any or many rural and remote areas needs to be dependent on very few and distantly located Hospitals

4. Telecomm services:The government’s policies for reduced tariffs, call rates, lesser mobile handset prices and private participation involvement has helped in increasing the level of competition, continuous improvement in technology and thus has resulted in the growth of the rural telecomm market

5. Automobiles Services:There has been a huge increase in the number of two wheeler, four wheeler and Agricultural tools and vehicles in past few decades because of reduction in prices and government support to the rural population. This has given rise to a new business for providing maintenance and repair services to rural consumers.

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6. T.V. Channels Services:Due to the increased awareness, arenas of interest, leisure requirements, and number of entertainment options like televisions and computers due to reduced & affordable prices, the demand for entertainment services like T.V. entertainment channels have increased. Many companies have already gained profits by targeting rural markets which include Airtel (DISH TV), Reliance (BIG TV), and Tata (SKY).

7. Travel and reservation Services:The travel and reservation booking and organizing services for booking train, busses, taxies and tour consultancy has also been observed to create a huge demand in last few decades as more and more rural population need to mobilize for business and personal reasons.

8. Low Cost Hotels:Due to increased mobilization because of business and personal needs, there is also increased demand for hotel and lodging services to the travellers.

9. Event Managements:The rural population are majorly involved in celebrating and organizing festivals, which require lighting arrangements, venue decoration, food, lodging, transportation, catering and event planning etc. for:i. Family gatherings, Marriages, engagements, birthday parties,etc.ii. Festivals like Diwali, Onam,Christmas, lohri, Eid, Dushera, Kannada Rajamahotsava, Navratri, Garba and Dandia mahotsava etc.

10. Beauty Parlours:As there has been major improvement in the quality of life style and increased awareness among the rural customers (especially females), there has been great demand observed for beauty products and services. This market is still dominated by unorganized and local players who lack adequate tools, methods, skills, process, technology and beauty products to meet the demand of rural population.

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11. Affordable Movie theatres:Till now the entertainment service providers for movie theatres at affordable prices in rural markets are dominated by local and unorganized players who lack proper facilities and infrastructure as well as quality delivered.

12. Educational and Career consultancy:The rural markets lack adequate and quality educational services which are majorly catered by government agencies and bodies. But due to lack of proper infrastructure, expertise, knowledge, talent, funds and participation of the service provider, this sector is unable to meet the desired level of service expectation of the rural customer for career building.

Emerging Areas in Rural Marketing Agri-Business Management NGO Management Natural resource Management Rural Infrastructure Management Micro-finance Corporate Social Responsibility

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Concept of Agri-business Agri-business can be defined as

commercialization of agriculture, which refers to market orientation of agricultural production process.

Transition from subsistence to commercial agriculture.

From production oriented approach to market oriented approach

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Agri-business: Current Status and Issues The food chain in India from the

farmer to the consumer involves several intermediaries leading to handling at multiple points and longer transit time.

It is estimated that 20% of the food produced in India is wasted. This is valued at Rs 50,000 crores approximately.

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Agri-business: Current Status and Issues This wastage is equal to the amount

that the government spends on food subsidy by more than six times.

Only 25% of the consumer’s rupees reaches the farmer as compared to 50% in developed countries.

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Agri-business: Current Status and Issues India produce a wide range of fruits

and vegetables of both the topical and temperate varieties because of the varied climatic conditions in our country.

Unfortunately, less than 2% of our produce is processed as against 30% in Thailand, 70% in Brazil, 78% in Philippines and 80% in Malaysia.

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Agri-business: Current Status and Issues The wastage is estimated as high as over 25%

of the total production of fruits and vegetables. The cold chain system is primitive and under

developed. The existing capacity of 1 million tonnes is

primarily used for storage of potatoes. The current method of forecasting of agricultural produce does not provide for any time to take corrective action in terms of crop failure or surplus. There is need to develop efficient market information system.

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Distinction between Rural and Urban Markets

Urban Market Rural Market1. City has a large population size growing at a fast growth rate due to immigration from rural areas for education and employment. The population density is high. Towns are smaller urban units.

1. Village is a human settlement with a small administrative unit. It comprises few hundred households and the population growth due to immigration is insignificant. Migration from village to city/town is to get better education and employment.2. The city settlement is

compact though spread over a larger area. Land use is residential, commercial , industrial roads and streets, institutional and community facilities etc.

2. Village has land for human settlement and for cultivation. The settlements are predominantly clustered but in some areas households settle on respective cultivable land holdings.

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3. Structure of houses is permanent and often rises to more than one storey. Housing on rental is highly prevalent.

3. Houses are largely semi-pucca or kachha. They are owner occupied.

4. Primary resource base is production and distribution of industrial goods and services.

4. Land is the primary resource for livelihoods. Other forms of resources are water bodies, forests , and mountains. Cows, buffaloes and poultry are kept for household need for milk, eggs and meat.

5. Occupations are diverse ranging from professionals, skilled, semi-skilled to unskilled workers. Higher education and training is required to build skills.

5. Predominant occupations are cultivation and agricultural labour.

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6. Rigid, conservative in approach and custom bound. Society is guided by age old customs. No scientific outlook.

6. Free from traditional outlook. More scientific approach to the issues.

7. Media reach is very high. Marketers generally prefer Televisions, internet and print media to be reached to the target customers.

7. Media reach is very low. Marketers prefer Radio, loudspeaker on rickshaws to reach to the target customers.

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Nature of the Rural Market Large and Scattered Market – Consists of

approximately 75 crore rural consumers who live in approximately 638365 villages spread over 32 lakh square km area. Covering such a large and widely scattered geographical market, raises the inventory and transportation costs.

Heterogeneous Market – As many as 20000 ethnic groups are present in rural India. There are 24 languages and 1624 dialects and the dialect varies every 100 km, making it extremely difficult to develop a uniform promotional message. Divisions based on caste, community and other factors also continue to exist.

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Income from Agriculture – Nearly 55% of rural income comes from the agriculture sector, hence rural prosperity is tied with agricultural prosperity to a great extent.

Standard of Living – Over 70% of the rural population is employed in small-scale agricultural and related occupations. This dependence on agriculture and natural factors has led to an acute seasonality and high chance element in income receipts in rural areas.

Infrastructural Facilities – Roads, warehouses, communication system and financial facilities are inadequate in rural areas. Roads do not connect nearly 50% villages in the country. Over 50% rural households have access to electricity as a main source of lighting but 46% still use kerosene for lighting.

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Classification of Rural MarketRural

Economy

Farm Sector(Agri & Allied)

Non-farm sector (Formal & Informal sector)

Agriculture

Animal Husbandry

Horticulture

Forestry, Fishing

Rural Industries Rural Services

Agro Processing (Sugarcane, Oilseed etc.)

Retailing & Trading

Manufacturing (Handloom, Handicrafts

etc.)

Community & Social Service

Mining, Construction Communication

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Classification of Economic Activity Primary Sector – Agriculture and allied

services such as livestock, fishing and forestry.

Secondary sector – Mining and manufacturing activities.

Tertiary Sector – Services such as transport, communication, trade, financial services and community services.

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Transition

1. Food grain crops2. On-land activities

3. Farm activities

1. Non-food grain crops, cash

crops2. Off-land activities like livestock and

fisheries3. Non-farm

activities, includes

manufacturing and services.

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Mandis Agricultural markets set up by state government

to procure agricultural products directly from farmers. Located in high production centres of different crops, these markets may be categorized as grain mandis, soya mandis, cotton mandis.

Most agricultural areas with a Population of more than 10000 have mandis and caters to 136000 population.

Displays the latest commodity prices. The price quote from the seller may vary depending on factors such as quantity, packaging, delivery terms, payment method etc.

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Road Connectivity Pradhan Mantri Gram Sadak Yojana – It

was launched in December 2000 with the objective of providing connectivity through good all-weather roads to all unconnected habitations with a population of more than 500 persons, with an anticipated investment of Rs 60000 crore.

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Mobile Postman Scheme The scheme is designed to make a

telephone available at the doorstep of every rural household. Under the scheme, a mobile telephone will be provided to a postman. When the postman goes to a house to deliver a letter, he will carry a telephone with him. Since a postman reaches practically every house, the scheme will enable the telephone services to be made available practically to all citizens in his area.

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Pradhan Mantri Gramodaya Yojana This Yojana for the primary health sector is

an initiative to strengthen and revitalize the primary health infrastructure for the improved provisioning of basic minimum services in rural areas so as to improve the quality of life. The Planning Commission of India has allocated additional Central Assistance of Rs 2800 crore for six sectors, i.e. rural electrification, primary health, primary education, shelter, drinking water and nutrition.

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Rural Electrification Indian planners visualized the necessity of Electrical Energy

and included it in the Five Year Plans. A rural electrification programme was devised for

increasing the infrastructural input for agricultural production programs. To implement the program effectively, the Rural Electric Corporation (REC) was set up.

REC has been a catalyst for rural development. The Corporation has sanctioned financial assistance of Rs. 28,588 crore under 37335 rural electrification projects so far. About 3.05 lakh villages have been electrified through REC funded schemes.

Over 78 lakh pumpsets stand energised with the corporation’s assistance.

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Public Distribution System Distribution of essential commodities to

a large number of people through a network of FPS (Fair Price Shops) on a regular basis (often referred to as ration shops). The commodities distributed are wheat, rice, sugar, edible oil and kerosene.

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Haats

Haats (Periodic markets) play an important role in the rural economy as well as in the social life of villagers.

First point contact for villagers with the market.

Means of distributing local products and exchanging agricultural surplus.

Opportunity for buying daily necessities as well as farm supplies and equipment.

A place for political, social and cultural contact.

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Melas Serve as the meeting ground for people from

different communities and religious groups, for livelihood and agricultural commodities, for crafts and craftsmen and for displaying various skills.

Melas are gatherings of people away from their residences for entertainment and for the sale and purchase of goods and services at a particular time.

Melas may be classified on the following basis:o Religious, cultural or commercial (commodity,

cattle, exhibition)o Local, regional and nationalo One day, short duration or long duration.

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Regional Rural Banks

Set up under an Act of Parliament in 1976 with the objective of developing the rural economy through the promotion of agriculture, trade and commerce and industry and by extending credit to small and marginal farmers.

Authorized capital of RRB is Rs. 5 crore.

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Cooperative Banks

There is a three-tier pyramidal cooperative credit structure in the rural cooperative banking sector, with the

State cooperative bank (SCB) at the state level

District Central Cooperative Bank at the district level

Primary Agricultural Cooperative Society at the village level, essentially to ensure flows of short-term credit for production purposes.

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NABARD NABARD has been the primary government

institution dedicated to developing systems and delivering institutional finance in rural for both the farm sector and the non-farm sector. It refinances assistance for financing farm mechanization, i.e. purchase of tractors, power tillers and also the accessories.

It also provides agricultural credit through the Kisan Credit Card. This scheme aims at the provision of adequate and timely support from the banking system to the farmers for their cultivation needs, including the purchase of inputs in a flexible and cost-effective manner.

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Innovations in the rural credit domains by NABARD

Self-help groups and micro finance Farmers clubs Rural Infrastructure Development Fund Watershed Development Tribal Development Women and Development District Rural Industries Project Rural Entrepreneurship Development Programme Rural marketing Revival of the Short term Rural Co-operative

Structure Co-financing

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DRDA (District Rural Development Agency)

It has been the principal organ over the years at the district level for overseeing the implementation of various anti-poverty programs.

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Employment Opportunities With the objective of promoting self-

employment among the educated unemployed rural youth, government programs such as the Pradhan Mantri Rojgar yojana and the Integrated Rural Development Project, were developed. These programs aim to provide skill-based training and link access to bank credit(subsidized).

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Sampoorna Grameen Rojgar Yojana

The Employment Assurance Scheme and the Jawahar Gram Samridhi Yojana are two schemes under the programme. The EAS is meant to create additional employment opportunities during periods of acute shortage of wage employment through manual work for the rural poor living below the poverty line.

The JGSY aims at the creation of need-based rural infrastructure at the village level.

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Rural Housing The Central government announced a

National Housing and Habitat Policy in 1998 aiming to provide ‘Housing for All’ by facilitating the construction of 20 lakh additional housing units annually.

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THANKS

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