Rural Mktg Notes

INTRODUCTION

The concept ‘Rural’ and ‘Marketing’, though used very frequently in various forums,

have eluded any precise and non- controversial definitions. When we join them, the

resulting concept ‘Rural Marketing’ means different things to different persons. This

confusion leads to distorted understanding of the problems of rural marketing poor

diagnosis and, more often than not, poor prescriptions.  

The Indian rural market with its vast size and demand base offers great opportunities to

marketers. Two – thirds of countries consumers live in rural areas and almost half of the

national income is generated here. It is only natural that rural markets form an important

part of the total market of India. Our nation is classified in around 450 districts, and

approximately 630000 villages, which can be sorted in different parameters such as

literacy levels, accessibility, income levels, penetration, distances from nearest towns,

etc.  

Rural marketing and urban marketing are identical as regards basic marketing structure.

However, rural markets and rural marketing have special features and dilemmas as

compared to urban markets. The rural markets offer a great scope for a concentrated

marketing effort because of the recent increase in the rural incomes and the likelihood

that such incomes will increase faster because of better production and higher prices for

agricultural commodities.

The rural markets dominate Indian marketing scene and need special attention for the

expansion of marketing activities and also for providing better life and welfare to the

rural people.

  Given the development, which has taken place in the rural areas under the five- year

plans and other special programmes, today the rural market offers a vast untapped

potential. Development programs in the field of agriculture and allied activities, health

education, communication, rural electrification, etc have improved the lifestyles of poor

and the illiterate and some market agencies forecast the rural demand will supercede the

urban demand in the near future.

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Profile of Rural Marketing

1. Fast changing pattern and demand

During the last decade the rural consumers were in need for low end products

which would meet their basic demands and necesities. But of lately due to change

in technology rather advancement in technology the demand for people have also

changed and the buying pattern which initially comprised of basic products have

now shifted to luxiorous products.

    2. Large and scattered market

In the 1st place, in terms of number of consumers, the rural market of India is a

very large market ; it consists of more the 600 million consumers. The second

aspect is that geographically, it is a vast market. Practically the role of India,

barring the metropolitan cities and towns constitute the market. It is also highly

scattered market: the consumers are scattered over 5,70,000 villages spread

through the length and breath of the country. In terms of business generated too,

it is a big market; 22000 crore rupees worth of non-food consumer goods are

being sold per year in the market at present.

    3.  Heterogeneous market

It is not as if the whole of rural India can be taken as one homogenous entity.

There is a great deal of difference among the various states in this regard. A study

conducted by IMRB provides some clue to the relative status of the rural areas of

different states. The study provides development index points for each state in the

country collected village level data on various parameters such as availability of

health and education facilities, the nature of facilities, availability of public

transport, electricity transmission, banks, post offices, water supply and so on. A

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weight was decided upon for each facility, by type, based on the relative

importance of that facility in industry to the extent of development reached by that

village. The study has demonstrated that while the average village in India has 33

development index points, Keralas average 88; Bihars is just 22; MP, Rajasthan

and UP are close to Bihar; and states like Maharashtra, Haryana, Karnataka range

between 40 and 50.

   4.  Demand, Seasonal and Agriculture Dependent

Regarding the nature of demand for various products, it can be seen that the

demand is heavily dependent on agriculture. And as a natural corollary, it is

seasonal in character. It is irregular as well, since agriculture in many parts of

India still depends on the vagaries of the monsoon. Rural demand is not only

harvest linked but also festival linked – the festivals often coinciding with the

harvest.

   5. Characterised by Great Diversity

The rural consumer of India are also vastly diverse in terms of religious social,

cultural and linguistic factors.

   6.  Steady Growth Despite Inhibiting Factors

Despite several inhibiting factors, the rural market of India has grown steadily

through the years. This is evident from the data presented earlier. Not only has

the market grown in quantitative terms, but qualitatively too, it has undergone a

significant change. Many new products have made their entry in to their rural

market basket. The upper segment in particular have started buying and using a

variety consumer products which were till recently unknown in the rural. In fact

the impression that the rural market is confined to certain traditional consumer

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product and agri-inputs has totally lost its validity in today’s context.

Profile of Rural Consumer

1.      Size of rural consumer population:

The size of India’s rural consumer group can be understood from the details provided in

the following table:

  1971 1981 1991

  Population

in crores

Percentage

to total

Population

in crores

Percentage

total

Population

in crores

Percentage

total

Rural

Population 43.90 80 50.20 76.3 64.1 76

Urban

Population 10.91 20 15.62 23.7 20.3 24

Total

Population 54.81 100 65.82 100.00 84.4 100

The table shows that now 76% of India’s total population is rural. If we consider the state

level picture, in several states like Uttar Pradesh, Madhya Pradesh, Rajasthan and Kerela,

the rural population constitutes more than 80% of the total population. And there are also

states like Bihar and Orissa where as much as 90% of the total population is rural.

 2.      Significant Aspects of Rural Consumer Profile

Coming to consumer characteristics, it can be seen that in general sense, low purchasing

power, low standard of living, low per capita income, low literacy level and overall low

economic and social position are the traits of the rural consumers. By and large, the rural

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consumers of India are a tradition bound community; religion, culture and even

superstition strongly influence their consumption habits.

Colgate Herbal’s priced at Rs.12 for a 50 gm, Rs.22 for a 100gm and Rs.41 for a 200gms

tube is an attempt to sell value added toothpaste at the lower end, where the Indian brands

are hoping to shut the multinationals. This is a variant for the boring white Colgate

cream, which is used over the years by the rural people. Also, since the literacy level is

low it’s advertising campaign never gave emphasis to the same old calcium content rather

this time more over giving importance to the latest technology and the natural qualities

that are well defined by the character “Billoo” in the advertisement.

 3.      Location Pattern of Rural Consumers

Whereas the urban population of India is concentrated in 3,200 cities and towns, the rural

population is scattered over 5,70,000 villages. Statistics show that out of 5, 70,000

villages only 6,300 have a population of more than 5,000 people each. More than 3 lakh

villages or more than 55% of the total number of villages are in the category of 500

people or less and more than 1.5 lakh villages or 25% of the total are in the category of

200 people or less. The inference is clear; rural demand is scattered over a large area,

unlike the urban demand, which is highly concentrated.

Take the case of Colgate again. Why is it the leader in the dental care products? It did not

even leave the rural area with minimal of 200 people per village as compared to the

heavily populated area with an average population of 5000 people per village. Now, it has

established itself in such a way that people accept Colgate as the tube with red and white

box. Hence, they haven’t changed the color of the box for say a decade and a half.

4.      Literacy level

It is estimated that rural India has a 23% literacy rate compared with 36% of the total

country. The adult literacy program launched by the government in the rural areas are

bound to enhance the rural literacy rate in the years to come. Two aspects need to be

specially emphasized: (1) In absolute numbers, there are 11.5 crore of literate people in

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rural India compared with 12 crore in urban India, and (2). Every year 60 lakh is getting

added to the literate population of Rural India.

Looking at the second point there’s something for the company for the taking. Coco Care

had a brilliant strategy to market itself in different Indian villages, depending on the most

spoken language over there. Say in Maharashtra it had flyer distribution done in Marathi

as a medium of communication.

       5.      Rural Income

An analysis of the rural income pattern reveals that nearly 60% of the rural income is

from agriculture. Evidently, rural prosperity and the discretionary income with the rural

consumer is directly tied up with agricultural prosperity. Anything that contributes to

agricultural prosperity will directly result in increase income for the rural population and

the consequent increase in their spending capacity. The pre dominance of agriculture in

the income pattern has one more significance ie- rural demand is more seasonal.

6.      Rural Savings

Statistics reveal that in recent years, rural consumers have been drawn into the saving

habit in a big way. The commercial banks and the co-operative have been marketing the

saving habits in rural areas for quite some years. Today, as much as 70% of the rural

house hold are saving a part of their income. The habit is particularly widespread among

salary owners and self employed non-farmers.

Since the major income in the rural areas is from agriculture the demands turns out to be

seasonal. Take the example of Hero Honda Splendor; it had a major promotion done in

the crop-cutting season, as this being that golden season for the farmers.

Potential and Changing Pattern of Rural Marketing

Consumer products where rural consumption is more than urban consumption are

Bicycles 80% Rural 20% Urban

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Safety razor blades 67% Rural 33% Urban

Silk Clothing 59% Rural 41% Urban

Books & Stationery 55% Rural 45% Urban

Woolen Clothing 53% Rural 47% Urban

Other Consumables 53% Rural 47% Urban

Generators 95% Rural 05% Urban

Products where rural consumption growth rates are higher as compared to urban markets are as follows:

1.      Packed Tea

2.      Alcoholic Beverages

3.      Tobacco Products

4.      Medicines

5.      Detergent Powder

6.      Soap Cake/Bar

7.      Detergent Cake/Bar

     Due to television the rural consumer is aware of international products.

    Literacy has brought about a change with respect to the rural outlook.

    New employment opportunities due to change in government policies has resulted in round the year income for at least a certain section of the rural population.

    Green Revolution and after the Indian farmer has become prosperous.

    The savings pattern of rural India has resulted in better buying power for the rural consumer.

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Tapping the Rural Market Problems

While the rural market of India certainly offers a big attraction to marketers, it would be

totally naive to think that any firm can easily enter the market and walk away with a

sizeable share of it. A firm seeking a share of this market has to work for it, as the market

bristles away with a variety of problems. The enterprise has to grapple with these

problems and find innovative solutions to them. In fact, only because a few pioneering

firms correctly understand these problems and came up with innovative solutions to

them, that we now see a wonderful trend of growth in rural markets.

What are these problems? How are they peculiar to the rural market? And how does a

firm solve them?

The existing problems in rural marketing are:

a.       Physical Distance

b.      Language/Culture

c.       Accessibility

d.      Money/Expensive

e.       Lack of Human Resource

f.        Competition

g.       Technology

h.       Rules & Regulation

i.         Lack of Information

j.        Size of the Market

k.      Buying Power

l.         Image

Major Problems in Tapping the Rural Markets and the possible solutions are as

follows:

1.   Managing Physical Distribution In Rural Markets

2.   Channel Management In Rural Markets

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3.   Sales Force Management In Rural Markets

4.   Marketing Communication In Rural Markets

1.      Managing Physical Distribution In Rural Markets

The main problems in physical distribution in the rural context relate to:

a.      Transportation:

      Inadequate railways

      Bad or no roads

      Immediate carriers or cargo operators

Eg. Accidents in India 1per day and 1 in 4 days complete loss to property and some life

b.      Warehousing Problems

      No electricity (only 35% of India have electricity)

      Unavailability of godowns

      Marketing purposes

 c.       Communication Problems

      Only 3% of India is connected by phones

      Unreliable post and telegraph facility

1947 – 1 postman for 9000 people

2000 – 1 postman for 47000 people

Transportation problems

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Transportation infrastructure is quite poor in rural India. Though India has the 4 th largest

railway system in the world, many parts of the rural India remain outside the rail

network. As regards road transport, nearly 50% of the 576000 villages in the country are

not connected by roads at all. Many parts in rural India have only kacha roads and many

parts of the rural interiors are totally unconnected by roads with any mandi level town. As

regards carriers, the most common mode is the animal drawn cart. Because of these

problems in accessibility, delivery of products and services continues to be difficult in

rural areas.

 Warehousing problems

In warehousing too, there are special problems in the rural context. Business firms find it

quite difficult to get suitable godowns in many parts of rural India. And there is no public

warehousing agency in the interiors of rural India. The central warehousing corporation

(CWC) and the state warehousing corporation (SWC’s) which constitute the top tier in

public warehousing in India, do not extend their network of warehouses to the rural parts.

They go only upto the nodal points or major market centers. The warehouses at the mundi

level which constitute the second tier in the warehousing chain are mostly owned by

cooperatives. And the same is the case with rural godwons, which form the third tier.

None of these tiers function as public warehousing agencies ; they provide the

warehousing service only to their members. As such, a business firm has to manage with

the CWC/SWC network which stops with the nodal points, or it has to establish its own

depots or stock points run by its stockists / distributors. Of course, in such cases, the

commercial advantages of operating through a public warehousing agency like

CWC/SWC are lost to the firm.

Communication problems

Communication infrastructure, consisting of posts and telegraph and telephones, is quite

inadequate in rural areas. Since communication is the first requirement of efficient

marketing, lack of proper communication infrastructure poses difficulties, especially in

physical distribution.

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Cost-Service Dilemma Gets More Acute

The effect of these problems on the physical distribution front is certainly felt by any

business firm venturing into the rural market. They adversely affect the service aspect as

well as the cost aspect. Maintaining the required service level in the delivery of the

products at the retail level becomes very difficult. At the same time, physical distribution

costs get escalated with 80 per cent Of the total rural consumers living in the 'less than

1,000 people' category of villages. The scattered nature of the market and its distance

from the urban based production points, compound the difficulty arising from the

constraints in transportation, warehousing and communication. Larger pipeline stocks

and bigger inventories in warehouses are the natural outcomes of these constraints. It

means higher costs of transportation, higher inventory carrying costs and transit and

storage losses. And as we will see in detail in the next section, costs of distribution

channels too are much higher in the rural context. Consequently, the total distribution

cost per unit is higher by as much as 50 per cent on an average in the rural market, as

compared to the urban market. In fact, the experiences of some companies operating in

the 2rural market show that the cost of distribution in rural areas is two and a half times

that of urban areas.

Solving of Physical Distribution Problem

The marketers have to find solutions to the distribution problems. While deriving

solutions, the marketers have to keep in mind cost and the service to the consumers.

Some of the solutions are as follows:

The Firm can Share Physical Distribution Responsibility with Its Stockists or C & F

Agents

With a view to keeping the costs low, some firms try out remote control marketing. But

experience shows that firms with major aspirations in rural marketing cannot depend on

such remote control operations; they cannot take the route of ‘simply consigning the

goods’ and retiring the bills through banks.' For them, effective presence in the market is

a must. While it may not be necessary to have a netw6rk of own stock points throughout

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the marketing territory, the firm should have a network of stockists or clearing cum

forwarding agents(C&F agents) at strategic locations for facilitating physical distribution

can be shared by the firm and the stockists.

Combining different modes of transportation may be advantageous

As regards transportation, the system of rail-cum-trucks for long distance movement,

trucks for medium/ short distance movement and delivery vans and bullock carts for local

haulage should effectively serve the purpose. Water transport too, has a role in specific

areas. Bullock cart has a special role in rural distribution. Business firms operating in the

rural market of the country have to appreciate that the bullock carts play a major role in

secondary transport. They are available in plenty and they are ideal for the rural roads.

Company delivery van

Companies like Hindustan Lever, Tomco Brooke bond – Lipton and ITC who are the

pioneers in rural marketing in India, have successfully experimented with company

delivery vans, for resolving the distribution problems in the rural market. The delivery

van takes the products to the retail shops in every nook and corner of the rural market.

Besides resolving the problem of product delivery, the van also serves certain vital

secondary purposes – it enables the firm to establish direct sales contact with thousands

of rural consumers; it also helps the firm in sales promotion. But the cost of operating

such vans is quite high. And the proposition can work only if the market/ area assures

business potential enough to cover such costs. In the case of HLL, ITC, etc; they knew

that such a level of business would accrue only out of a sustained and long term

marketing effort and market presence. These firms had the resources, as well as the will

to stay in the market. Through the system of operating the vans, they were not just

solving a transportation problem, they were developing the market. And they were

viewing the costs as a long term investment.

Syndicated distribution

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While the company delivery vans are very useful in rural distribution, the idea cannot be

easily implemented by firms with relatively less resources. Syndicated distribution may

be of help in such cases, the firms can come together and encourage an independent

agency to operate such delivery vans with a view to hiring its services. The delivery van

here becomes a syndicated service.

Assistance form stockiest

The Company can also get assistance from stockiest. The stockiest can own or hire vans

or trucks and accordingly distribute the goods to the retailers and the dealers. The

company should help finance such kind of plant and projects.

Central Warehousing Facility

The Central Warehousing Corporations (CWC) and The State Warehousing Corporations

(SWC) should also pay attention in providing suitable warehousing in rural areas. At

present the CWC and the SWC concentrate their warehousing activities only at major

markets. The smaller markets are handled by cash starved gram panchayat’s or Satellite

municipalities. There is an urgent need to have good warehousing facilities at local

market to. These have to be provided either by the government or the companies

operating in particular areas. A system can be devised where in a group of companies can

come together and have common warehousing facilities. Here the cooperative rule can

also help provide good warehousing facilities in rural areas.

Sorting out communication problems

The communication problems in the villages can be sorted out (mostly) by the

government alone. The marketer must make the government must make the government

realize the importance of rural markets and the corresponding network of post, telegraph

and telephones. Locally there are examples of private telephone exchanges that have

worked wonders for specific areas. However small exchanges have limited scope.

Recently the government has alone sent corporate partnership in printing and

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disembursing postal and telegraphic material. However the experiment doesn’t seem to

have caught on.

2. Channel Management In Rural Markets  

Organizing an effective distribution channel is the second major task in rural marketing.

This task too is beset with many unique problems.

Problems in Channel Management

Multiple tiers, higher costs and administrative problems

In the first place, the distribution chain in the rural context require large no. of tiers,

compared with the urban context. The long distances to be covered from the product

points and the scattered locations of the consuming households cause this situation. At

the minimum, the distribution chain in the rural context needs the village level

shopkeeper, the mandi level distributor and the wholesaler/ stockists in the wholesalers /

stockists in the town. And on top of them, it involves the manufacturer own warehouses/

branches office operations at selected centers in the marketing territory. Such multiple

tiers and scattered outfits push up costs and make channel management a major problem

area.

Scope for manufacturers own outlets limited; greater dependence

The scope for manufacturers direct outlets such as showrooms or depots is quite limited

in the rural market unlike in the urban context. It becomes expensive as well as

unmanageable. Dependence of the firm on the intermediaries is very much enhanced in

the rural context as direct outlets are often ruled out. But controlling such a vast network

of intermediaries is a difficult task. Control is almost indirect. And because of these

factors the firm has to be more careful while selecting the channel members in the rural

context.

Non availability of dealers

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In addition, there is the problem of availability of dealers. Many firms find that

availability of suitable dealers is limited. Even if the firm is willing to start from scratch

and try out rank newcomers, the choice of candidates is really limited.

Poor viability of the retail outlets

Moreover, sales outlets in the rural market at the retail level suffer from poor viability. A

familiar paradox in rural distribution is that the manufacturers incurs additional expenses

on distribution and still the retail outlets find that the business is not remunerative to

them. The scattered nature of the market and the multiplicity of the tiers in the chain use

up the additional funds the manufacturer is prepared to part with. And no additional

remuneration accrues to any of the groups. Moreover, the business volume is not

adequate enough to sustain the profitability of all the groups and the retail tier is the worst

sufferer.

Inadequate bank facilities

Distribution in rural markets is also handicapped due to lack of adequate banking and

credit facilities. Rural outlets need banking support for the three important purposes:

  To facilitate remittances to principals and to get fast replenishments of stocks.

  To receive supplies through bank

  To facilitate securing credit from banks

As banking facilities are inadequate in the rural areas, the rural dealers are handicapped

in all these aspects. It is estimated that there is only one bank branch for every fifty

villages.

Analysis shows that many companies hesitate to venture into rural markets largely

because of the problems on the distribution front. They find it uneconomic to operate

outlets in rural areas as in their perception, cost of selling, cost of transportation, cost of

sub – distribution and cost of servicing the outlets are all very high in the rural market.

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Possible Approaches for Effective Channel Management in the Rural Context

Taking due note of the difficulties, let us see how a firm can go about these tasks.

The Existing Market Structure

It has been estimated that the Indian rural market is composed of 22,000 primary rural

markets and 20 lakh retail sales outlets of which nearly one lakh are fair price shops of

the Public Distribution System (PDS). One retail shop serves on an average 60 to 70

families in the rural areas. The structure involves stock points in feeder towns to service

these retail outlets at the village level. The stock points belong to either the manufacturer

or the marketer / distributor for the area. In either case, the stock point in the feeder town

is the key to rural distribution.

The Available Channel Choices

Today, the channel types that are available in the rural markets are as follows:

     The private shops

     The co operative societies

     The Fair Price Shops (FPS), (co operatives or private), of the PDS

     The village shandy or weekly market

Out of the above, the cooperative societies are mainly concerned with the distribution of

agricultural inputs and the FPS with the distribution of essential commodities consumed

by the common man. The 'village shandy' is a widely used channel of the rural market.

But its role in marketing branded products is somewhat limited.

The Private Village Shops

For a large variety of consumer products, the private shops are the main channel in the

rural markets; they are also the cheapest and the most convenient channel to align with.

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As such, we shall examine in some detail how the private village shops are utilised by the

business firms in their rural distribution effort.

According to a census of retail outlets carried out by the Operations Research

Group(ORG), there are 2.02 million sales outlets in rural India, with a major chunk

constituted by the private shops. In fact, the private village shops are seen to be one of the

cheapest distribution channels in the world. This is quite striking, considering the many

handicaps with which the village shopkeeper in India has to operate. He is forced to deal

in a large number of products in order to make his operations viable. That means a larger

inventory. The longer lead time for replenishments from the urban based production point

enlarges the inventory holding further. And as his sales are not uniform throughout the

year, he has to carry the inventory over a longer period of time. All these factors lead to

the blocking up of his capital. The scope of compensating for the higher costs through

increased mark up is rather limited. He cannot add a higher mark up on many of the

products he is handling simply because the consumer he is catering to cannot afford to

pay a higher price. Nor is he able to make up by increased turnover. The average daily

turnover of a rural shop is often less than Rs200. Even this level of turnover is generated

only when he extends credit to his customers. And he incurs additional expenses for the

frequent trips he has to make to the supply points in the towns/market centres. But in

spite of all these handicaps of low turnover, high inventory costs and inadequate

marketing support from the principals, the village shopkeeper operates quite efficiently.

He achieves this feat largely through his inborn ability for astute management of money

and other inputs. He also puts in hard work. He keeps his shop open for 14 hours a day

compared to the 8 hours service provided by the urban shops. And he keeps his shop

open for 365 days in the year with the support of his wife and children and ensures that

he does not miss a single possible sale. In fact, it is mainly this human labour, the cost of

which neither, gets accounted or paid for that makes the traditional private village shops

of India one of the cheapest distribution channels in the world.

It is quite natural that firms seeking an effective presence in the rural market willingly

embrace the private village shops as the major component of their distribution outfit.

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And on their part, the village shops function as an effective bridge between the scattered

rural consumers and the urban-based producers.

Organising one’s channel out of these private shops, however, requires assiduous efforts

on the part of the firm. It has to select its outlets from out of existing shopkeepers or

select a few freshers and appoint them as the outlets. The choices are usually confined to

the following categories:-

      Existing traditional private shops

      Money lenders willing to branch off to trade

      Land owners willing to branch off to trade

      Educated Unemployed persons

The firm has to select personnel from among the above groups depending on the product

line and other relevant factors and then train them and develop them into competent

dealers.

Satellite Distribution

A concept that has come to be known as satellite distribution can be tried in developing a

distribution channel in the rural market. Under this system, to start with, the firm appoints

stockists in feeder towns. They take care of financing goods, warehousing of goods and

sub- distribution of goods in the area covered by the feeder town. The firm also appoints

a number of retailers in and around the feeder towns and attaches them to the stockists.

The firm supplies the goods to the stockists either on cash or on credit or on consignment

basis. The stockists take care of the sub-distribution job on the terms and conditions

determined by the firm.

The sales volume of the retailers will vary depending on the potential of the area covered

and the capacity of the dealer concerned. Over a period of time, some retailers grow in

terms of business turnover. If such retail points also happen to be transportation centres

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within the feeder town area, the firm elevates them as stockists. The area of operation of

the original stockist shrinks in this process, but care is taken to see that his, volume of

business does not shrink. This is achieved, in practice, on account of the growth in

demand and deeper market penetration. If twenty retailers operate in the network of an

original stockist, five or six of them get elevated over a period of time as stockists. Out of

the retailers some remain attached to the original stockist and others are attached to the

new stockists, depending on location, service convenience and other relevant factors. The

process continues as long as the market keeps expanding just like the second-generation

stockists, a set of third generation stockists get established in course of time. And at any

point of time, enough retail points invariably hover around a particular stockist. Hence

the name satellite distribution. The main advantage of this system is that it facilitates

market penetration in the interiors of the rural market. However, the firm must ensure that

in the process, the motivation of the earlier generation stockists is not destroyed due to

overzealous and premature elevation of the retailers into stockists.

The Experience of Hindustan Lever and Lipton India

We can understand some of the practical dimensions of running an efficient distribution

channel in the rural markets by analysing the experience of Hindustan Lever Ltd. (HLL)

and Lipton India who are pioneers in rural marketing in India. The salient features of

HLL's rural distribution system are as follows:

From the factories, the products move to about 40 C & F agents. From there, the

products reach 3,500 stockists located in towns with population of upto 20,000. From

these stock points, the stocks reach the remotest rural markets going through the semi-

wholesalers; some stocks move directly to village shops. The company's salesmen spend

30 per cent of their time visiting the rural dealers and consumers. Special distribution

methods are used to suit specific regions, specific climatic zones and villages with

specific conditions of accessibility. The products are sold at a uniform price in 3,500

towns and 70,000 rural locations.

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Lipton India, now Brooke Bond-Lipton India Ltd, also has an extensive rural marketing

outfit. In fact, today, their distribution network is the largest rural market network.

Lipton's network alone is composed of 660,000 selling outlets consisting of 430,000

dealers and 230,000 catering points serviced through a network of 3,000 redistribution

stockists. The network is indeed mammoth in width and depth of distribution and market

coverage. Many of the 230,000 catering points are serviced each and every day and

others serviced every week by a large sales force comprising 1,260 salesmen. And this

mammoth distribution outfit endows Lipton with a unique 'bazaar power' in the rural

market. While the major part of sales turnover of most big business firms comes frorn 12

big towns in the Country With a population of more than one million, more than 70% of

Lipton’s sales comes from semi- urban and rural areas and only 11% of it sales comes

from the 12 big towns.

Promoting the Viability of the Village Level Outlets

Promoting the viability of the retail outlets is an important part of channel management in

the rural context. In the first place, the firm -must appreciate that maintaining a network

of retail outlets in the rural market becomes a viable proposition only over a period of

time. The firm must be willing to view rural marketing as a long-term venture. Secondly,

the firms must help improve the viability of the retail outlets by encouraging and helping

them deal in a number of product lines. Quite often, the retail dealer is not in a position

to organise such activity by him. The firm can assist him in this regard. In fact the firm

can go a step further - it may collaborate with other firms and make a joint retailing offer,

promoting thereby viability of the retailer’s operations.

     The firms and the government should launch a drive to develop retail outlets and

arrange for loans for the retailers who are willing to take up ownership. The companies

can provide financial assistance in terms of credit and initial write off. Assistance as far

as handling and training in areas alien to the rural retailer should be provided free of cost.

20

      Other necessary infrastructural facilities like construction material, know how, etc

should be provided by the manufactures and the government in a joint venture type basis.

Loans to this effect may be provided on a low interest basis.

      Adequate training may be provided to the retailers to improve their sales efficiency.

The company should conduct special workshops and training jamborees and refreshers

for an enterprising rural retailer.

      Village cooperatives must be encouraged to handle distribution of consumer goods.

The stockiest can directly supply to cooperatives. Here the cooperatives act may benefit

the stockiest that does not have to pay local taxes for the product that he supplies to the

cooperatives. Infact an amendment should be suggested in a cooperative act that may

provide for a further discount to such stockiest for a percentage of goods supplied

elsewhere.

3.  Sales Force Management In Rural Markets

Let us now turn to personal selling and sales force management in the rural context. As a

general rule rural marketing involves more intensive personal selling effort compared to

urban marketing.

Rural Marketing Calls for Some Unique Traits on the Part of Salesmen

While the basic traits of personal selling such as empathy, enthusiasm, communication

skill and knowledge of selling techniques are required in equal measure by urban and

rural salesmen, the latter require certain additional traits and capabilities in order to match

the peculiar conditions of the rural market.

Willingness to Get Located in Rural Areas

First of all, only those who are genuinely happy in living and working in the villages can

become good rural salesmen. It is common knowledge that the rural areas lack modem

amenities compared with the urban areas, Because of this factor, salesmen are generally

reluctant to work in rural centres. To circumvent this problem, some firms locate their

21

salesmen in towns and allow them to cover the rural areas assigned to them from these

towns. Experience has shown that such an arrangement does not produce optimum

results. Experience has also shown that successful rural marketing firms locate their rural

salesmen right in the midst of the rural market to be covered. Lipton India for example,

has located one of its salesmen in Khategaon, an interior place in Deva district in Madhya

Pradesh. It takes three hours by bus to reach the location from Indore Similarly, it has

located a salesman at Anthiyoor in Tamil Nadu, which can be reached (only after a 2 1/2

hours journey by bus from Coimbatore followed by half an hours walk through paddy

fields. The company proudly cites this practice as one main source of its bazaar power.

Cultural Congruence

Location is just the starting point. The salesmen must have proper acquaintance wi6 the

cultural pattern of rural life in the given rural territory. Since the cultural pattern of rural

communities differs from one another, a cultural background that is in consonance with

the culture of the given rural community is a specific requisite of success for the rural

salesmen. Urban markets in contrast, present a cultural convergence.

Rural salesmen must also be able to guide the choice of products. They should not hook

the customers into buying all the products in the catalogues. On the contrary, they must

help them eliminate items that are outside their specific requirements and those that are

beyond their financial reach.

Attitude Factors

Attitude factors are of particular significance in the rural context. For example, the rural

salesmen must have a great deal of patience, as their customer is traditional and cautious

person. Perseverance is another essential trait. It will not be possible for the rural

salesman to clinch the sale quickly. He may have to spend a lot of time with the customer

and make several visits to him to gain a favourable response from him.

Knowledge of the Local Language

22

Another special requirement is that the rural salesman should be well versed with the

local language. Whereas his urban counterpart can successfully manage with English and

a working knowledge of the local language, the rural salesman needs a strong background

of the local language. In fact, he has to go one step further; he must be well versed in the

specific lingo and idiom of the local area/community, for, in rural India, within each

major language group, the colloquial expressions and speaking manners vary

considerably from locality to locality.

Capacity to Handle a Large Number of Product Lines

The rural salesmen are often required to handle a much larger number of product lines

compared with their urban counterparts. In urban marketing the salesmen are able to

generate economic size of business through a limited number of product lines. As such,

their employers do not have to load them with too many items. The rural salesmen on the

contrary, usually do not generate economic volume of business if they handle just a few

products. They are compelled to handle a large variety of items. Quite often, the items

differ widely from one another. In other words, the rural salesmen are required to become

a jack of all trades. The rural salesmen are also required to travel more compared with

their urban counterparts. Whereas the urban salesmen move in highly concentrated and

compact market segments, the rural salesmen have to cover larger territories and

scattered customers. Their workload and strain could therefore be more.

Greater Creativity

Rural selling also involves greater creativity. Often, the products concerned may be very

new in the rural context. The rural salesmen cannot sit back and say that it will take,

several years for a particular product to penetrate the rural market. On the other hand, he

must endeavour to introduce them in the rural areas through creative selling, using the

consumption pioneers and opinion leaders. Rural marketing also presupposes the delivery

of a new standard of living to the rural masses. It is essentially developmental marketing.

The rural salesman has to be a carrier of a developmental message to the less privileged

rural community.

23

Solving Sales Force problems by managing sales force in rural areas

Managing the Rural Sales Force

In tune with the special requirements which the rural sales force has to meet, the task of

sales force management too carries certain added dimensions in the rural context. In

selecting the salesmen, in giving them orientation, in motivating them and in developing

them the sales manager has to adapt to the unique requirements of rural selling. For

example, while providing orientation to the newly recruited rural salesmen, the sales

manager may have to devote a longer time. And mere classroom training will not meet

the requirements of orientation of rural salesmen. The salesmen need comprehensive on

the job coaching in selected village markets. And they need to be educated about the

rural marketing environment in addition to being trained in salesmanship and selling

techniques. The rural sales manager must also support his salesmen with non-

conventional means of market promotion suitable to the rural consumers. Rural salesmen

also need more intensive sales training & as they have to handle a variety of products.

In short, sales force management in the rural context becomes an exacting job, especially

when the firm has big stakes in rural marketing and when it operates on a nation wide

basis. For example, Hindustan Lever's rural salesmen have to cover 70,000 rural

locations. Administering such a large and scattered sales force, supervising them,

supporting them in sales calls, coaching them on the job, attending to their official and

personal problems and above all, motivating them for better results in an exacting task for

the sales manger.

4.     Marketing Communication In Rural Markets

Constraints in Marketing Communication in the Rural Context

Marketing communication, and promotion too, poses problems in rural markets.

There are many constraints emanating from the profile of the audience and the

24

availability of media.

The literacy rate among the rural consumers being low, the printed word has

limited use in the rural context. In addition to the low level of literacy, the

tradition bound nature of the rural people, their cultural barriers and taboos and

there overall economic backwardness adds to the difficulty of the

communication task. The situation is further compounded by the linguistic

diversity. Rural communication has to necessarily be in the local language and

idiom. The constraints of media further compound the difficulty. It has been

estimated that all organised media put together can reach only 30 per cent of the

rural population of India TV is an ideal medium for communicating with the

rural masses. But its reach in the rural areas is limited even today. As regards

the print media, the various publications reach only 18 per cent of the rural

population. Even in areas reached, the circulation is limited. And as already

mentioned, the low literacy level of the rural population acts as a further

inhibitor in the use of the print media in rural communication. Cinema is

relatively more accessible. It has been estimated that 33 per cent of the total

cinema earnings in the country come from rural India. Rural communication has

also become quite expensive. For rural communication to be effective, repeat

exposures is a must; and if the gap between exposures is long the message loses

its edge during period. These factors make rural communication more

expensive. Rural communication has to go through all the time consuming

stages of creating awareness, altering attitudes and changing behaviour. In

addition, it also has to work against deep-rooted behaviour patterns.

In short, the crux of marketing communication in the rural context is one of

finding a medium' that will deliver the required message in a cost effective

manner to target an audience that is predominantly illiterate.

1.      Promotion and Marketing (Communication)

25

a.      Consumer/market composition related problems.

1. The literacy rate is low. Therefore usage of print media or for that

matter any print material is redundant. Moreover even the segment that

can be serviced by printed material is multi-lingual in nature.

2. There is social backwardness in rural areas. This implies that in

most of the consumer durable segment the user is seldom the buyer or

the decision maker.

3. There is an indifferent attitude towards the purchase of certain

goods such as packed food, high price premium soaps, hair oils,

toothpaste etc. because they are used to the traditional way of

consumption.

b.      Media related problems.

1. About 30% of the rural masses can be reached through organized

media such as TV, radio, newspapers etc. Theoretically TV covers 25%

of the rural population, radio about 90% and the press around 20%. But

in reality the %’s can be still lower.

Solving of promotion and communication problems

      Media Mix: Apart from the organized media like TV, Radio, Newspaper

and the press, the rural marketer or the advertiser is expected to make correct

use of the following:

         i.      Hoardings in the market place

       ii.      Van publicity

      iii.      Village mela kind of events

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     iv.      Sponsorship to drama troops

       v.      Organizing as well as advertising lottery tickets

     vi.      Use of bus tickets as a method of advertising

    vii.      Post and telegraph publicity

  viii.      Effective point of purchase advertising

     ix.      Puppet shows (both sponsorship as well as advertising)

       x.      Music rewards and mike announcements

      Interpersonal Media: Interpersonal media has a special  advantage in

rural marketing in the sense that it facilitates 2 way communication and

interaction. Infact it is observed that rural buyers prefer face-to-face

communication. They take and adhere to advice from the seller in the most

responsive manner. The interpersonal media can be conducted in the following

manner:

   i.      Group meetings of consumer or prospects (prospective buyers) with the

marketing people.

ii.      Information centers or service centers where rural consumers can sort

information and advice regarding the use of certain products such as

agricultural inputs and machinery.

iii.      Live demonstration about products.

iv.      House to house or door-to-door promotion campaign.

v.      Sponsoring product related quizzes and other contest in schools or at

27

community centers.

vi.      Sponsoring local sports, festivals or cultural events.

Motivating the Rural Consumer

What works in the urban market may not in the rural areas that are with respect to

marketing. Pesticide used by the farmers are same or similar to what are used in urban

households but have to be packed or packaged and distributed differently due to the

differentiation in usage. Also pricing becomes a factor here. Similarly water is the

universal commodity i.e. either piped or bottled for the urban consumer and canalled or

irrigated for the rural farmer. Therefore the marketer must bring the right product to suit

the needs of the rural consumer. In this connection the following can be considered

motivating.

1.     Packaging: Unlike the Eg., given earlier the rural consumer prefers smaller

packages this is because

      The rural consumer buys in low quantity due to low purchasing power.

      Secondly the rural consumer may be trying out the product and doesn’t like to be

saddled by the larger quantities.

While designing the packages, the color, design and quality of the pack is of great

importance. The rural consumer may prefer a pack with either dark or bright or both

dark and bright colors in a contrasting combination. He may also prefer packs that

have fancied designs. As far as the quality of the pack is concerned he may not mind

medicour packaging and even no packaging if this results in lower prices. 

2.     Product Quality: It is of utmost importance. The dimensions of the quality that are

to be considered are durability, features and serviceability in that order. In no way,

the marketer must ever even think of sacrificing quality or manipulating its winning

combination dimensions. This is because the fragile rural consumer may loose faith in

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the product and may either resort to alternative brands or traditional products. The

new product should not only excite him but also satisfy him.

3.  Pricing: The product pricing must be reasonable and must depend upon the quality of

the product. Distributing to various rural areas is very expensive. However the cost of

this should not be transferred under any circumstances on to the rural buyer. It should

be noted here that the rural consumer is highly price sensitive and competition is not

between competitors but with the fact of “no-use”.

4.  Branding: The rural consumer prefers to buy nationally advertised brands as

compared to local brands. They consider or perceive powerful national brands to have

more value than locally available brands. Naming a particular brand is an important

activity. Brand names should be such that the rural consumers don’t find it difficult to

pronounce and remember. Short, sweet and simple brand names can work wonders

with the rural market. At times marketers will try to experiment with brand names

that have local connections.

Agricultural Marketing

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 fertilizers, pesticides, farm equipments,

29

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 fibers which require

transportation, storage, milling or processing, packaging and retailing to the consumers.

Importance

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.

1. 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.

2. 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 nearly 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 importance.

4. With the introduction of green revolution agricultural production in

general and food grains in particularly has substantially increased. Agriculture

once looked as a subsistence sector is slowly changing to a surplus and business

proposition.

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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.

8. 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

consumption.

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.

12. 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.

Most Indian farmers are small cultivators, they produce crops that are seasonal in nature,

vulnerable to failure, differ from area to area (region to region) and are certainly

perishable. Economically agricultural produce is inelastic because it is difficult to vary

the output in response to the price. Agricultural produce is bulky in nature hence difficult

to transport and very much vulnerable to the forces of nature.

Next, these small cultivators are unorganized and scattered all over the country. They

have little time or inclination for gaining knowledge about the marketing side of their

31

operations. These farmers cannot organize themselves so as to bargain on equal terms

with buyers to operate on a large scale and have powerful organizations behind them.

Further most of the Indian farmers have loans for sowing and are heavily in debt. Thus

they are forced to sell their produce immediately after the harvest and that too in their

own villages.

Significance of agricultural marketing

The 2 basic elements of agricultural system are production and marketing. Marketing of

agricultural produce is as important as production itself. As a link between producers and

consumers marketing plays an important role not only in stimulating production and

consumption but also in increasing the pace of economic development. Its dynamic

functions are thus of primary importance in promoting economic development activities

and for this reason it has been described as the most important multiplier of agricultural

development.

The problem of marketing agricultural produce has assumed added significance

particularly after the advent of modernization in agriculture. The call to “produce more”

without providing efficient marketing machinery, which can ensure fare, returns to the

producer-seller. Carries no conviction with the farmer. The United Nations conference on

food and agriculture held in October’ 95 at Quepec says, “Marketing is the crux of the

whole food and agricultural problems”. It would be useless to increase the output of food

and would be equally futile to setup optimum standards of nutrition unless means could

be found to move food from the produce to the consumer at a price, which is

remunerative to the producer and within the consumer’s ability to pay.

The cost of marketing agricultural produce forms a substantial percentage of the price the

consumer pays for it. This cost includes expenses borne by the cultivators till the

assembly stage and those borne by wholesellers, distributors and retailers. The total

marketing cost cannot be considered independently without relating it to the ultimate

price realized by the producer. The marketing sector, infact, plays an active role under

32

certain circumstances by changing the demand and cost functions in agriculture in such a

way so as to encourage its expansion.

According to the National Commission on Agriculture “Agricultural Marketing is a

process which starts with a decision to produce a saleable farm commodity and it

involves all aspects of market structure or system, both functional and institutional, based

on technical and academic consideration and involves pre and post harvest operations

assembly, grading, storage, transportation and distribution”. In Agricultural marketing

we are concerned with demand and supply conditions, marketing operations including

marketing functions, functionaries and cost, price fixation, market structure, conduct and

performance and marketing efficiency.

Fundamentally there are 3 entities involved in the marketing system they are as follows:

1.      Producer

2.      Consumer

3.      The Middlemen

Each of these entities has its own objectives, which often conflict with the others interest.

The producers after making a lot of investment and putting in lot of hard work would

naturally look forward to get the largest/best possible returns for his produce. The

consumer on the other hand would like to get his required quantities of goods of pure

quality at the least possible price. The middlemen would aim at realizing the largest

possible net profits from the deal. An efficient marketing system should, therefore, aim at

balancing this conflicting interest in such a way that each entity gets a fare deal.

Increase production resulting in greater percentage increase in marketable surplus

accompanied by increase in demand from urban population calls for a rapid improvement

in the existing marketing system. It is necessary to improve the marketing system to aid

the process of agricultural development for 2 reasons.

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      Firstly, If the additional produce does not move to the market to bring additional

revenue to the farmers, it may work as a disincentive to increase production.

      Secondly, If the system does not support supply food-grains and other agricultural

commodities at reasonable prices to the consumer at the time and place needed by them,

increased production has no meaning and plays no role in the welfare of society.

Thus the farmer in general sell his produce at an unfavorable place at an unfavorable time

and usually gets very unfavorable terms. It could be observed that inadequate credit

facility to the farmer is the root cause of all defects in the agricultural marketing system

in India where the poor peasants are under the firm grip of the moneylenders.

The market structure in India is saddled in the long chain of middlemen between the

cultivators and the ultimate consumer. These middlemen take away the Lion’s share of

the price paid by the consumer and consequently the farmer-seller gets a poor price in his

share.

Markets for agricultural commodities may be broadly classified into 3 categories viz.

1. Wholesale                      2. Retail Markets                      3. Fairs

There are various dimensions of markets which can be classified on the basis of the

following dimensions:

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

  2.   On the basis of time

  3.   On the basis of nature of commodities (Type of goods

transacted)

  4.   On the basis of area of coverage

  5.   On the basis of location or importance

  6.   On the basis of nature of transaction

  7.   On the basis of volume of transaction

  8.   On the basis of no of commodities in which transaction take

34

place

  9.   On the basis of stage of marketing

10.   On the basis of extent of public intervention

1.      Wholesale Market

The wholesale markets fall into 3 subcategories

      Primary

      Secondary

      Terminal

Primary wholesale markets

Primary wholesale markets, where the bulk of arrivals is from village or village hats.

These market are periodically held, either once or twice a week or at longer intervals or

on special occasions. Agricultural produce, or livestock or both are sold in these markets.

There are about 22000 such markets located mostly in the interior of the country. The

area served by a hat or a shandy varies considerably. In some cases it is only one village

but in others it may have a radius of 6 or 7 miles.

These markets deal in sale of Fruits and vegetables, food grains, cloth; earthen wares, lac

and glass bangles and articles of daily use and transactions take place either for cash or

exchange in household requisites.

Such markets are organised by village panchayats and every shopkeeper has to pay some

rent for the space he occupies. Here haggling and bargaining is a common feature. The

village bania acts as a middleman in return for a small commission.

Such markets are known as Painths or hats in U. P., Bihar, Orissa and West Bengal, and

Shandies in south India.

For the up keep of such markets superficially 3 types of taxes are collected viz.

35

a.       Sales Tax

b.      Service Tax

c.       Place Tax

However in practice a large number of ritualistic deductions and local taxes are applied to

the produce sold here.

Secondary wholesale markets

Secondary wholesale markets, also known as mandis and Gunjs, stretch over a wide area

covering from 10 to 20 miles. There are about 1,700 such markets in the, country. In

these markets, the bulk of the arrivals is from other markets. These are usually situated in

the district and taluka headquarters, important trade centres or near railway stations.

Here transactions are generally between wholesalers or between wholesalers and

retailers.

Secondary Markets functions are usually in urban and semi-urban areas. Here facilities of

storage and banking are available. Mostly wholesale as well as retail trade both take place

in the same complex simultaneously. A large number of intermediaries exist in these

markets. The traders who purchase from the primary markets in wholesale trade, they buy

in these markets. The manufacturers who use agricultural produce as a primary input

purchase raw material in wholesale in these markets. The wholeseller performs the

marketing function of assembly and distribution. It may be noted that the actual producer

the “Farmer is completely absent in wholesale markets”.

Terminal Markets

Terminal Markets are those in which the produce is either finally disposed of directly to

consumers or processors or assembled for shipment to foreign destinations or for

redistribution to surrounding areas. Such markets are usually the ports, which possess

sufficient warehousing and storage facilities and cover a very wide area extending over

even a State or two.

36

It may be observed that a particular market may function as a Primary wholesale market

for some agricultural commodities, which are produced locally and as a secondary market

for other commodities. Again, even for the same commodity a market may function as

primary wholesale market for certain parts of the year and as a secondary wholesale

market for the rest of the year.

2.      Retail Markets

These markets are found scattered all over the town or a city or concentrated in particular

localities. They are owned by the retailers subject to municipal control. They usually

deal in all types of produce and serve the needs, of the city people as well as the

surrounding villages. Cloth market, sharafa market, grain mandi, vegetable market, shoe

market, hardware market, sweetmeat market and grocery market are usually found

located in different parts of the city.

Retail (Primary) Markets are basically assembly markets that are not regulated. They

serve as convenient points fro assembling, distribution and exchange of goods moving

from villages to bigger cities, for consumer goods also these primary assembly markets

become convenient points for reverse movement from industrial sectors (big cities) to the

villages. The trader being both buyers (of agricultural produce) and sellers (of consumer

goods) ignore the interest of the farmers.

3.      Fairs

These are held, on religious occasion, at pilgrim centres and number over 1,700.

Of the total 50% deal in live-stock only; 10% deal both in live stock and

produce and 40% deal in agriculture products only. Produce fairs are all found in

Bihar and Orissa only, While live stock fairs are held in U. P., M. P., Gujarat,

Maharashtra, Punjab, Haryana and West Rajasthan. These fairs are held

annually specially between the months of October and May and the duration of

livestock fairs varies from one day to 3 months. Camels, horses, bulls, donkeys,

cows, bullocks, sheep and goats are usually sold at these fairs. Such fairs are

37

organised by District Officers, Local bodies or private agencies.

Such religious fairs are Maghmela at Allahabad, Kartikisnan mela at

Kurukshetra, Garhmukteshwar and Pushkar.  

Dimensions

1.   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.

2.  On the basis of time:

a.       Very short period markets: These are for few hours and are mostly for highly

38

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. These 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

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

a.       Commodity markets

b.      Produce exchange- commodities are produced and not manufactured.

Generally one market in one commodity. e.g. cotton exchange Mumbai.

      Manufactured goods markets: These are markets of manufacture and semi

manufactured goods. For e.g. Leather exchange of Kanpur

      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

4.    On the basis of area of coverage:

1.      Village Markets: Buying and selling activities are confined among buyers and

39

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

grains.

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.

5.  On the basis of location or importance:

a.       Primary Wholesale markets: These are located in big towns near the centres

of production of agriculture commodities, transaction mostly take place

between farmers and traders.

b.      Secondary Wholesale markets: These are generally located at districts

headquarters or important trade centres near railway stations. Produce is

handled in large quantity.

c.       Terminal markets: Here produce is either finally disposed off to the

consumers or processors or assembled for export. These are located in

Metropolitan cities like Mumbai, madras and Calcutta.

      Sea board markets: These are located near seashore and are mainly meant for

import and export of goods.

      Fairs: These are held on religious occasions.

6.  On the basis of nature of transaction:

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a.      Spot or cash markets: Here goods are exchanged for money immediately after sale

of within reasonable short period of time.

b.      Forward or future markets: Here a transaction takes place for a standardized

commodity with a promise to pay and deliver a commodity at some future date.

7.  On the basis of volume of transaction:

a.       Wholesale markets: Here commodities are brought by and sold in large lots or in

bulks. Transaction takes place generally between traders.

b.      Retail markets: Her commodities are brought by and sold to the consumers as per

their requirement.

8.  On the basis of no. of commodities in which transaction take place:

a.       General market: In these markets almost all the types of commodities,

such as foodgrains, oilseeds, gut fiber crops etc. are brought & sold.

b.   Specialized markets: In these transaction takes place only in once or two

commodities.

For every group of commodities, separate markets exist e.g. Food grain markets,

Cotton markets etc.

9.  On the basis of stage of marketing:

a.       Producing markets: These markets mainly assemble goods for further

distribution to other markets for production purpose. They are located

producing areas.

b.      Consuming markets: Here produce is collected for final disposal to the

consuming population. These are located generally in thickly populated

areas, where production is adequate.

10. On the basis of extent of public intervention:

41

a.       Regulated markets: Here business is done as per the rules and regulated by

statutory market organization. Market charges are standardized and fixed and practices

regulated by Agril Produce Market committee.

b.      Unregulated markets: Here business is conducted without ant set of rules and

regulations. Traders frame rules and conduct business. These markets suffer from various

defects in functioning.

Methods of Sale

One of the most important aspect of marketing in India is concerned with

different methods of trading employed in markets. In some cases transactions

are settled under a cover of a cloth with the help of fingers and signs. In other

cases agricultural produce is auctioned in the open market and the buyer with

the highest bid takes the produce. Under another method sellers settle the sale

separately and individually with buyers. Still another practice is to settle the

trade deal on the basis of the sample of the produce. There is yet another method

known as “Dhara Sale” under which heaps of grain of different qualities are sold

at a flat rate.

Ways and means in which transactions takes place in the Indian agricultural

market

Many methods of sale are in vogue and simultaneously co-exist in different

markets even in the same market different methods are followed for different

commodities and some times even the same commodity. Every method has its

merits and demerits. We shall discuss each one of these methods in detail. It is

however possible that you may find some of these methods having no visible

merits at all, but the benefits of such methods are rational and convenience

based.

42

1.   Forward Sale

2.   Jalap Sale

3.   Maghum Sale or Unbhav Sale

4.   Sale by Sample

5.   Hatta Sale (Undercover)

6.   Sale by Open Agreement

7.   Sale by Open Auction

8.   Sale by Tender System

9.   Dara Sale

1.  Forward Sale  

Under this system the producer-seller sells his anticipated future produce in advance to

the trader directly at a price fixed at the time of striking the deal either in the village or at

the business place of the trader depending upon the willingness of the party that initiates

negotiations. This is only an oral contract and is not enforceable in any court of law. The

trader usually enters into a contract with a speculative motive and when the price declines

subsequently he may force the seller to reduce the price by refusing to lift the produce.

2.      Jalap Sale

Under this method the trader’s purchase the standing crop of the producer well in

advance of the harvest at a price fixed on the date of the bargain. The price is usually

coated in lump sum for the entire crop and the seller may receive 50% of the value of the

sale transaction in advance. Usually the Jalap Sale goes against the agriculturalist seller

as the price is fixed and determined by the buyer on the basis of the urgency to sell and

not on the basis of the prevailing market rates. Such price quotations are in most cases

abnormally low, further if the crop fails to give the expected return the buyer may force

the producer to reduce the price further.

3.      Maghum Sale or Unbhav Sale

43

 Under this the seller is bound to deliver the produce to the buyer on a set date

within a period prescribed by a verbal understanding between the 2. In return the

buyer is supposed to pay the price ruling on the delivery day. This method is

usually adopted in interior areas where price fluctuations get communicated

within a conventional time lag. It is usually beneficial to the farmer as he dictates

the price and the buyer should pay on a future date of his choice. This method is

followed when cultivators borrow from traders or where their residence is far

away from the market.

4.      Sale by Sample

It is the most convenient method of sale where the produce is systematically graded. It

saves the cost of transportation and inspection. However utmost honesty in the dealing is

to be followed. The produce or the commission agent shows the sample to the trader and

finalizes the price.

After the establishment of warehousing facilities in some regulated markets, producer as

well as traders stores notified agricultural produce. When such depositors will send their

stock representative. Samples are given to them from their produce. They can use this as

a certified sample of this produce. In regulated markets, open auctions can also be

conducted on the basis of such representative samples. This regulated market process is

called quoting on samples. Disputes may arise when the samples prove to be

unrepresentative.

5.      Hatta Sale (Undercover)

Popularly known as undercover or secret sale. The sale under this system is open to a

variety of malpractices as the seller remains in the dark all the time and it is only the

commission agent and the ultimate buyer who really knows the negotiated price. Under

this system the commission agent covers his hand with a kerchief and invites offering

individually from each buyer. The buyers make these offers in a secret language, which is

mostly understood only by the commission agents and the buyers. Most of this secret

language is a sign language that involves pressing fingers and finger joints. The highest

44

offer made is intimated to the seller and if he agrees, the bid is closed. Thus a sale gets

confirmed. However there is no guarantee that the benefit of this higher price always

goes to the producer, as he is unaware of the price offered. Thus the Hatta system of sale

operates to the disadvantage of the producer.

6.      Sale by Open Agreement

Whenever the grower or the farmer deals with the buyer to enter into a sale/transaction

with him, a sale with an open agreement is said to have been made. There are no

middlemen and it is the seller who moves from one buyer to another in search of a

remunerative price or offer. The Tobacco and Cotton are the two important

commodities sold by an open agreement. In such kind of a sale, ignorance of market

conditions may prove to be damaging. Also the buyer may exploit him through over

weighing, manipulation of accounts deductions of unauthorized allowances and

delays in making payments. Further, oligopsony may result in depressing the prices.

Oligopsony means the state of a market controlled by a few buyers in relation to

many sellers.

7.      Sale by Open Auction

Under this method the produce is sold through an open auction by the general

commission agent or the brokers or some other auctioneer in the presence of the seller or

his agent and the competing traders. The offer of the highest bidder is accepted with the

consent of the seller. There the seller has the discretion to refuse the offer of the bidder if

he considers the bid too low. The objective of the system is to create conditions of perfect

competition by eliminating undercover practices and providing for the interaction of the

forces of supply and demand in relation to the quantity and quality variations. This is

possible as a pre-auction inspection of the graded lots is allowed and disputes regarding

the quality are eliminated. The farmer who views the open auction process gets a kind of

45

a physiological satisfaction. He feels he cannot be cheated due to the open method of

price fixation (bidding). The buyers too have the opportunity of putting forward repeat

bids to reach a maximum paying capacity for striking a deal.

The demerits of this system are:

1.      The process is very time consuming and requisites an extensively developed system

of commercial grading.

2.      The auction has to be done by lots and this results in a large number of traders in

the beginning but the number thins out as the day progresses.

Higher bids are few and far between as the buyers are relevant to pay a high price for the

produce. They feel that if a product has come up for auction, it is somewhat inferior

8.      Sale by Tender system

Under this system the produce (preferably a graded one) is arranged lot wise and

is open for inspection by the intending buyers. The time is stipulated (fixed) for

submission of tenders. The intending buyer after examining the lost records the

bids in their tender slip supplied by the market committee. These tender slips are

then deposited in a sealed box. While depositing the bid-slip, the buyer also

signs a priority register. The objective of using a priority register is that incase

of tie-bid, the slip deposited first, as indicated by the register is deemed as the

highest. Usually the tender box is opened and the market superintendent or

secretary compares the slips. The highest quotation for the lot is recorded in the

bid-declaration slip. The maximum price quoted is announced on the public

address system for the benefit of the sellers and buyers. If the seller is not

willing to sell at the quoted price, he has to inform the market secretary within a

predecided and stipulated time limit. In this system the physical system involved

is the least for all parties concerned. And there is a certainty of completing the

sale of all the lots by the stipulated hour irrespective of the numbers involved. It

is further observed that the differences in price offered by the highest bidder and

46

the nearest competitor in many cases is just a few rupees. This clearly indicates

that the prices quoted are based more on individual calculations of profit

margins rather than by simply working out the parity price based on terminal

prices. The tender system of sale has one definite advantage over the open

auction system, as it is time saving.

9.      Dara Sales

In this system, the heaps of grain of different quantities are sold at a flat price.

The advantage claimed by the system is that within a short time a large number

of sales can be affected

Marketing Agencies

The Next important aspect relates to the functionaries operating in the Indian agricultural

markets. A very large number of intermediaries have come to exist between producer and

consumers of these the major ones are:

1.      Village Beopari is by far the most usual purchaser of the produce, who deals in his

individual capacity. He usually collects the produce from the villages and hats and

brings it to the wholesale markets and from there it reaches the consumers. Beoparies

generally purchase when prices are low and sell it when they are high.

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2.      Itinerant Beopari wanders from village to village, collects the produce and takes it

to the nearest market. He purchases at cheaper rates owing to the lack of competition

from other beoparies.

3.      Tola or Weigh men also to some extent function as intermediaries. Technically

speaking they are supposed to only weigh the produce and charge a commission for

certifying its weight. But it is more than often seen that these tola also arrange the

sale of the producer by carrying samples to dealers in towns. They obliviously charge

a commission for this and also ‘Tolai’.

4.      Local landlords and cultivators, especially the medium size holders also sell the

produce directly to the village beoparies or town dealers visiting the village markets.

5.      Arhatiyas or Brokers: They usually occupy a very important position among all the

intermediaries. They are of 2 types:

a.       Kutcha arhatiya mainly concentrates on the work of collecting and assembling

the produce.

b.      Pucca arhatiya on the other hand arranges for the sale and distribution of the

produce.

Both work together in tandem as master and apprentice. They also advance loans to

the village merchants and traders on the condition that the produce will be sold to

them or through them.  

Although the seller is free to sell his produce in the market directly to the buyer, he in

actual practice does it through a commission agent. The intricacies involved in the market

transactions have compelled him to adopt this costly agency. Broadly speaking, 70% of

the produce is handled by the producers themselves and the balance is handled by trade

comprising commission agents, wholesalers, retailers, co-operatives and the

governments.

Marketable surplus and marketed surplus

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India is the world’s largest producer in approx. 9 different agricultural

commodities. However it is not the largest exporter in even a single segment.

This is because of 2 basic reasons viz.

1.      Indian consumers are more in number hence they do not leave any surplus

and

2.      Indian products that are surplus are non marketable in nature.

Indian agricultural marketers have the tough task of making non-marketable

Indian offers attractive.

Unlike the case of manufactured products where the entire produce is set aside

for the market, in agriculture all produce is not sold. The actual amount of crop

sold is dependant on a large number of factors. One of the major factors in this

case is “Marketable Surplus” the other factors being need for cash, price trends,

availability of storage facilities etc. The marketable surplus, in turn depends upon

the production on one hand and the growers household and farm requirements on

the other.

In agricultural marketing is involved the putting up of the surplus in the market

through a definite channel. The surplus may be marketable surplus and marketed

surplus. The former indicates the residential quantity left with the producer after

meeting his requirements for family consumption, farm needs, and payments-in-

kind to casual and permanent labour, the landlord, artisans and seed and stock to

cover the future exigencies including wastage. The latter term refers to the

quantity of produce that is actually sold in the market by the producer

irrespective of his home consumption and other requirements.

A farmer's marketed surplus can be either more, less or equal to his marketable

surplus. If the farmer retains less of the produce than is needed for the

consumption at home, the surplus is more. This usually happens when cash is

needed immediately after the harvest to meet certain urgent needs. It is less,

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when a farmer holds some of his surplus produce on the farm or consumes more

than normal amounts of it. It is worth noting that marketed surplus of small

subsistence farmer’s increases with a price fall because more quantity has to be

sold to meet the minimum cash needs. Large farmers market little when prices

are low and hold stocks in anticipation or future higher prices. The size of the

marketed surplus thus depends upon the relative share of small and large

cultivators in the marketing, and may thus vary considerably from one year to

another.

Marketable surplus will always be less than the actual production. But it can be

higher or lower than the level of marketed surplus during a period depending on

the extent of hoarding from the current production or dehoarding of the

accumulated stock by the producers. This means the “theoretical surplus

available for disposal with the producer, left after his genuine requirements of

family consumption, payment of wages in kind, feed, seed and wastage have

been met.” Objectively it is the arrivals, direct from the producing areas, out, of

the new crop.

It is very difficult to calculate marketable surplus of agricultural crops because

production year varies from crop to crop. Old crops cannot be easily demarcated

from the new crop. There is always the fear of double counting, farmers and

traders have always the tendency to under-estimate the quantity of the crop sold

or stored. Further, the quantity retained for use in each farm depends on a variety

of factors, such as the size of the farm and the family, the proportion of food

grains in the total farm production and the amount of hired labour. Nor is the

absolute quantity retained for home use constant from one year to another. Even

if one takes into account population changes, which affect rural food

requirements, year-to-year changes in the crop size affect marketed surplus in a

complex manner.

Therefore, in calculating marketable surplus usually subjective methods are

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employed, such as acreage under cultivation, average yield per acre in the area,

average size of holdings, social conditions prevailing in the region with regard to

payment of wages, economic conditions of farmers particularly with regard to

indebtedness etc. Besides, the amount of crop to be marketed is also determined

by the nature and size of crops, market facilities and the price at the time of sales.

Thus, marketable surplus is not a free variant but a forced surplus.

Defects of Agricultural Marketing

1.      Lack of organization among producers

2.      Forced Sale

3.      Superfluous Middlemen

4.      Multiplicity of Market Charges

5.      Malpractices of Middlemen

6.      Absence of Grading and Standardization

7.      Inadequate storage facilities

8.      Underdeveloped Transport System

9.      Lack of Marketing Information

10.  High Cost of Borrowing

11.  Multiplicity of Weights and Measures

12.  Adulteration

A SPICY TALE

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 1.      Lack of organization among producers:

Lack of organization among producers is one of the basic and fundamental problems in

the Indian Agricultural Marketing scenario. The farmers of India are small and scattered

all across the country. The producers have little or no place to store. The produced

moreover is small per farmer. Also almost all small farmers are neck deep in debt and

need cash reasonable fast due to the unusual structure of agriculturism in India. An

organizational attempt at the grass root level usually fails. Cooperative movement in

India seems to have failed and thus the small farmers lack organization

2.      Forced Sale:

In a scenario wherein the farmer producer is disorganized, requires cash at double speed

and has no storage facilities at the local level, he is forced to sell at a lower price. Many a

times the endrocities of the moneylenders are almost hedging on the farmers to sell their

produce at lower than reasonable rates. The forced sale phenomenon is one of the major

reasons responsible for the pathetic condition of the rural farmer.

Causes of Heavy Sales in the Villages

The following are chief causes leading to heavy sales in the villages: -

      The most important cause for the high percentage of produce sold in the village is

without doubt the indebtedness of' the producer.

      The second important factor, which is responsible for the high percentage of village

sales, is the unsatisfactory, nature of communication with the nearest market.

      The element of time is an important factor and this for double reason. The marketing

possibilities of perishable commodities depend very largely on the rapidity with which

they can be transported to the marketplace.

Most of the cultivators are hard-pressed for cash to meet the claims of their creditors and

to pay off rent and other charges. Even when they know fully well that by holding up the

52

crop for a few months they would be able to secure a better net return, they have usually

no other alternative but to market the produce immediately in order to meet their urgent

liabilities.

3.      Superfluous Middlemen:

Traders are the main functionaries in a market. They dominate every activity in the

markets. They ignore the interest of the farmer-producers who are the sellers. Due to this

the Indian farmer is not getting good returns. The Middlemen intervention is uncalled for,

as they are the reason behind the malpractices in agricultural marketing in India. Due to

the sales methods adopted by the middlemen the farmer seldom know what price they are

to receive for their sale. Infact due to inadequate new facilities most of the time farmers

don’t even know the prevailing prices/rates in the market.

Due to the various barriers in taking the produce to the urban market, many farmers

prefer to sell these in the local village market, as these village markets are small and

distant, there are very few buyers for agricultural produce. Sometimes there is only one

buyer. This buyer resorts to monsoly and buys at a very low rate. Moreover he further

exploits (resorts to monopoly) by selling consumer goods and agricultural inputs to the

farmers at a very high price.

It will thus be noted that there exist as many as 10 to 12 intermediaries comprising of the

village bania, itinerant merchant or beopari, dalai, kutcha and pucca arhatiya, co-

operative commission agents and wholesale merchants and the retailers. They function at

various stages in the process of assembling and distribution of the produce. The

existence of a long chain of middlemen reduces the, share of the consumer's price

received by the actual cultivator. According to the findings of the Marketing Surveys, the

share of producers in a rupee paid by the consumers ranges from 52Paise in the case of

rice to 57Paise in case of wheat, in case of linseed it is 62Paise, in case potato 50Paise

and in case of groundnuts 45Paise.

4.      Multiplicity of Market Charges:

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Market charges are “Those charges that are incurred by the seller or the buyer or

both from the time a commodity enters the market for sale till the time the title of

ownership of the goods is transferred from the seller to the buyer”. In the course of

transacting sale, or a purchase a number of operations involved which cannot be

attended to by sellers or the buyers. These necessarily have to be done by the

respective functionaries. In order to pay these functionaries, market charges are

collected from growers or buyers at prescribed rates. 

One of the main problems is “The multiplicity of market charges and their heavy

incidence on the producer-seller.” In the absence of statutory regulations these

charges are neither defined, nor are based on any service consideration and are

recovered either in cash or in kind, and often both. These charges have no

sanctions except usage or customs prevailing. They are always introduced in favor

of the traders and the functionaries.

On a sale of produce worth Rs.100, as much as 21.5% of the income of the

producer goes to meet the various expenses:  

In the market the cultivator has to arrange with a kachcha arhatiya for the sale of

his produce and in the larger markets he has to employ a broker or Dalal to get into

contact with the kachcha arhatiya. For their services he has to pay some

commission. In addition to the arhat paid to the arhatiya and the dalal, a number

of other charges have to be incurred. Tulai has to be paid for the weighing of the

produce, palledari to cover the cost of the labourers who help in unloading the cart,

preparing the produce, filling the scale-pans, holding the bag open where the

produce is being measured, etc. the seller has also to submit to deduction known as

garda for impurities in the produce, and dalta for possible loss of weight and dana

given to sweepers, watermen, and even beggars. During the measurement and in

almost all the markets deductions are made from the amount due to the seller for

dharmada or charity, dispensary, gaushalas, pathshalas.

The objectionable feature about the market charges is that they are not only high

54

but are also not clearly defined and specified. The charges vary from market to

market and there is also no uniform practice as to charges that are borne by the

seller and those that are borne by the buyer. Even within the same market the

kachcha arhatiyas may charge lower rates to the village beoparis who visit the

market often and have regular trade connections than to the farmer who visits

market only occasionally and has, therefore, only small volume of business to offer

to the arhatiya. To make things worse many of the market charges are taken in

kind and in taking their shares the persons concerned are liable to be generous to

themselves. As the Report on the Marketing of Wheat in India points out, “not

only the arhatiya and dalal, but the munim (arhatiya's clerk), the chaukidar, the

sweeper, the waterman, the arhatiya's cook and a horde of beggars of every

description all regard themselves as entitled to a share of his produce.”

Some of these charges and deductions existing in the markets are:

1.      Arhat (Commission)

2.      Dallali (Brokerage)

3.      Hamali (Handling Charges)

4.      Tulai/Dharwari (Weighment)

5.      Chalani (Sewing)

6.      Borioto (charges for holding the gunny bags while filling)

7.      Dhanak (charges for pushing the grain in the gunny bag on to a scale pan)

8.      Charity

9.      Karad (Deductions in kind for the quality difference)

10.  Dhalta/Jhukta (leaving the balance in favor of the buyer)

11.  Namuna (sample)(is shared by the commission agent and the buyers)

12.  Baisari (charges for supervision of weighment to be paid in kind)

13.  Munim (clerks allowance)

14.  Valta/Wata (refraction allowance)

15.  Patti (cost of sale slip)

16.  Bardana (rent for gunny bags supplied)

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17.  Rent for cart park

18.  Rent for storage in godowns

Charities

      Muthi (to be paid in kind for temples in the market yard)

      Darwada (cowsheds or Balaji’s fund)

      Pathshala (funds for schools in the area)

      Doodh Khawa (fund to pay for milk for the buyers children)

Some of these charges are highly outlandish like the farmer has to pay for various

charities, which he would be otherwise not inclined to pay for. Also charges such

as ‘Shagirdi’ where the seller is supposed to pay fro the Arhatiya’s sweepers and

water carriers are uncalled for. Only some of these charges are justifiable. Among

these are

      Arhat or Commission

      Hamali

      Tulai

      Charges for sewing

Any deductions in the name of charity in any kind are unwarranted. Similarly

payments to the muneem or the apprentice of the Arhatya are uncalled for.

Especially when the principle arhatya gets full commission for the services

performed by him. Again there is no case for claming allowances for quality and

weight where the produce is subject to thorough examination by the buyer before it

is offered for sale. Hence in the light of numerous unwanted deduction and high

market charges, it is suggested that markets be regulated.

5.      Malpractices of Middlemen

Due to improper market structure traders or middlemen have become all powerful.

They have bent the rules in such a way that it is possible for them to cheat and get

away. Moreover the unorganized producers and the market machinery are no

match to the powerful trader legally. Even in regulated government markets

56

middlemen resort to malpractices. Some of the malpractices commonly resorted to

by middlemen are as follows:

a.       Scales and weights are manipulated against the seller. This practice is

rendered easier by the fact that there are no standardised weights and measures

nor any provision for regular inspection.

b.      There are all kinds of arbitrary deductions for religious and charitable

purposes and for other objects. The burden falls entirely on the seller and he

has no effective means of protest against such practice.

c.       Large quantities are taken away from the produce of the cultivator as bangi

or sample.

d.      Bargains between the agent who acts for the seller and the one who

negotiates on behalf of the buyers are made secretly under a cloth so that the

seller remains ignorant of what actually takes place.

e.       The broker whom the cultivator employs is more likely to favour the

purchaser with whom he comes into contact almost daily than the seller whom

he only sees very occasionally. This tendency becomes all the more

pronounced when, as it frequently happens, the same works for both parties.

f.        When disputes arise the cultivator has no means of safeguarding his interest.

g.       Differential prices for the same grade of produce

h.       Levying unfair charges for basic services

i.         Restrictive trade practices

j.        Arbitrary deductions on account of alleged adulteration and inferior quality

Some of the practices obtaining in the market amount to nothing less than common

57

theft

6.      Absence of Grading and Standardization:

Although the agricultural produce (grading and marketing) act was passed in 1937 even

today in most unregulated markets the practice of grading is unheard of. Whatever

limited grading is accomplished is technical in character i.e., commercial grading, which

can be understood by the lay farmer, is almost completely absent. If sales of agricultural

produce at a higher price are to be augmented without personal physical inspection of

every lot by open auction in the regulated markets, commercial standardization and

grading are essential. Also if lots are to bulked through cheap and efficient warehousing

and transport, standardization and grading becomes imperative. 

Absence of grading and standardising agricultural produce is another defect. The

reputation of Indian agricultural producers in the world’s market is low.

There are no standard grades commonly accepted throughout India even for such

important commodities as rice and wheat. In the absence of certain standard grades

accepted by the whole trade as the basis for commercial transaction, attempt of individual

producers merely secures the ordinary market rate. In fact the present practice of dara

sales, wherein heaps of both good and bad produce are sold together as one lot common

in most markets, gives a premium to the inefficient producer as the good produce is made

to carry along with it the poor stuff also. The practice of selling un-graded products of

mixed quality has naturally reduced the reputation of Indian agricultural produce in the

world markets.

7.      Inadequate storage facilities:

In most of the villages ryots store their produce in pits or receptacles variously

known as kudurus, kallis or thekkas. In the upcountry markets produce is stored

in kothis or kuthalas (earthen cylinders) and khattis (pits in ground lined with

mud and straw) and in a few centres in pakka khattis made of concrete. But that

58

there is a general inadequacy of good storage facilities both in rural and urban

areas can hardly be denied. The indigenous methods of storage adopted in the

villages as well as in most of the upcountry markets do not adequately protect

the produce from dampness, weevils and other vermin’s.

The losses due to inadequate storage have been estimated to range from 1.5%

(Food grains Investigation Committee) to 2% to 2.5% (The Prices Sub-

Committee) to 5% (as estimated by Dr. Baljeet Singh). A recent estimate puts

the loss at from 5 to 15% by weight of the production and it is due to defective

stage. This in turn is due to moisture absorption, excessive heat, insects, mites,

rodents and birds. Even at 5% the loss of cereals, millets, spices, oilseeds, jute,

cotton, tobacco would come to over Rs. 4,000 million every year in India.

With the change of temperature, grains loose weight. When wheat is harvested,

it contains some moisture, which evaporates in summer and is regained during

the monsoon month. Dampness raises the moisture content of the grain thereby

making it soft and therefore susceptible to insects. The damage is greater when

the grain is stored in kachacha underground pits where the sub-soil water table

ranges from 8 to 10 feet below the surface.

It is quite obvious that the food grains stocks held by co-operative societies,

grain merchants and even by farmers are not kept in proper conditions.

Therefore, the losses are substantially larger. In addition there are crops like

jawar, pulses and maize, which are infested by stored grain pests even before

harvest. The insects form inside the kernel and are visible until the threshed

grains are put in storage. By the time the infection is detected, internal damage

to grain becomes very great.

Losses due to rodents are also very great. The rats start damaging the grain right

from the field to the time it is consumed. According to Dr. P. J. Deoras, there

are approximately 2400 million rats in India. He has estimated that about 20

rats could consume the quantity of food sufficient for one person. On a gross

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estimate this would mean that rats are spoiling at least one fifth of the grain

produced. Calculating on this basis of a tonne of grain being consumed by 100

rats per year, the total consumption by the rat population of 2,400 rnillions

would amount to about 24 in. tons. In terms of money this would come to about

Rs. 18,000 million when calculated at the rate of Rs. 750 per tonne.

The nature of damage studied by Dr. Deoras is as follows:-

(i) It has been noticed that apart from damaging crops and food grains in

storage, rats carry food grains to their nests in burrows. As much as 15 kgs. of

grain have been recovered while digging out nests from about 30 rats burrows.

(ii) The rats damage 10 times the quantity of food material they eat. They would

execrate about 86 faecal pellets in 24 hours, which would get mixed up with

foodgrains.

(iii) They void 1½ gallons of urine during the year, and further contaminate

grain by shedding thousands of hair from their bodies.

(iv) In Bombay as many as 9,000 bags of foodgrains are auctioned as they are

unfit for human consumption because they are damaged by rats in yards and

godowns.

(v) The small mice in the paddy fields have been found to climb up to the paddy

plant and eat every grain while the big field rat usually cuts the whole plant.

Besides rats, “Insects, beetles and moths are prolific and each couple lay

anywhere between 100 to 400 eggs and their lifecycle is completed in 4 to 6

months. It has been estimated that weevilled grain in the case of wheat varies

from 1 to 2% or more, peas one to 5% or more and arhar upto 2%.”

8.      Underdeveloped Transport System:

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Transport plays a very important role in the marketing of the agricultural produce. A

smooth and efficient system of transport from the farmer’s village to the consumer door

goes a long way in not only helping the agriculturalist to bring his produce to the market

without much difficulty but also helping the consumer in securing his needs with a

reasonable time and cost.

In India with her vast distances, the existing means of transport are woefully inadequate.

“Communications from the field to the village and from village to the mandi are often

extremely poor and defective. Bad roads, lanes and tracts connecting villages with the

markets not only add to the loss of transportation and aggravate the strain on bullocks and

other pack animals, but also lead to the multiplication of small dealers and intermediaries.

They also restrict market by hindering cheap and rapid movement of agricultural

produce.” Thus the rural transport network is very bad. The railways established by the

British have not been developed further and hence are inadequate by today’s standards.

Bad roads lead to delay in supply and also due to the time lag the produce may be

damaged.

The bullock carts do most of the transport in rural areas. Some of the agricultural produce

needs special storage systems even while being transported. Carts both pulled by bullocks

or tractors cannot provide these kinds of facilities. Hence it is very much needed that an

initiative be taken to improve transportation facilities.

9.      Lack of Marketing Information:

The importance of an efficient marketing new service particularly for the producer-seller

in regulated markets hardly needs any emphasis. This news service acquaints him with

the ruling price and thereby strengthens his bargaining power and position. The price

information if available grade wise helps him to know the approximate returns he is

likely to get for his produce. It also induces him to produce better quality crops and thus

raise the standard of farming. Generally the producer-sellers have to depend upon oral

information about market conditions, market arrivals, demand conditions, ruling prices

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and market trends etc. that reach them through village sahukar or commission agent or

their own neighbors.

Absence of market intelligence as to prices is another defect. The villagers have

practically no contact with the outside world nor are they in touch with the trend of

market prices and they mostly depend on hearsay reports received from the village bane

who is not at all interested in supplying them the correct information as to prices

obtaining in the wholesale market. Even in cases where information as to prices is

available prices are not comparable on account of (i) the lack of standard grades

acceptable to the whole country; (ii) Variation in the amount of refractions allowed and

the terms of standard contracts obtaining in different markets; (iii) inaccuracy of

information supplied by various agencies concerned; (iv) variation in the price quotations

give by the local and Central government; (v) the considerable variations in weights and

measures used in several markets in the absence of standardisation of weights and

measures.

10.  Cost of Borrowing:

The most important requirement of growers to facilitate their production

activities is credit. Though cooperative credit has been increasingly spreading its

fold in the agricultural sector it is still far from occupying a pre-dominant

position.

The cultivator is financed by the village sahukar-cum-trader who is in his own

turn financed by arhatiya and the indigenous banker. In the absence of

warehouses and the lack of facilities for making advances against the security of

warehouse receipts there cannot be any system of cheap finance against security

of goods. There is at present no proper link between indigenous bankers or

commercial bankers and The Reserve Bank of India. The various marketing

agents borrow funds at a high rate of interest. This naturally leads to a rise in

the cost of marketing with the ultimate result that the share of the price received

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by the producer is correspondingly reduced.

The case for borrowing private finance and the flexibility in the repayment make

it attractive despite many malpractices. Through various surveys it has been

proved that though government has taken active measures to provide cheap

institutional finance a large majority of farmers are dependent on private

moneylenders and commission agents in obtaining credit. It may be noted here

that the activities of traders and commission agents through money lending

curtail the freedom of the grower-seller to dispose off their produce profitability

in market yards and make them permanently indebted. The official machinery

has to realize the gravity of the situation and take effective steps to realize the

poor and innocent agriculturist from the clutches of the oneylenders cum

commission agents.

11.  Multiplicity of Weights and Measures

Till recently, there had been an absurd multiplicity of weights and measures in India. The

chaotic state of weights and measures in India has been more clearly brought out in all

the reports published by the Central marketing staff. Weights made of sticks, stones and

bits of old iron are common feature in the markets and villages.

This multiplicity of weights and measures employed in India has deplorable effects in

several ways.

Firstly, it affords greater opportunities for cheating the ignorant cultivator and

unscrupulous dealers readily avail themselves of such opportunities.

Secondly, it gives rise to needless complications in practice as between one market and

another, which is by no means conducive to the interests of trade and commerce.

Thirdly, for the collection of data on price movements the relative level of prices in

different regions, the volume of agricultural production, etc. lack of standard weights and

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measures is bound to be a great handicap and seriously affects the accuracy of statistical

calculation.

The multiplicity of weights and measures make supervision difficult and afford greater

opportunities for cheating the producers, creates an element of uncertainty in trade and

renders fraud on the part of retailers as easy as it is profitable.

The report of the Marketing Sub-Committee has rightly observed that, “Deliberate

malpractices, ignorance and carelessness have all combined to make the consumer in

India pay an unnecessarily high price for many goods of different quality.”

12    Adulteration

Adulteration is often resorted to while marketing crops and one of the most

important reasons for such deliberate adulteration of agricultural produce is the

high amount of refraction (khad) allowed in most markets and the non-mutual

terms. In most of the wholesale markets in the producing areas a fixed deduction

is made for impurities (say 5%) and the terms are non-mutual, i.e., a producer

offering, cleaner produce which has only 1 % of impurities receives the same

price as the producer offering produce containing 5% impurities. Naturally when

this is the case the seller whether he be the middlemen or the farmer takes care to

see that the produce is adulterated to the maximum limit allowed in the market.

Adulteration Of Commercial Crops

Various devices of adulteration are in vogue. Such as: -

Damping of cotton is done by the middlemen on the contention that the kapas

comes in so very hot that if one puts one's hands into it they would grass while

curry powder in several cases has been found to be heavily adulterated with horse

dung.

“Tomato sauce is often only a mashed pumpkin with a small percentage of

tomato, Vinegar in some cases has been found to be acetic acid. Small chippings

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of white stone have been found in rice in some localities.

“Most of the common salt contains large-quantities of white chalk, while

turmeric is adulterated with lead chromate which has a deep Yellow colour. In

red chillies, many unscrupulous traders use lead oxide to brighten the colour and

add weight.”  

On these finds, Mr. H. Chattopadhyaya has so wittily composed a Poem, which

may be reproduced here for the information of the readers; Poem – A Spicy Tale  

Lines of Improvement

Due to various defects in the agriculture market of India the traders (middlemen) occupy

a unique position and due to such a unique position, the traders succeed in manipulating

the market scenario and to take home a major proportion of the price paid by the

consumer. In some cases like rice nearly 48% of the prices charged to the final consumer

is siphoned away by the middlemen. A very small proportion of the consumers paid up

price actually goes to the producer-seller.

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Any program of getting the farmer-producer out of this situation necessarily envolves the

breaking up of the monopolistic powers of the trader. Measures to make the producers

directly connected with the marketing of the produce are the need of the hour. This may

be done by creating a situation where the cultivation has greater confidence in being able

to sell his produce in the market. For this it is important to protect the producer’s interest.

Further maximum share of the consumer’s routine can be had by the producer if the

conditions of orderly marketing are created. Thus a need is felt to tackle the emerging

problems of agricultural marketing more resolutely and efficiently than ever before by

regulating the markets.

It has been observed that well regulated markets create in the minds of cultivators a

feeling of confidence. The producers believe that they get a fare deal in these regulated

markets. Such a scenario provide for a mood where the farmer is willing to accept new

ideas and strives to increase his agricultural produce. The value of such regulated markets

thus can be exaggerated but it is yet to catch on in India.

If the agriculturalist in India is to receive a higher price for his produce, if the needs and

preferences of the consumer are to be conveyed to the producer with a minimum amount

of delay and friction, and if the large scale industries are to secure a steady and reliable

supply of raw material of uniform quality, obviously the defects in machinery for

marketing of agricultured produce should be remedied as quickly as possible.

It would be useless to increase the output of food, it would be equally futile to setup

optimum standards of nutrition, unless means could be found to move food from the

producer to the consumer at a price, which represents a fair remuneration to the producer

and is within the consumer’s ability to pay. Similar considerations also apply to other

agricultural products and to fish and forest products. It is therefore necessary to remove

the defects in the machinery for marketing of agricultural produce.

An improved system of agricultural marketing, which will secure for the cultivator a

larger proportion of consumer’s price is a ‘sin qua non’ for agricultural improvement in

India.

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The following are the various Lines of Improvements:

  1.   Establishment of Regulated Markets

  2.   The market yard; amenities and facilities

  3.   Use of Standard weights and measures

  4.   Increased Provision of Storage and Warehousing facilities

  5.   Improvement of transportation facilities

  6.   Provision of marketing news

  7.   Standardization of contracts and payments of sales proceed

  8.   Improvement in Grading and Standardization

  9.   Remunerative Prices for Farmers

  10. Development of Co-operative Marketing

1.  Establishment of Regulated Markets:

(What is Regulated Markets)

Most of the defects and malpractices to the disadvantage of Producer-seller can be

removed by the exercise of proper control over markets and this could be done by the

establishment of Regulated Markets in the country. Markets may be regulated either by

local bodies or under State legislation.

As a result of the rationalisation of market charges alone, the producer-seller is benefited

to the tune of 3 to 5 rupees for every 100 rupees worth of produce marketed by him in

these markets. Besides, there has been the reduction in the market charges varying from

28% to 69% in various markets. There has also been an increase in the number of sellers

bringing their produce to these markets. Until 1944 less than 40% of the produce was

taken to the markets by the producers themselves. The average percentage has now gone

to 70%.

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What are Regulated Markets?

Markets that have rules and regulations with respect to the price of the product sold, the

method and the produce in which the transactions take place are other similar market

operations are said to be regulated markets. These regulated markets ensure a fair and

level playing field for all viz. the producer, middlemen and buyer. This is done by

eliminating the malpractices at the grass root level.

Establishment and Regulation of Markets in India

The most effective and direct measures to improve the conditions of the markets as taken

by the government through regulating the markets and the market practices by legislation.

The common objective of the various acts for straight agricultural produce markets is to

bring all the parties that is the producer, the commission agent and the buyer to the same

level of advantage by eliminating malpractices and rationalizing market charges. The

regulated markets provide a unique system of marketing that is only beneficial to

developing countries like India. In developed countries besides government legislation

semi-independent commodities, commissions or corporations or producer-controlled

boards are set up under various acts. These boards, commissions, corporations function to

regulate and develop marketing. Added to this cooperative marketing has also made good

progress in some developed countries.

In India the situation is however different. Indian producers find it most convenient and

least troublesome to sell agricultural produce in the unregulated primary village market.

Nearly 2/3rd of the marketable surplus of all agricultural commodities are disposed off

(sold) in such markets. If the farmer comes to the assembling center for sale, in non-

regulated markets, he is liable to be deceived by the commission agents or broker or

traders.

Sale through the cooperative society has not been possible because of the failure of the

cooperative movement in India. At the same time the marketing methods followed in

advance countries like the establishment of producer controlled marketing boards are not

possible in our country as it is difficult to organize such boards on account of small and

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scattered producers thus the only option left is the regulation market practices in existing

unregulated wholesale and retail markets.

Regulated markets in India

The first attempt to regulate the Indian agricultural market was made as early as 1886.

Karanja was the 1st regulated market in India. It was situated in the then Hydrebad

residency. The process of regulation received wider acceptance in 1918 when the General

Cotton Committee appointed by the government of India recommended ‘regulation of

market’ as a solution to agricultural marketing problems. In pursuance of this

recommendation, the then government of Bombay was the first to enact the Bombay

Cotton markets act in 1927. Infact, it was the first law in the country which attempted the

regulations of markets with a view of evolving sound market practices which are fare to

the producer as well as the trader 

Since then further act have extended the scope of agricultural legislation to the

commodities other than cotton. Today market legislation in India covers almost all

agricultural as well as horticultural produce, livestocks and these products and forest

produce. However since the regulation of markets is a state subject, these are some

variations in the state legislations.

Most of the regulated markets now functioning are, by and large, multi commodity

markets. There is however some markets, which deal in simple commodity, like tobacco,

vegetables or livestock.

Although legislation provides for the regulation of all types of products in actual practice

only some important commodities have been so far brought within the preview of enact.

It would, however, be advantageous to the producer-seller if all the commodities are

grown in the market are brought within the orbit of regulation. This enables the producer-

seller to dispose off their entire marketable surplus in one and the same market. It is,

therefore highly desirable that all agricultural commodities, which are commonly grown

in notified areas and for which there is a fare marketable surplus, should be included

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amongst the notified commodities for the markets. Several committees have also

recommended this from time to time.

The poor standard of primary and secondary commodity markets where producers

convert their produce into cash, the prevalence of various malpractices such as short

weights, excessive market charges, unauthorized deductions and allowances made by

commission agents, adulteration of produce and the absence of machinery to settle

disputes between the seller and buyers were recognized as the main hindrances in

agricultural marketing as early as 1928 by the Royal Commission on agriculture on a

national scale, which by observed that “these can only be removed by the establishment

of regulated markets”.

A regulated market is a market that has rules and regulations with respect to the price of

the product sold, the methods or the procedure in which the transactions take place and

other similar market operations are said to be regulated markets.

These regulated markets ensure a fair and level playing field for all viz. the producer,

middlemen and the buyer. This is done by eliminating the malpractices at the grass root

level.

Progress of regulation in India

Regulation of markets in India is today a state subject. The directorate of marketing and

inspection at the central level render advice in farming market legislation and its

enforcement. In 1938 a model bill was prepared by the central agricultural department

(now known as Directorate of marketing information). On the lines of this bill several

states drafted and passed their own bills. The progress of regulation was very slow due to

the 122 markets were regulated till the end of the war. After independence the planning

commission in its 1st and subsequent 5 years plan emphasis the vital role played by

regulated markets. Due to this the number of regulated markets grew rapidly after

independence. The number of the markets increased from 432 in 1950 to 3631 in 1976.

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A number of steps have been taken in the last 50 years to regulate markets. These are

aimed at regulating marketing practices, standardizing weight and measures, developing

certain infrastructure facilities in assembling markets and introducing quality standards

AGMARK certificate.

Though the legal framework has been provided in those state the progress is uneven

hence it’s suggested time and again that:

a.       A further expansion of the regulated market system in terms of both market and

commodities to be brought within the scope of regulation.

b.      Strengthening the arrangement of enforcement and inspection to ensure a regulated

system of open auction, trading practices and margins of intermediaries.

c.       Development of rural markets and shandies and establishment of rural markets in

areas where such facilities are not available.

At the central level financial assistance is being provided to select regulated markets for

establishment of grading facility for some important items at the producers level. Some

schemes are also assisting the development of infrastructure facilities in selected

regulated markets both primary and wholesale levels. But despite this the progress is not

very satisfactory. Quite a sizeable size of markets remains unregulated even in this day

and time.

Benefits or advantages of regulated markets:

Regulated markets have many advantages over unregulated ones. Economically the

producers gains by way of reduction of unwarranted multiple market charges and

unauthorized market deductions. Socially it profits the producer as he is now directly

involved in the management of the market communities. This provides him with a

platform where he can discuss matters concerning his interest and give bent to his

grievances. Psychologically the producer occupies a dominant position in the market

community and faces the trader with greater confidence.

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Market the social and economic benefits accruing to the cultivators, as a result of the

regulation of markets may be briefly enumerated as below:

1.      As a result of the rationalization of market charges alone, the producer-seller is

benefited to the time of 3-5Rs for every hundred Rupees worth of produce marketed

by him in the regulated markets. It works out to be 15-25lakhs on rupees in respect of

markets with an annual turnover of 5crores of rupees. This is no small benefit to the

tiller of the soil. Besides there has been a reduction in the market charges which

varies between 28&69 % inn various markets.

2.      There has been an increase in the number of sellers bringing their produce to these

markets. Until 1944, the producers themselves took less than 40% of the produce to

the markets. The average percentage has now gone up to 70%.

3.      Markets charges are clearly defined and specified. Excessive charges are reduced

and unwarranted ones are prohibited

4.      Market practices are regulated and the undesirable activities of the market

functionaries are brought under control so that a fair dealing is assured

5.      Correct weighment is ensured by periodical inspection and verifications of scales

and weights. Only correct and stamped beam scales and weights are allowed to be

used in the market.

6.      A machinery for the settlement of disputes between traders and sellers is setup this

machinery provides suitable arrangements for the settlement of disputes regarding

quality, weighment and deduction prevent litigation, safeguard the interest of the

seller and smoothens business by creating good relation between sellers and buyers.

7.      Reliable and up to date market news are available to the sellers.

8.      Proper market yards with full facilities like sheds for the sale of produce, cart

parking place, better grading and warehousing facilities for accommodation of

agricultural produce are duly provided by the market committees.

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9.      Open auction methods are strictly followed and unjustified trade deductions like

karda, dalta, batta namuna etc are eliminated.

10.  In these markets suitable quality standards and standard terms for buying and selling

are conveniently enforced.

11.  Besides reliable statistics of arrivals, stock and prices are easily available.

Thus regulation of markets has been a boon to the agriculturalists. It has not only

introduced a system of competitive buying, helped to eradicate undesirable malpractices,

rationalized market charges, standardized weights and measures, protected cultivators

from authorized deductions and unduly low quotations but has also developed a

machinery for serving impartial settlements of disputes between the practices. Taking the

overall picture, regulated markets have produced a wholesome effect on marketing

structure and have generally raised the efficiency of marketing at the primary level.

Steps have to be taken in the future not only to bring the remaining assembling and

terminal markets but also the primary markets under regulations.

2.      The market yard; amenities and facilities:

A market yard is “A statutory declared area situated within the market proper

where all sellers of the notified commodities are supposed to bring them and

affect transaction with licensed traders directly through the other license

intermediaries under the supervision of the employees of the committee. The

market yard is the nerve center for the performance of the activities of a

regulated market.

A well laid out market yard includes the provisions of certain basic amenities

and facilities. Normally a market yard acquired amenities and facilities such as

auction halls or platforms, godowns, market office, space for parking carts,

drinking water, rest houses, sanitary arrangements, cattle shed, internal pucca

roads, canteen, lighting facilities, post offices, banking facilities, etc. However

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no market yard can actually claim to have provided all amenities and facilities

laid in the standards for regulated markets formulated by the Indian Standard

Institute (ISI).

3.      Use of Standard weights and measures:

The weighing of agriculture produce is an important aspect in the working of a

regulated market. It influences the actual earnings of producer-seller and also

their perception of the transaction fairness. There are many malpractices

connected with weighing and weighment. Some of the traders resort to using

unauthorized and faulty weights and scales. Then there is a problem of

conventional and marginally over weighment. The buyers demand access weight

allowances and insist on arbitrary deduction for counter balance. They also

resort to very unethical practice of free taking away of excess left in the lot after

weighing. All such malpractices rampantly co-exist due to the absence of an

impartial and independent agency for weighing. There is also a complete

absence of uniform weighing charges or weighment. The lack of any fixed

procedure of supervisors over the actual weighing process is also responsible for

the situation.

The multiplicity of weights and measures has deplorable effect on the market

scenario. The traders take full advantage of the situation and cheat the ignorant

cultivator on every available or possible occasion. Further the multiplicity of

weights and measures makes supervision difficult. It creates an element of

uncertainty in trade and renders scope for fraud.

Mostly weighing of agricultural produce in most regulated markets is done

wholly within the premises of the market yard. The produce is weighed by

different licensed weighmen simultaneously at different spots in the yard.

Depending upon the nature of the commodity the procedure of weighing differs.

Mostly it is done lot by lot by the same weighmen, sometimes if a seller has a

high amount of produce to be weighed he engages the service of more than one

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weighmen. The system adopted however depends on the availability of

sufficient number of weighmen, the number of licensed weighmen, in turn it is

determined by the size of the market, the frequency, the scale of the commodity

arrivals and the possibility of earning sufficient daily income by way of charges

collected. It is however observed that in many regulated markets across the

country the number of licensed weighmen was small. Many times it so happens

that though the sale transaction are over in the morning the growers have to wait

for getting their produce weighed till late in the evening and may be even

overnight. This shortage of weighmen in all the markets is due to the fact that

the market committees are averse to issue more and more licenses to weighmen.

Their logic is that if more weighmen are given licenses the earning of the

existing set of weighmen would be adversely affected.

Many suggestions to the improvement in the scenario have been given by

various national level committees. It is suggested that the market committees

should expedite the process of issuing license to weighmen in the interest of the

producer-seller. It is also suggested that the market committees should

themselves provide weighing and measuring equipment as against the present

practice of traders using their own equipment.

The use of standard weights and measures safeguards the interest of parties

against cheating by false or under-weight. It is even now more urgently needed

in rural areas in regard to transactions in which the farmer is concerned. The

Planning Commission has recommended to adopt the metric weights and

measures throughout the country because it is simple, easier to learn and

remember; and its use would save time and labour in calculations. The

Standards of Weight and Measures Act has been passed in 1958 and enforced in

all the states with a view to check fraudulent views of weights and measures.

According to a survey it is estimated that 80% of the transactions were deemed

to be proper and fair as 20% is not a small figure. This 20% of malpractices can

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be eradicated if there is an efficient supervision by authorities of the market at

time of weighing. It has been observed that the “surprise inspection” weapon

provided to the market committees with respect to weighing provisions is a

failure. This is because most market committee member is honorary and thus

indifferent to pay such visits and invite trouble. Also the employees appointed as

inspection staff by the government are far too inadequate in number. Also this

inspection staff (agricultural supervisors) are in the habit of taking bribes from

the commission agents and traders for conniving at improper weighing. The

surprise visits made by the market securities are rendered ineffective as a result

of before hand knowledge of the visit to the supervisors and licensed weighmen.

Thus here again it is suggested that market committees take the punitive actions

against offenders and check these malpractices. Further it is suggested that the

weighing work among the licensed weighmen should be given on a rotation

basis. This will minimize the collusionary group affiliations and thus reduce the

malpractices in weighing agricultural produce.

Besides the check from the authorities the grower can also do a lot to eliminate

weighing related malpractices. The grower should be diligent and meticulous

with respect to the procedure of the weighing laid down by the authorities. The

grower should also take the trouble of weighing the produce at their own end

before bringing it to the markets. It is observed that the grower seldom do this

and thus the loss on this account is sizeable.

4.      Increased Provision of Storage and Warehousing facilities:

It has been well said that the business of accumulating and storing perishable as

well as non-perishable products in times of flush production, preserving them

safely and then distributing them in times of scarcity is necessarily a part of

production and equal in importance and dignity. By holding back a part of the

surplus at harvest time the middlemen prevent a sharp fall in prices of

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commodities so that the producer's share in the benefit is increased and by

letting out produce from the store in seasons when prices are normally likely to

rise sharply, they check the rise and bring about some stability in market prices

which benefits the consumer immensely." Storing is, therefore, a very important

part of marketing. This point was realised by the Royal Commission on

Agriculture and subsequently supported by the Central Banking Enquiry

Committee.

Storing goods, before they are sold is an important part of marketing. This point

was fully realised by the Royal Commission on Agriculture and subsequently

supported by the Central Banking Enquiry Committee and later on by the

Agricultural Finance Subcommittee, the Rural Banking Enquiry Committee and

by the Rural Credit Survey Committee. All these bodies recommended that

storage and warehousing facilities should be made available at all nuclear points

of trade in agricultural produce.

As mentioned in the previous section, losses in storage are due partly to the

change in temperature, dampness and partly to insects etc. These losses in

temperature can be reduced by making provision for efficient ventilation in the

godowns and by closing them during the monsoons and keeping them open

during the dry season. Grains in bags can also be protected by damage. It is

necessary that sufficient space be kept between the bags while preparing a stack-

plan.

Storage of farm produce is one of the essential elements of orderly agricultural

marketing. It is necessary at various levels to varying degrees. The method of

storage at the primary market level depends upon the prevailing traditions, value

and the retaining capacity of the commodities to be store, the availability of

facilities for storage and the waiting capacity of the producer-seller.

Due to the lack of storage facilities that are adequately and efficient the losses

are great. Realising the need for good storage and warehousing facilities the

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Indian parliament in acted the agricultural produce (development and

warehousing) Corporations act in June 1956 in order to accelerate the efforts of

building warehousing, the government subsequently passed the warehousing

corporations act in 1962.

Accordingly the national co-operative development corporation, the central

warehousing corporation (CWC) and the SWC in each state came into existence.

A 3 tier storage system was suggested by various committees viz.

a. The National Level

b. State and District level

c. Village and Rural level

In accordance with these suggestions, the food corporation of India and the

CWC created storage facilities at centers of all India importance. The state

government and the SWC made warehousing and provided for storage facilities

at centers of state or district level of importance. Over and above all this villages

/ Rural storage needs are been looked after by the co-operatives.

These efforts have had a mixed impact but definitely the storage capacity over

all has gone up considerably.

Further the government of various states has issued private operators licenses to

build and run scientifically designed warehousing and other storage facilities.

The licensed warehousing offers other distinctive benefits. The private

warehousing storage receipts are transferable and thus the ownership of the

goods can be transferred without the actual movement of produce. The scientific

storage eliminates lose from spoilage. The private warehousing also provide for

insurance cover against fire, flood and theft. They also help the grading and

standardization of various commodities.

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5.      Improvement of transportation facilities:

Right means of transport at the right time is essential for the smooth functioning

of any market. This kind of a facility at reasonable rates will influence

substantially the working of market mechanisms. It has been observed that the

cost of transport directly affects the price of the agricultural produce.

All involved in agricultural marketing i.e., the farmer, trader and the consumer

are affected by the shortage of transport facilities. The market committees are

under no statutory obligation to provide for transportation but the nature of the

problem is such that it is suggested that they step in.

It is the fact that most farmers due to regulated markets would like to sell their

product directly at secondary markets but not at village assemblies centers.

However due to bad transportation facilities the farmers are not willing to take

the risk of transportation. Here is where it is suggested that the market

committees take upon them some responsibility. They should organize some

trucks or lorries for the transport of the produce of small farmers from village

assembly centers to urban secondary markets. The fact is that the produce of just

one farmer may not be enough to fill in an entire truck. Hence the market

committees should help coordinate 2-3 farmers to pool their producer together

so that an entire truckload is completed. The cost of such facilities provided

could be recovered from the sale of the produce.

The method suggested above can be executed as follows:

a.       The individual grower-seller may record their transport requirements with

the market committee.

b.      The committee after receiving such requisition pools them and contract

lorry supply offices, thus arranging for the transportation.

c.       As mentioned earlier the cost of coordinating and transporting can be

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deducted from the sales proceed.

Similarly to assess the traders in having adequate transport facilities, the

committee officials may contact transporters as well as railway authorities in

obtaining the required number of lorries or wagons.

This would reduce substantially the transport bottlenecks thus benefiting both

the farmers as well as the traders. The markets will also function continuously

without the need for closure for want of transport.

6.      Provision of marketing news:

The Agricultural Commission had recommended that steps should be taken for a

better dissemination of the marketing news. The marketing surveys conducted

under the direction of the Central marketing staff have shown that “there is at

present a surprising lack of co-ordination as between different markets. Prices

do not move in harmony even in markets, which are not far from each other.

We often find a market glutted with a produce which is scarce in another

perhaps only a few miles off.”

The problem of lack of marketing information was discussed earlier. Now

having realized the need for a good agricultural marketing news service, the

government of India through its 5 year plans has allocated some budget for this

activity.

The government of India in collaboration with the various state government

help, setup of an all India market news service in the 2nd 5year plan. This mainly

benefited the farmers, as initially almost all the news relayed from these centers

was agricultural in nature and market oriented.

In 1957, the integrated scheme for the improvement of market intelligence was

launched in Bombay. The main objective of this was to give upto–date

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information to the producers with regards to the wholesale prices of agricultural

commodities ruling in various markets. This scheme covered two aspects viz.

a.       Collection and compilation

b.      Information dissemination

Since then the government has given a lot of importance to improving the

quality of agricultural marketing news services. All India radiobroadcasts daily,

the closing of agricultural commodities and gives information regarding prices.

The penetration level of the radio set is almost 90% hence the broadcasts are

very useful.

Thus the objective of an efficient market news service should be to aid towards

more intelligent production with the ultimate object of achieving effective

distribution and fair pricing of farm produce both for the producers and the

consumers.

7.      Standardization of contracts and payments of sales proceed:

Business practices worldwide show that the best time to sell ones produce is

when the prices are high. Hence the farmer world over stock their produce in

anticipation of a price rise. However in India the farmers are very poor and

small. They have no waiting capacity to store the harvest produce for a

favourable selling time. When they bring the produce to the market their

immediate goal is to sell and obtain cash. The traders take advantage of this

situation.

The mode of actual payment of sales proceed differ from region to region,

market to market and within the same market from transaction to transaction.

Most of these modes are exploitative.

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Some of these methods are:

      Instead of prompt payment of the total value of the produce purchased,

payment by installments is forced on the seller. This happens usually after

the delivery of the entire purchase lot.

      In cases where the moneylenders are the buyer it is seen that they make

direct adjustments in the debt accounts of the sellers who have earlier

borrowed funds from them. The farmers being uneducated, ignorant and

illiterate seldom understand such adjustments.

      Most traders insist that all transactions should be on credit and make the

seller agree to this. If they cannot convince the seller for a credit transaction

they deduct exorbitant amount for cash payment.

      Almost all marketing charges of transport, storage and weighment are

pushed on manipulatively to the seller. The buyer behaves as if these are

traditional practices and if changed will result in some thing un toward

happening. Thus the seller is forced to follow such rules of thumb.

With the setting up of regulated markets all such irregularities can be eliminated

to a large extend. The market legislations have clearly provided for insuring

prompt payments. But the problem is of implementation. If is recommended that

market committees play an active role in implementing such legislations. It is

expected that at least this will make direct sales in the markets free and fair.

However in the case of indirect sale the system of payment by the buyer to the

commission agents is more governed by trade convictions. The commission

agent may not necessarily recover the amount from the buyer immediately on

delivery of goods. There may be a time lag between the delivery of goods and

the payment by the buyer, which generally varies. Further it is seen that the

commission agents in most of the markets follow the practice of calling on to get

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their payments. This is particularly so in the case of certain commodities like

cotton and groundnuts. The buyers of these commodities are generally the

processing factories, which make payments at their own premises. It may be

noted that due to this practice of deferred payments the commission agents

demand a higher rate of commission from the producer-seller for prompt

payments or result to a system of deferred payments to the farmer.

Due to the cash crunch in Indian markets such deferred payments or forward

training cannot be avoided. In order to stop unhealthy speculation, forward

training of agricultural commodities is regulated under the forward contract

regulation act 1952 for enforcing the act the forward market commission was set

up in 1953. This commission identified forward markets in raw cotton,

groundnut oil, coconut oil, black pepper and other oil seeds. As a policy

measures the commission has sort to eradicate monopoly of any kind.

As far as the operations of moneylenders are concerned they are governed by the

Bombay Agricultural Produce Market Rules of 1941. The rules state that

licensed general commission agents or brokers could give advances either in

cash or in kind to the agriculturalist on the condition that

1.      “If an agreement was entered into between the moneylender and the

borrower, the lender should supply a copy of the agreement to the borrower

and

2.      The lender should keep an account book, recording all advances made by

him to an agriculturalist and repayments affected in the manner specified by

the committee in its byelaws and should supply a copy of an account book,

under his signature, to the borrower, entering therein every load transaction

and its recovery”

However the committees have practically no direct control over the credit

activities of the traders, general commission agents and the brokers. As co-

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ordination between the working of the market committees and the administration

of the moneylenders act should be attempted.

8.      Improvement in Grading and Standardization:

Grading of commodities has 3 main purposes.

      Firstly it protects the consumers and the producers through the establishment of

standards of quality.

      Secondly it serves as a mean of describing the quality of commodities to be

purchased or sold by buyers and sellers all over the country.

      Thirdly it provides a basis for the payment of premium on the quality of

commodities.

Further trading on the basis of accepted quality standards makes pricing more precise and

equitable. Thereby making the price reporting mechanism more meaningful.

In India grades, standards and appropriate trademarks have been developed under the

agricultural produce (grading and marketing) act 1937. The agricultural produce is graded

under the trademark ‘AGMARK’. This is done in order to ensure good quality both for

export as well as the domestic market.

The act provided for the fixation of grade designations, which indicate the quality of

scheduled commodities of agricultural produce. The grading for other commodities is

voluntary.

The grading practices of produce at the farmers level need to be emphasized and widely

canvassed. This will (it is hope) fetch a competitive price to the grower in the markets

compared to the ungraded produce.

9.      Remunerative Prices for Farmers:

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It has been increasingly realised that mere increased production could be of little

avail so long as the excess production failed to reflect itself in the shape of some

extra income to the producer. How to ensure an economic and remunerative

return to the producer; how to establish a relationship between the price return

and the quality of a produce; how to provide a self-propelling incentive for the

maintenance of a standard which will bring the maximum return: how to prepare

the produce for the market, how to grade and differentiate – how to pack and

transport; what security and what facilities the producer should get in the

market; how to keep him informed of market trends and prices; how to keep him

abreast of consumer preferences – these have been some of the questions which

demanded close attention of those concerned with the agricultural marketing

10.    Development of Co-operative Marketing:

With the commercialisation of agricultural products efficient marketing is as

necessary as scientific agricultural operation and so side by side with the

progress in cultivation methods of suitable machinery for the efficient sale of

farm produce should also be made. The income of the farmer depends to a great

extent on the ability with which he is able to market his produce for a fair price.

Even if the production side is strengthened and cultivation improved, the

cultivator would not gain much, if there is no proper arrangement for the

marketing of his produce as the benefits of better farming would probably be

reaped by middlemen intervening between them and the ultimate consumer. It

has, therefore been recognised that defects of agricultural marketing may be

removed by organising the work through co-operative societies.

Conclusion

In a country like India where, agriculture contributes nearly 49% of the national

income and provides purchasing power for over 70% of the population engaged

in the production of crops, the marketing of farm produce, which involves all the

processes in the movement of goods from the farm to the consumer, has

obviously a significant influence on production activities and is patently as vital

85

as the latter. The conditions under which the farmers dispose of their

marketable surplus in the villages and nearby mandis will, therefore, have a

significant influence on the national production programme as low farm incomes

discourage the use of fertilizers and improved seeds and push marginal lands out

of cultivation and thus mar the very incentive to produce more. It is, therefore,

advocated that the primary consideration for the development of agricultural

marketing is to reorganise the existing system so as to secure for the farmer, his

due share of the price paid by the consumer to sub-serve the need of planned

development. This progress in the country as a whole has been rather slow and

it needs acceleration

Agricultural Marketing Finance in India

INTRODUCTION

Finance in agriculture is as important as development of technologies. Technical

inputs can be purchased and used by farmer only if he has money (funds). But

his own money is always inadequate and he needs outside finance or credit.

Professional moneylenders were the only source of credit to agriculture till

1935. They use to charge unduly high rates of interest and follow serious

practices while giving loans and recovering them. As a result, farmers were

heavily burdened with debts and many of them perpetuated debts. There were

widespread discontents among farmers against these practices and there were

instances of riots also.

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Although the co-operative banks started financing agriculture with their

establishments in 1930’s real impetons was received only after Independence

when suitable legislation were passed and policies were formulated. There after,

bank credit to agriculture made phenomenal progress by opening branches in

rural areas and attracting deposits.

Since independence India has made substantial progress in respect of

agricultural finance. Reports of all India rural credit survey committee and all

India rural credit review that farmers were fully dependent of various sources of

credit. Agricultural credit in early years was characterised by the growth of

cooperative credit and there was decline in the share of moneylenders.

Moneylenders were the main sources of credit during 1951-52. However

occasional moneylenders like landlords and traders have come up as a important

suppliers of rural credit.

Moneylender was the most convenient and easiest source of credit.

Moneylender did not make difference between production and consumption

credit. His credit was available at the time needed by, the farmer. His

administration was simple and quite flexible. He could asses credit worthiness of

not only borrower but his entire family. The most important advantage to money

lender was the absence of any worthwhile formal source of credit and illiteracy

and ignorance of rural community as whole. The social thinkers in India were

confined to freedom movement and other religious evils and had little time for

assessing the damage done by moneylenders who were essentially Indians

during two centuries proceeding independence.

Charging exorbitant interest rates, cheating the illiterate borrowers by inserting

larger amounts than borrowed, non-issue of receipts for repayments were the

main reasons of malpractice for moneylenders decline. All these activities

aimed at grabbing the farmers land, the only productive asset of that poor man.

The development of agricultural sector called forth medium and long-term credit

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large scale. This need was associated with green revolution. The moneylenders

depending upon their own fund could not entertain term lending.

The factors accounting for decline of moneylenders apart from malpractice

could be their inability to provide term loans. There are certain important

positive factors for this. Most important positive factor on the part of authorities

was the realisation of needs for institutional credit in agriculture. This let to

official patronage for co-operative credit societies by way of extending and

liberalising refinance facilities. Further the short lived social control of

commercial banks and their subsequent nationalisation, the establishment of low

cost regional rural banks and restructuring of apex, have helped in a major way

to institutionalise agricultural credit.

Growth of literacy education and communication network has also helped to

reduce the importance of indigenous moneylenders in a big way. It should be

kept in mind that the informal sources haven’t totally disappeared, but have only

declined in relative terms.

AGRICULTURAL CREDIT

Needs and types:

Finance had a very limited role in traditional settings as the transactions were

undertaken within the limits of village. Farmer’s dependence on others for input

requirement was marginal. Inputs such as cowdungs composts, etc. were

supplied by the households. Cash was only needed to pay land revenue or to

purchase consumption goods. The need for finance grew with modernisation.

Frequent crop failures were another reason for growth of cash transactions. Crop

failure forced farmers to borrow from moneylenders for meeting consumptions

requirements. Due to this the self-sufficient communities were exposed to credit

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gap. A gap of over one year implies a perpetual time and over a time spreads to

the entire village community.

Agricultural Credit is classified into two:

I.                    Production credit

1.      Short term: The producer requires various factors of production, like

capital, land, labourer for production purpose. Some factors are owned by

him but for other factors he has to depend on respective markets. The other

factors either have to be purchased or hired if they are durable. If the

producer has adequate owned funds he does not have to bother about credit.

But if he does not have adequate funds he has to depend upon others for

credit.

Credit repayable within a period of 15 to 18 months is short term credit. These

loans are granted to meet the daily working capital requirements of farmers.

Short term loans are granted to purchase seed, fuel, fertilisers, insecticides,

pesticides and other input requirements. Payment of wages, hire charges of

agricultural machinery and tools, electricity charges, land revenue and other

taxes, etc. are other things for which short term loans can be needed.

The important form of short-term credit is the crop loan. Need for crop loan

comes from considerable increase in current cost of production. 

Capital intensity has increased the land productivity upto come extent. Crop

loans help the farmers to enable the productivity function with the use of

modern inputs. Crop loans have two components

      One for meeting current cash outlays and

      Another, which can be distributed in kind.  

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a.       Cash component: It is made to meet the cash requirements by the farmers

during the time of production.

b.      Kind component: Financial agencies may make necessary arrangements

with co-operative marketing societies to supply needed inputs by the farmers

instead of giving cash loans which are ultimately meant for purchasing

various inputs. It is possible to grant loans in the form of chemical fertilizers,

pesticides, insecticides, improved seeds, etc.

The advantage of short-term credit loan is that it minimises the possibility of

misuse of loans by the farmers. Part of cash loans can be used for consumption

purpose. They should be restricted upto marginal requirements only.

1.                  Medium term loans: Productivity can be improved by improving

quality of assets or by creating new assets. Availability of working capital

only cannot make much significance on productivity. As the assets are

available for many years, cost is spread over those years. It cannot be a

repaid fully with one or two cropping seasons. For production purpose,

medium term loans are granted. Medium term loans defined by survey

committee is one, which is repayable over a period of 15months to 5 years.

After the establishment of NABARD medium term period is increased

between 18months to 7 years.

Medium term loans are required mainly for creating capital assets. They may

also be used for purchasing livestock, agricultural machinery and equipment

such as diesel engine, electric motors, etc. In the same way deepening and

repairing of wells for improving irrigation, development of activities like

dairy, poultry, piggery, etc. are the purposes for which medium term loans are

granted.  

Only a part of medium term loan is expected to return in current production.

The remaining loan is carried forward and can be paid over the period of 7

90

years.  

2.                  Long term loans: Long-term loan is granted basically for

permanent improvement or for acquiring new assets. It is the one, which is

repayable between the period of 5 or 7 years to 20 or 25 years. Long term

finance is needed by farmers for intensifying the agricultural operations on

existing holding by making permanent improvements on land, green

revolution is associated with intensive use of capital. Variety of machinery is

needed by the farmer. Mechanisation is another important factor determining

long-term finance. Land fencing also needs long term finance. In the same

way construction of farmhouses, storage facilities, etc. are some of the

important items for which farmer requires cheaper term loans.

Certain loans are considered as medium term or long term loans. The term

structure is relative and is determined by the repaying capacity of the borrower.

II.                Consumption loans:

Industrial credit is wholly meant for production but a part of it goes for meeting

consumption requirements of farm families. A farmer uses his marketed surplus

to pay off previous loans and very little to meet family consumption. Farmer

has to wait for next harvest for receipts because there is no continuous daily,

weekly or monthly receipts. Therefore he is forced to borrow both in cash and

kind for his consumption requirements. Festivals, religious, rites, marriages, etc.

als consume a lot of funds. Loan is also required due to crop failures.

In India agriculture is dependent upon nature. Good rainfall leads to good crop

failure of monsoon damages the crop. Indian agriculture continues to be a

gamble in monsoon. Crop failures reduce the necessary goods for self-

consumption and also reduce the prospective returns. Farmers have to borrow

for survival. Consumption loan is basically for survival of farm families. They

could be considered as production loans. It is difficult to differentiate between

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production and consumption loans. Both the loans have same importance. Local

moneylenders never made any distinction between production and consumption

loans therefore they were successful in their lending, activities during the first 2

decades after independence.

MAJOR OBJECTIVES OF INSTITUTIONAL CREDIT IN INDIA:

1.      To bring about greater co-ordination between credit institutions under the

multi agency approach.

2.      To direct a larger share of credit to weaker sections of society.

3.      To secure an increase in the total volume of institutional credit for

agricultural and rural development.

4.      To improve the recovery of loans to ensure continues recycling of credit

and

5.      To reduce the regional imbalance in availability of credit.  

SECURITY:

Safe lending is widely accepted principle. Now lending has been made more

objective in priority areas. Security is now been replaced by purpose. Even

now for many reasons lending agencies insist on security. There is no dispute

about the need for security, but its, problem is regarding the size and nature of

security and whether small and marginal farmers have anything to do with it.

There are different agencies in India extending short term credit such as primary

credit societies, regional rural banks, commercial banks, etc. Production

oriented credit is extended against anticipated crops (crop loans), consumption

credit is provided on personal security. Some times, third party guarantees or

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gold ornaments, etc. are accepted as security.

Loans meant for purchasing equipments machinery are issued on the basis of

hypothecation of relevant machinery. However land mortgage is still insisted

upon medium and long term loans. Land mortgage conditions come in the way

of tenants who have no right on land. Lending agencies are responsible to the

depositors on one hand and being public institutions are expected to be

responsible to the society. Responsibility and accountability make them adopt

security minded approach. It is more important due to high risk and uncertainty

of agriculture in India. Similarly it is also a fact that a large variety of

small/marginal farmers are unable to furnish the necessary as security for loans.

In case of non-repayment the whole loss is borne by the local lending agency. It

is necessary to spread risk for liberalising security conditions by introducing

credit guarantee schemes and refinancing.

SOURCES OF AGRICULTURAL CREDIT:

Sources of agricultural credit are divided into institutional and non-institutional.

Non-institutional sources were of great importance during 1950's and 1960’s;

now due to the growth in institutional sources their importance is declining.

The different sources of agriculture are as follows:

(A) CO-OPERATIVE CREDIT:

Co-operative credit consists of two parts. One engaged in short and medium

term.

(i) Primary co-operative credit: Primary co-operative credit cater to short term

and land development banks cater to medium and long term credit. Primary

credit societies, which cater to short-term credit requirements lie at the bottom

of co-operative institutional structure. Primary societies are located in villages

and their activities are co-ordinated with central co-operative banks. It is seen

93

that primary societies dependence is extensive on central co-operative banks.

At the top of the co-operative credit stricture are state cooperative banks. They

provide short and medium term loans to farmers through central and primary

societies. Just as the central co-operative banks control the primary societies, the

state co-operative banks control the central co-operative banks. They also keep

and lend the funds to central co-operative banks.

(ii) Co-operative land development banks: Farmers also require medium term

and long term finance. For meeting such requirements, the government has

encouraged the growth of land development banks, on co-operative lines.

Farmers in reed of long term credit have to approach the primary land

development bank or the branches of central land development banks. All loans

are issued against mortgaging of land. Each loan is limited to 50% value of land

offered for mortgage. Usually land development banks do not accept farmers

valuation of land. They have their own values. The loans are granted to meet the

specified long term requirements for a period of 5 to 20years. Most crucial

problem faced by land development bank is the increasing rate of over dues,

which is about 55%. In other words, the fund flow is mostly one way and no

banking system can survive for long with over dues despite the best refinance

facilities.

Land development bank, obtain funds by the way of share capital reserves,

deposits and debentures and bonds issued and refinance now from NABARD.

LIMITATIONS:

1.      Limited geographic coverage: The spread of credit societies has been

limited only upto certain states like Himachal Pradesh, Andhra Pradesh,

Karnataka, Tamil Nadu, Punjab and Maharashtra. In other states like U.P,

Bihar, Madhya Pradesh, West Bengal, Gujarat have not made any head way.

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2.      Small and marginal farmers: Majority of farmers in India are small and

marginal. They need finance, for their needs but they are unable to obtain it

and even societies find it difficult to lend them. These farmers invariably

cultivate for self consumption leaving very little marketable surplus. In

absence of such surplus they cannot repay loans. Hence the societies go

around the large and medium farmers.

3.      Inconvenience in borrowing: Large farmers find it convenient to borrow

from commercial banks and other institutions for such institutions do no face

any shortage of' funds and have certain targets to be fulfilled. Whereas

cooperative societies are forced to depend on central and state co-operative

banks and ultimately on government apex body like RBI and NABARD for

financial requirements.

4.      Huge overdues: Banking activity is a two way process. Societies will be

able to lend only when loan and advances are regularly repaid. But actually

in India credit societies are overburdened with huge over dues. This stops

continuous activities. The liability to repay loans may be due to poor crops

or non and unproductive use of credit.

5.      Linked with ownership landholding: The co-operative credit societies

appear to be linked with ownership holding of land. That stops tenant

cultivators from the purview of co-operative credit. Similarly small and

marginal farmers also would not get adequate credit. Thus the basic purpose

of self credit is defeated.

Lastly certain degree of politicalisation of co-operative movement, lack of

training and professional attitude of staff; growth of commercial and regional

banks in rural areas are also responsible for the retarded growth of co-operative

credit in India.

(B) RESERVE BANK OF INDIA AND RURAL CREDTI:

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RBI has taken initiative to appoint the all India rural credit survey committee to

solve the problem of rural credit by suggesting ways and means to improve the

existing structure.

The RBI has set up two funds on the recommendations of AIRCSC. They are:

I.                    The national agricultural credit (long term operations) fund;

II.                 The national agricultural credit (stabilisation fund)

RBI also keeps an eye on the policies and working of other financial institutions

providing agricultural finance, besides helping the co-operative sector and

taking lead in the establishment of financial institutions to help the agriculturist.

RBI has issued the following guidelines:

I.                    Margins and security: Production oriented loans are given against

the hypothecation of title documents of land owned, guarantee of one or

two solvent parties crops, etc.

II.                 Credit norms finance: In ratio 30:70 the short term loans are

divided into cash and kind components. The bank has to check whether

the kind component is lifted by farmers.

III.               Recovery and default: Banks should develop habits of punctual and

thrift payments on part of farmers. Schedule of recovery should coincide

with cash realisation i.e. after harvest time.

(C) STATE BANK OF INDIA AND RURAL CREDIT:

As a solution to the Problems of cooperative finance in India the all India rural

credit survey committee recommended the integrated scheme of rural credit.

After the nationalisation of imperial bank of India, SBI came into existence in

1951. SBI has been providing financial assistance to marketing and processing

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co-operative societies as well as for co-operative sugar factories, land

development banks, industrial cooperatives, etc. SBI has opened branches in

small towns and mandis to generate banking habits in farmers. The whole group

of SBI has a network of branches and sub offices. Nearly 19,400 villages come

under the "village adoption scheme". SBI provides credit to all potentially viable

farmers.

ASSISTANCE GIVEN BY SBI TO CO-OPERATIVE SECTOR:

SBI is providing assistance to co-operative sector also. Remittances provided to

central and state banks are in a liberal way besides granting them with short term

loan facilities against government securities at a low rate of interest.

SBI assists land development banks also by subscribing their debentures. It

popularises their debentures by giving advances on security of debentures.

Special Activities:

Special and innovative schemes are adopted by SBI, which leads to rural

development. SBI has taken broader view through co-operatives in leading the

development of rural India.

(D) COMMERCIAL BANKS AND RURAL FINANCE:

For the development of trade and commerce in India banking system is been

developed. It caters to the needs of large scale organised industries and its

activities are concentrated on urban areas. Commercial banks are extending

support, to agriculture in direct as well as indirect way. Direct finance is granted

for agricultural operations for short and medium periods. Indirect finance is

granted by providing advances for distribution of fertilisers and other inputs.

These banks also finance for the operation of Food Corporation of India, State

Government and their agencies for food procurement.

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Critical review of operations of commercial banks:

In the case of rural credit commercial banks have made achievements, but their

operations have got some criticisms. They are as follows:

1.      Rapid expansion and diversification: Due to rapid expansion and

diversification the quality of scheme has been deteriorated. One of the

problems of deterioration is quality under the anti-poverty programme.

2.      Neglected supervision: There is lack of supervision in rural branches

because of which the banks have found sanctioning and monitoring a time

consuming and of high cost, ACRC has also found out that there is lack of

adequate staff in rural branches of commercial banks.

3.      Profitability affected: Rise in establishment expenses, inadequate business

potential, and increase in non performing, advances affect the profitability of

banks, The yield on advances his been decreasing, average cost of deposits

and borrowings is increasing, reducing the margins available to banks.

4.      Failure in filling the geographical gap: Availability of' credit is not covered

geographically by the co-operatives. In the absence of proper geographical

spread of bank branches it is found that more than on bank operates in same

area, which results in unhealthy competition between 2 or more commercial

banks.

5.      Regional Imbalances: The banks have disbursed regional imbalances in the

credit. For e.g. in 1994-95 the disbursement of total credit in southern

regions stood 51.6%, while in northern, eastern and western regions was just

11.3%, 6.4 and 0.5 % respectively during the same period.

6.      Lack of co-ordination: There is lack of co-ordination not only between two

commercial banks but also between banks and government departments.

There is lead bank in every district but in many cases number of branches

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belonging to commercial banks.

7.      Problem of recovery: The recovery position of commercial banks create a

problem. This alarming situation calls for a corrective action.

PROBLEMS FACED BY COMMERCIAL BANKS:

1.      Absence of proper records: It becomes difficult to ascertain the total

indebtness of some farmers because of the absence of proper records of land

rights, which creates problem of over financing or problem of recovery.

2.      Difficulty in verifying actual utilisation of loans: There is often misuse of

funds in case of medium term loans. This creates difficulty in verifying the

actual utilisation of funds. For e.g. in case of pump sets the dealer would

sell an old set instead of new one for which bank would sanction him the

loan. Farmer would get additional cash to serve his short- term needs.

3.      Difficulty in judging the creditworthiness: Due to lack of intimate

knowledge of the character of the borrower it is difficult to judge their

creditworthiness.

4.      Lack of sufficient supervision: There is no sufficient supervisory staff in

the bank as a result there is misuse of loans, which plugs in loopholes.

(E) AGRICULTURAL REFINANCE DEVELOPMENT

CORPORATION:

Indian farmers take long term loans for following purposes:

I.                    Digging, wells or deep tube-wells or sinking shallows.

II.                 Mechanisation of seasonal operations and for laying out orchards or

for traditional plantation of crops.

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III.               Reshaping, levelling or dressing his land.

IV.              Terracing hilly and undulating land.

V.                 Mechanisation of water lifter.

VI.              Installing weirs on small streams, etc.

In the past, improvements in lands were financed by moneylenders and by

government. Subsequently, Land development banks, co-operatives came in

existence. These banks operated statewise with assistance provided by the state

government. But their financial position was weak enough to provide finance

for agricultural development schemes. With the adoption of new strategy of

agricultural development, long term financial assistance became significant. So,

it was recognised that India needed a refinancing body with adequate resources

of money and an expert coordinator to guide and assist the long term finance

lending institution.

The parliament established the agricultural refinance and development

corporation in 1963 with view of above objectives. Apart from the primarily

being a refinancing agency the corporation has certain promotional and

developmental functions. They are as follows:

I.                    Diversifying the lending by identification of new activities.

II.                 Reduction in the regional imbalances of agricultural development

by focussing more attention on less developed regions.

III.               Emphasising on economic upliftment of weaker section of

community.

PERFORMANCE OF CORPORATION:

a.       Purpose wise disbursement of refinance: There is highest mean of

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growth rate in favour of farm mechanism followed by dairy development

and fisheries. Decreasing trends have been noticed in rest of the purposes.

Increasing share of farm mechanism, dairy development and fisheries are

favourable development.

b.      Helping in reduction of regional imbalances: The agricultural refinance

and development corporation has been helping in reducing the regional

imbalances in the agricultural development.

c.       Reduction in regional disparities within states: ARDC has taken special

care in reducing regional disparities within states by allocating schemes and

resources to larger parts of the states.

d.      Economic upliftment of weaker sections: ARDC has provided 100%

refinance. It has laid more emphasis for economic upliftment of weaker

sections.

    It has also disbursed loans to IDA and IBRD for projects selected by         them

for financial assistance.

(F) REGIONAL RURAL BANKS:

The establishment of regional rural banks (RRB) was recommended by the

working group on rural banks to provide a helping Land in the effort of

commercial banks and co-operatives in extending credit to small and marginal

farmers, landless labourers artisans and other rural residents. With a view to

reach the rural people more extensively, these banks were started combining the

local feel and familiarity with rural problems, which the co-operatives possessed

and the degree of business organisation and modernised outlook, which

commercial banks had. The staff of RRB's is recruited from neighbouring areas

because they have better understandings of local problems, local peoples needs

and their constraints.

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FEATURES:

1.      Rural based: Primarily the RRB's are rural based. They supplement the

co-operative credit societies. These banks are to be sponsored by any

national commercial bank.

2.      Cater the need of backward areas: The areas where cooperative and

commercial banks have not been established, RRB's are established there.

They cater to the needs of tribal and backward areas. Their working

procedures are understood by the local people. They provide productive

credit and their interest rate changed is also low.

3.      Authorised capital structure: RRB's authorised capital is 1 crore and

paid up capital 25lakhs. Share capital ratio is 50:15:35 from which 50% is

raised by government, 15% is it own deposits and 35% from sponsoring

commercial banks.

PROBLEMS OF RRB'S:

I.                    Problem in organisation: Government contributes 50% capital to

RRB. Therefore there is multi-agency control over it. This brings lack of

uniformity in their functioning. Besides there is lack of monitoring by the

sponsoring banks. RRB operates in a restricted area. Within the institution of

RRB there has been lack of proper system and procedure. 

The process of recruitment and training of RRB staff does not received

adequate attention. There is unplanned and unwieldy growth of these banks

and branches are opened tinder the pressure of state government.

II.                 Increasing losses: A number of factors are responsible for the

increasing losses, which lead to non-viability. They are:

a.       RRB's are confined only to lend to weaker sections where interest earned

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on loans is very low in the banking system.

b.      There are low margins with high cost of servicing.

c.       RRB's do not have any scope of cross subsidization in the absence of

loans yielding higher returns.

d.      Opening branches of RRB's year after year has added to the overhead costs

without proportionate increase in income.

e.       Economic environment of RRB's is not satisfactory.

III.               Recovery problem: The high incidence of overdues is due of

number of internal and external factors. Internal factors include defective

loaning policy, weak supervising and monitoring, failure in recovery. The

external factors include political interference, wilful default, droughts and

floods, lack of legal and administrative support from state government.

IV.              Problems in management: RRB's staff finds it difficult to take

independent decisions in new environment because the sponsor banks have

been deputing middle management staff to run them. Meetings of Board of

directors are not held regularly. A number of problems come up due to

multi agency control of RRB's

(G) NATIONAL BANK FOR AGRICULTURE AND RURAL

DEVELOPMENT (NABARD):

NABARD is a specialised financial institution in the field of agriculture and

rural development. It has been designed specifically as an organisational device

for providing undivided attention, forceful direction and pointed focus, to the

credit problems of rural sector. Half of NABARD's capital was contributed by

RBI and other half by the government. It has enough financial resources to

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support agricultural and rural development programmes.

Function of NABARD:

a.       It works as an apex body which looks after the financial needs of

agriculture and rural development.

b.      It provides short term loans (upto 18 months) to state co-operatives for

seasonal agricultural operations.

c.       It provides medium term credit (18 months to 7 years) to state

cooperatives and RRB's for approved agricultural purposes.

d.      It maintains research and development fund to be used of promote research

in agriculture and rural development.

e.       It has authority to oversee the functioning of co-operative sector through

agricultural credit development.

f.        It is entrusted with the responsibility of inspecting central and state co-

operative banks and RRB'S.

g.       It provides long term and medium term credit (not exceeding 25 years) for

investment in agriculture to state co-operative banks, RRB's and commercial

banks.

h.       It provides long term assistance in form of loans to state government not

exceeding 20 years for contribution to share capital of co-operative credit

institutions.

NABARD and Rural Credit:

  Types of Refinance Facilities

Agency Credit facilities

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Commerical Banks       Long term credit for investment purposes

      Financing the working capital requirements

of Weavers’ Cooperative Societies(WCS) &

State Handloom Development Corporations

Short term Cooperative

Structure(State

Cooperative Banks,

District Central

Cooperative Banks,

Primary Agricultural

Credit Societies)

      Short term (crop and other loans)

      Medium term (conversion) loans

      Term loans for investment purposes

      Financing WCS for production and

marketing purposes

      Financing State Handloom Development

Corpoartions for working capital by State

Cooperative Banks

Long term Cooperative

Structure (State

Cooperative Agriculture

and Rural Development

Banks, Primary

Cooperative Agriculture

and Rural Development

Banks)

      Term loans for investment purposes

Regional Rural Banks

(RRBs)

      Short term (crop and other loans)

      Term loans for investment purposes

State Governments       Long term loans for equity participation in

cooperatives

      Rural Infrastructue Development Fund

(RIDF) loans for infrastructure projects

Non-governmental

Organisations (NGOs) –

      Revolving Fund Assistance for various

micro-credit delivery innovations and

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Informal Credit Delivery

System

promotional projects under Credit and

Financial Service Fund (CFSF) and Rural

Promotion Corpus Fund (RPCF) respectively

PRODUCTION CREDIT (SHORT-TERM) REFINANCE:

Eligible Institutions:

(a) State Co-operative Banks(SCBs) (b) Regional Rural Banks (RRBS)

Eligible Purposes:

a.       Agricultural production operation and marketing of crops by farmers,

farmer co-operatives etc.

b.      Marketing and distribution of iilptlts like fertilisers, seeds, pesticide etc.

c.       Production and marketing activities of village and cottage industries,

handicraft, industries, handicrafts, handlooms, artisans, small-scale and tiny

industries and other rural non-farm enterprises.

Period of Credit: Up to 12 months: Rate of Interest (as at December 1998):

(1) Seasonal Agricultural Operations

      For SCBs at 4% to 6.5% per annum depending on the SCBs' own

involvement in the total eligible loans disbursed.

      At 4% per annum for financing tribals and Cooperative in North Eastern

Region.

      For RRBs at 5.5% per annum

(2) Weavers' Finance by Co-operatives

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      8.5% per annum

(3) Short-term finance to RRBs for other than Seasonal Agriciiltural

Operations

      7.5% per annum

Other Facilities:

      The short term credit for 12 months can be converted to medium term

credit for 3 to 7 years subject to certain conditions when farm productions

are affected by natural calamities. 

(H) COVEIZNMEN-I'FINANCE FOR AGRICUL'I'URE:

Takkavi is the ancient and traditional form of government assistance to the

agriculturist. It has been essentially distributed to relieve distress cost by

droughts, floods and other natural calamities and to assist the farmers to over

come emergencies and restart his agricultural operations in the following years.

Takkavi loans had to be distributed in substantial years. The land improvement

loans act of 1883 and the agriculturist loans act of 1884 were the two legislative

measures passed to put the Takkavi operations on regular basis. The former is

concerned with long-term loans and the latter with the short-term loans. Starting

as "Distress loans", these loans became regular loans for productive purposes.

The state revenues department after the disbursement and recovery of the loans.

The nature of security usually for these loans was immovable property and the

rate of interest charged were relatively low.

After independence, the need for increase in agricultural production in general

and food grains in particulars became urgent. Therefore, grow more food

campaign and similar other schemes were undertaken. Besides, rehabilitation of

a large number of refugees from Pakistan was to be carried out on a war footing.

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The Government had therefore to disburse large amount by way of loans and

advance to agriculturists.

CRITICAL EXAMINATION:

A critical examination of the working of the takkavi finance was made by Rural

Credit Survey Committee. It was observed that the average amount per

cultivator was very small in respect of small cultivators. Further the medium and

big farmers were able to secure a large share of the available takkavi finance.

The main reason was the condition laid down that land had to be provided as a

security. The small landholders and tenants could not avail of takkavi loans, as

they were unable to furnish the security as required under the rules. Thus the

system suffered from defects, which resulted in inadequacy of amount,

inequality of distribution and inappropriateness of the basis of security.

Due to overlapping of functions, inadequate supervision and lack of co-

ordination between different departments there was too much disbursement of

loans. The officials concern were burdened with many responsibilities and were

not well equipped to deal either with the task of assessment of credit

requirements, or supervising the use of credit when granted. With the coming in

of co-operative credit societies and land mortgage banks, there was over

financing for the same group of influential agriculturists, keeping the needy

farmers high and dry. With lack of supervision there was considerable

misutilisation of loans resulting in mounting over dues.

The Rural Credit Survey Committee characterised Takkavi, "To be little else

then the ill-performed disbursement of inadequate moneys by an ill-suited

agency", and recommended that the Government finance should be strictly

limited.

CAUSES OF OVERDUES:

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There are certain internal as well as external factors responsible in the growth of

overdues. Defective credit policies and procedures are responsible for the

creation of overdues. Internal

factors are those on which lending institutions have some control. But they have

no operational or administrative control over external factors.

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Some of the external factors are is follows:

I.                    Lack of proper marketing facilities.

II.                 Changing cropping pattern.

III.               Infructious investments.

IV.              Increased cost of living due to inflation.

V.                 Disposal of assets like tractors, power tillers purchased with the

help of credit.

VI.              Delay in getting phones connection to weak points.

VII.            Unforeseen social and religious expenses.

VIII.         Natural calamities.

IX.              Misutilisation of credit.

X.            Failure in projects like societies, sugar and processing factories etc.

XI.         Inability of financial institution to provide credit to defaulting units to

bail them out from old debts.

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XII.            Inadequate or over financing.

XIII.         Uneconomic holdings.

XIV.         Political and governmental interference.

XV.           Alienation of land through sales gift or mortgage.

XVI.         Death of principal borrower and consequent disputes among heirs.

These were some of the factors on which the lending agencies have very little

control.

SUGGESTIONS:

All the committees and sub groups have made certain suggestions some of

which are listed below:

I.                    Very old dues may be written off.

II.                 Non-wilful defaulters should be extended rehabilitation credit after

careful study of each case.

III.               Lending agencies should take strict action by speeding the

arbitration references to execution of awards. Legal actions should be

resorted to.

IV.         It is possible to improve the situation by educating the borrowers. This

can be done by associating non-officials, voluntary agencies etc.

V.  Credit and marketing of agricultural produce should be linked.

VI.  Stabilisation fund should be given importance.

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VII.   Loan policies and procedures should be reoriented.

VIII.  When repayment problem is genuine, loans should be rescheduled and

overdues postponed.

IX.  Prosecute rich wilful defaulters.

X.  Chronic overdue areas may be identified and remedial measures takes.

XI.   There should be more closer and effective supervision of credit.

XII.  The mortgaged property should be sold to reveal the intentions of the bank.

XIII.  Loans may be issued by way of non transferable cheques, drawn in the

favour of borrowers and payable at bank branches.

XIV.  The lending agencies should set up their own recovery cells.

XV.  There should be full coordination with government.

XVI.  Publicity campaign may be undertaken to impress the need for recycling

of funds.

PRIVATE SOURCES OF AGRICULTURAL FINANCE:

I.  Money Lenders:

There are two types of money lenders in the rural areas. The agriculturist money

lenders and the village shopkeepers. Besides, there are professional

moneylenders whose only occupation is money lending. The agriculturist

money lenders combine farming with money lending. Primarily they may be

interested in farming but they carry on money lending as a side business.

The cultivators depend upon the money lender for their requirements, of cash.

The importance of money lenders is declining but they are still preferred by

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some of the farmers who do not have approach to institutional finance and

whose requirement of credit is urgent and mostly for meeting the consumption

need.

Malpractices of Money Lenders:

II.  They obtain bonds and promissory notes on false pretences from their

debtors and enter in them amounts larger than actually lent.

A.   They deduct exorbitant premiums.

B.  They give no receipts for repayment and often they deny such repayments.

C.  They charge high rate of interest often 24% and above.

The money lenders have been responsible for many of the ills of Indian

agriculture because their main interest has been to exploit the farmers to their

benefits and grab their lands.

III.  Commission Agents and Traders:

Finance provided by commission agents and traders is a sort of production

finance, which takes the form of advance payment of a part of purchase price.

This source of finance is not very desirable as it leaves scope for deprivation of

weaker farmers by powerful interests. The farmer is compelled by trader and

commission agents to sell his produce at a low price, thus depriving them of

profits.

(3)  Landlords:

Landlords are the important source of finance for farmers, specially the tenant

farmers. These loans from landlords are taken by farmers for consumption

purposes.

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(4)  Relatives:

For tiding over temporary difficulties farmers borrow from their relatives.

Relatives provide finance in smaller amounts. This amount is given to meet the

emergency needs of farmers. These conditions are also very soft.

IMPORTANCE OF NON-INSTITUTIONAL SERVICES:

The following factors account for the continued significance of non-institutional

agencies in agricultural marketing finance:

I.  No procedural delays are involved in granting loans to the farmers by the

money lenders. Farmers need not enter into very many formalities while

borrowing from the money lenders.

II.  Moneylenders do not press the borrowers for repayment of the principal if

they keep on paying the interest regularly.

III.  Non-institutional agencies can provide fresh loans even when no security is

offered by the borrower.

IV.  Non-institutional agencies provide credit both for productive and

consumption purposes. Commercial banks and cooperative societies are

generally reluctant to lend for consumption needs.

V.  A village money lender is always easily accessible to the borrowers.

VI.  Non-institutional agencies can provide fresh loans even when no security is

offered by the borrowers.

DEFECTS OF NON-INSTITUTIONAL AGENCIES:

The various defects of non-institutional sources of agricultural marketing

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finance are as under:

I.   They combine banking with trading and commission business and thus have

introduced trade risks in the banking business.

II.  They follow vernacular method of keeping accounts and do not give receipts

in most cases. Besides, the interest, which they charge is out of proportion

to the rates of interest charged by the other banking institutions in the

country.

III.  They are unorganised and do not have any contact with that sections of the

banking world.

IV.  They do not distinguish between short-term and long-term finance and also

between the purposes of finances.

The RBI has made several attempts to bring the indigenous banker under its

control. The government has tried to regulate the activities of non-institutional

agencies like money lenders and established more institutional agencies for

agricultural credit with a view to stop malpractices followed by them.

LEAD BANK SCHEME:

It is the scheme under which a particular commercial bank is entrusted to play a

leading role in a particular district rehiring to rural development. Lead role

means taking initiative for catering banking needs in its area. The lead bank of a

particular districts makes an assessment of credit needs of the area, coordinates

banking activities of various banks including cooperative banks and then makes

provision of sanction and disbursement of the loan.

GENESIS OF INCEPTION OF THE SCHEME:

Before the nationalisation, commercial banks just had a marginal role in the

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process of rural development. But after nationalisation of 14 major commercial

banks in 1969 government took necessary steps to expand banking services in

the rural areas. After nationalisation many commercial banks were opened in the

rural areas. But this expansion was neither planned nor coordinated. Hence

many economists criticised such unruly expansion and put forward an idea of

‘area’ or ‘micro approach’ for smooth, coordinated and rapid development of

banking activities in the rural areas. The National Credit Council Study Group

(NCCSG) under the chairmanship of Prof. D.R. Gadgil stated this idea. The

group strongly recommended for ‘area approach’. Another committee, known

as committee of bankers or Nariman committee appointed by the Reserve Bank

of India also expressed its support to the idea of ‘area approach’ and christened

it as ‘lead bank scheme’. In the same year i.e. 1969, RBI accepted the idea of

lead bank scheme and resolved to implement this scheme in all the 380 districts

across the country leaving just a few totally urbanised areas such as union

territory of Delhi, Goa, Chandigarh and metropolitan cities of Mumbai, Kolkata,

and Chennai.

Lead bank were entrusted to perform a leading role in their respective area

before surveying the needs of farmers, look after and plan out branch expansion,

make available the banking facilities in non-banking area and other function

aiming at providing better and coordinated banking facilities all over its

jurisdiction.

In essence lead banks were required to perform following functions:

I.   To survey the number of small-scale, cottage industries of the area and

identify among those, which have no link with banking sector. Encourage

such units to open their accounts in banks.

II.  To survey the facilities for stocking and warehousing, and assess specially

the facilities for storing inputs such as fertilisers, seeds, insecticides etc.

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III.   To examine inability of primary lending agencies and in case they are

potentially viable, then to encourage and strengthen them.

IV.  To ensure coordination of banking activities with government and semi-

government agencies.

VII.  To examine facilities for small-scale and cottage industry production

Cooperative Marketing

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The Co-operative Development Corporation

The National Co-operative Development Corporation has been promoting and financing a

wide range of economic activities in rural areas through co-operatives. The Co-operative

is a unique institution in the country catering to the development of the rural economy

and agriculture sector through co-operative. There is no other institution in the country

which is exclusively for meeting the requirement of co-operatives.

NCDC has been playing special attention to weaker sections co-operatives in various part

of the country. The promotional and development role of NCDC had lead to continuous

diversification and expansion of co-operative programs under its preview.

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

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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.

Organization: 

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.

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Resources:

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.

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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. Their 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 perishables.

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.

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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.    

State Trading

State trading in its narrow sense means import and export transactions of a state-owned

or state controlled agency involving purchase of goods on commercial sale. In a broader

sense, it includes purchases from abroad for governmental use and disposal of surplus

stores originally purchased for governmental use. A Report prepared by the E.C.A.F.E.

Secretariat defines state trading as “Direct participation by the government (or its agent)

in foreign trade including those trading activities in which the government (or its agent)

holds title to export before transactions and acquires titles to import.”

The main objective of state trading is to facilitate development of trade with countries

where trade is in government hand, and to assist the government in solving difficulties

and problems for which private trading channels are found to be inadequate. State

trading enables the private trading countries to negotiate with equal bargaining power

and, thus, safeguard against exploitations, which a large number of private importers and

exporters competing with each other, are confronted with monopolistic trading agency.

Benefits of State Trading

State trading has various advantages as compared with private trading.

Firstly, it is an important instrument of export promotion, by removing malpractices of

the private exporters; it helps in building reputation of the country's exports.

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Secondly, with its vast initial investment, it tries to develop new markets for exports and

new sources of supply of imports and also promotes exports of non-traditional items.

Thirdly, state trading helps the state in honouring its bilateral agreements.

Fourthly, it can be directed to patronize national banking, shipping and insurance for

encouraging the development of these services.

Fifthly, it undertakes bulk- buying and so lowers the cost of imports, dispenses with the

services of middlemen and thereby eliminates their commissions.

Sixthly, it can be used to take advantage of monopoly power in respect of commodities

for which the country holds a world monopoly. It can charge maximum price, which the

consumers abroad are ready to pay for such commodities.

Seventhly, it is an important instrument in regulating exports and imports for various

reasons, viz., to rectify disequilibrium in balance of payments, to restrict imports of non-

essential goods, and to provide protection to domestic industries.

Objectives of State Trading

State trading has the following objectives:

a. To ensure adequate and regular supplies at reasonable and stable prices of

essential commodities to meet local demand;

b. To effect exports and imports at more favourable prices through increased

bargaining power;

c. To stimulate production of essential agricultural and industrial commodities by

means of price and other incentives;

d. To stabilize the domestic prices of specified products by controlling their

production and marketing;

e. To explore export markets for products and to dispose of exportable surpluses of

commodities;

f. To obtain advantage of bulk transactions;

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g. To facilitate trade with centrally planned economics;

h. To facilitate the import of goods financed under foreign aid programmes;

i. To facilitate the implementation of trade agreements and barter deals;

j. To transfer trade from the control of non-nationals;

k. To direct trade in accordance with development policies;

l. To raise revenue for the treasury;

m. To influence changes in the distribution of income derived from foreign trade

transactions; and

n. To facilitate sanitary and public health controls.

State Trading Of India

The S. T. C. has been constituted as a limited liability company under the Indian

Company's Act, 1956. It normally has 10 Directors. As per its Memorandum of

Association the objectives of the S. T. C. are, “to organise and effect exports

from and imports in to India of all such goods and commodities as may be

determined by the Company from time to time, and to undertake the purchase,

sale and transport of and the general trade in such goods and commodities in

India or anywhere else in the world.”

Functions:

With the passage of time, the role and activities of the Corporation have

widened. Besides, the above objective, other important objectives are:

1.      To explore new markets for traditional items of export and develop new

items with a view to diversifying and expanding the export trade;

2.      To undertake import and/or internal distribution of commodities in short

supply with a view to stabilizing prices and rationalising distribution;

3.      To generally implement such arrangements for import, export trade, and/or

distribution of particular commodities as the Union government may specify

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in the public interest;

4.      To barter, exchange, pledge, manipulate, treat, prepare and deal in

merchandise, commodities and articles of all kinds and to carry on any kind

of commercial and/or financial business as the company may determine from

time to time;

5.      To hold or assist in holding exhibitions in India and elsewhere of the

products and articles in which the company is interested;

6.      To manufacture, store, export, import, and deal in all kinds of articles and

things, which may be required for the purpose of any business of the

company.

7.      To promote long-term export operations and "difficult to-sell" items.

The Committee on Public Undertakings has classified the above functions of the

S T C under the following six main heads:'

1.      Exports

a.       To promote export of traditional items, to introduce non traditional items

in the world markets and to find out new markets for Indian exports.

b.      To facilitate and organise exports of difficult-to-sell items (such as

manure, meal, sodium, dichromate, deoiled linseed cake, cement etc.) by

linking essential imports with additional exports and under special trade

promotion agreements.

c.       To organise product to meet export demands and to help product units in

overcoming difficulties of procuring raw materials and other essential

requirements.

d.      To develop new lines of exports.

e.       To ensure implementation of trade plans with East European countries.

f.        To help local producers by procuring reasonable prices and to hold stocks

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to maintain ultimate production at optimum level of commodities with high

export potential, thus, avoiding dislocation in production, maintaining

adequate availability for export and ensuring a fair price to local producers.

g.       To participate in fairs and exhibition abroad so as to create atmosphere for

expansion of exports and for introducing new products in foreign markets.

2.      Imports

a.       To import capital goods, industrial raw materials and certain scarce

commodities required for the economic development of the country.

b.      To import items which are canalised by the Government through this

Corporation so as to ensure that adequate supplies at the right time and at the

economical prices are made and are distributed to the industries and other

users in a co-ordinated manner.

c.       To undertake import of commodities where bulk purchase would give

better terms.

d.      To undertake imports from state trading countries or from where

monopolies are involved.

e.       To import commodities, which is in short supply in the country.

f.        To import speculative and high profit margin items with a view, to

stabilise the prices and to do distribution of such commodities in an

organised manner at fair prices.

g.       To ensure the implementation of trade plans with the East European

countries and other special agreements.

3.      Internal Trade

a.       To undertake internal trade in certain commodities like imported cars.

b.      To undertake price support and buffer stock operations with a view to

ensure fair prices to the growers of certain agricultural commodities, to

stabilize internal production and sustain foreign demand.

4.      Trade Promotion Agreements

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To arrange for essential imports against additional exports of traditional and

non-traditional items which are specified in special agreements.

5.      Export Aid to Small Industries

To assist the small-scale manufacturers in exporting their products by giving

wide publicity to their products abroad and by arranging attractive packing,

providing credit facilities, helping them in matters of shipping and exploring

possibilities of exporting their products in various countries.

6.      Participation in Export-Oriented Corporation

To lend increasing support in the form of financial and organisational

assistance to specialised export agencies like the Handi-crafts and Handloom

Export Corporation.

Besides these, S T C had also undertaken price support operations (at the

instance of the Central Government) for natural rubber in 1970 and tobacco in

1972. Growers were assured of remunerative prices and surplus quantities,

mopped up by the S.T.C., were exported.

Media

Living in Media Darkness

There’s no surprise in learning that over 70%, (roughly 670 million) of India’s teeming

masses live in rural areas. Of these, some 260 million live in almost complete media

darkness, without access to TV, radio, and beyond the reach of newspapers and

magazines. Widespread illiteracy allied with the multitude of languages and dialects puts

the most of these people beyond the reach of conventional media planning.

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Yet the villagers are increasingly important as consumers. A survey by India’s National

Centre for Applied Economics and Research revealed double-digit rural growth rates in a

cross section of products ranging from scooters to confectionery between 1995 and 1999.

For companies such as Unilever, Nestle, Glaxo, Lucky Goldstar rural consumers are a

huge market opportunity. About 45% of soaps, 40% of teas and 60% of watches sold in

rural India. Now that penetration for many consumer products in urban areas is high, the

rural markets are growing in importance for both marketers and their agencies.

Ogilvy Outreach, O&M’s rural arm, started with one employee supported by the head of

the media division in 1994. Today it has a team of 1,000 supervisors plus another 5,000

people who work on a project basis

According to D. K. Bose, Ogilvy Outreach’s president, selling in rural India is no longer

restricted to using mobile vans with television sets screening Hindi film songs

interspersed with messages about a product. New avenues include games (with the

product being given as a prize), door-to-door sales, folk dances, wall paintings, and even

putting up shoe racks in temples, putting tiles in village wells, plus occasionally painting

the horns of cows, and putting up scarecrows.

Tapping the rural market calls for new insights into what helps consumers remember and

understand brand messages. Research carried out by Ogilvy Outreach discovered that the

rural audience identifies more with colours, numbers, and visuals of animals all woven

together in loud colorful messages. These findings appear supported by the high recall

levels enjoyed by brands like Lifebuoy (popularly known as the lal sabun), 555, and

Monkey brand tooth powder.

McCann Erickson are also developing rural initiatives in India. Their strategy for the

rural market is built on two key planks. Consumer Insight which will helps understand

rural consumers from their own perspective and Experiential marketing, which

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executives say will be the most relevant, emotive and impactful tool, given the language

and cultural diversity of rural India.

Currently ResultMcCann, which is McCann India's integrated Communications

Company, is working for TERI (Tata Energy Research Institute) on a World Bank funded

project for Farmer education on Farm Forestry in the rural areas.

The knowledge gained from rural marketing in India is already being applied in

Bangladesh, Cambodia, Africa, and part of China and may yet prove the pathway that

extends the franchise of many brands to Asia’s rural billions beyond the reach of

television and the internet.

A Table for understanding the media penetration in India

Table 1: Macro Indicators - A Comparison

Media Penetration  (%) Urban'95 Rural'95 Urban'99Rural'99

Radio  25 21 50 26

Satellite  19 3 35 5

English Publications 14.5 1.7 16.4 1.9

Hindi Publications 23.4 7.4 26.6 8.6

Local Language Publications 29.7 12.1 31.9 14.5

Any Publication 55.0 20.4 58.5 23.2

Source: IRS-95 and 99  

Did U SAY Couch potato ….eh ???

There is a wide gap between urban and rural segments in terms of purchasing power,

literacy, and readership habits and media exposure. The purchasing power of the rural

consumer has been increasing in the recent years with the rise in income levels due to

agricultural prosperity.

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The trends in media penetration show that the penetration of print media (barring regional

publications), radio, and cinema is on the decline in both urban and rural areas; the only

media that is growing is Television through Satellite Channels. Also gone are the days

when advertisements could be conceived in English and then dubbed in regional

languages.

The regional language is becoming an important medium of communication for the

booming rural market.

Developing the right Marketing strategy ……..

Marketing companies had initially turned to rural India on a look out for newer markets.

Clearly, the possibility of converting approximately 700 million innocents into voracious

Cadbury- homping, shampoo lathering consumers has galvanised the industry. The focus

of the companies, apart from increasing the geographical width of their product

distribution is to capture the television-savvy rural consumer. Introduce their brands and

develop marketing strategies specific to the rural consumers. The existence of the divide

between the urban and rural consumer triggered these. The seriousness of the efforts is

evident from an in-house study conducted by ORG-MARG that revealed that 75% of

both Indian and the multinational companies are taking the help of the rural marketing

organisations to establish distribution links across the length and breadth of the country.

Some of the recent success stories are:

An Indian farmer working in jeans sounds improbable. But, Arvind Mills did not think

so. In the first two months the demand for its Ruf & Tuf kits crossed a million pieces as

against a production capacity of 0.25 million kits.

      The rural thrust was a part of HLL’s “Operations Bharat”. Last year, HLL perhaps

conducted the most extensive exercise of its kind, to create demand for its products in

the rural market. They peddled 15-rupee packs containing soap, toothpaste and a

fairness cream in 20,000 villages, which resulted in an incredible 30% conversion.

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      Britannia launched Tiger Biscuits especially for rural markets thus increasing its

share of the Glucose market from 7% to 15%

      HLL A1 tea became a INR 1000 million brand in less than a year after it was

introduced in the rural market

      BPL sells B & W TVs under Ajit brand name.

      Hindustan Motor signs joint venture with OKA Motors of Australia to launch

special rural transport vehicle.

      DCW Home products are test–marketing Captain Cook Super White Salt for non –

urban areas.

The key to the success of most of these products was that these products were designed

keeping the rural consumer in mind and recognising the fact that the two consumer sets

are different. Several surveys on rural marketing have pointed out that segmenting urban

and rural consumers on the basis of income alone will not help in formulating a correct

rural marketing strategy.

Factors like cultural diversity, including lifestyles in the area, literacy levels, standard of

living, consumption patterns, types of communication facilities and above all the size of

the rural market need to be considered in formulating an appropriate marketing strategy.

The key to the gateway of the rural segment emerged as expansion in distribution and

growing media penetration leading to increased usage.

The consumption baskets of the rural and urban markets also show a similar constitution,

with the products not very different. Approximately, 50% of the toilet soaps, washing

cakes and blades, 40% of the washing powder, tooth powder, tea, salt, digestive,

antiseptic cream, half of the market for black & white TVs, motorcycles, pressure

cookers, fans, cassette recorders, and blades are purchased by the rural market This paper

will analyse the urban and rural markets in the above context.

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The objective of this paper is to answer whether a divide exists between the two markets

and to measure the magnitude and the flavour of the divide in terms of key marketing

parameters like Distribution, Products and Markets

The sources of data for this paper include the ORG–MARG’s Retail Store Audit, Rural

Consumer Panel, Indian Readership Survey and other secondary sources like reports of

CMIE, NCAER, etc.

The rural market's potential for growth is the cynosure of marketers' eyes. Identifying

where the divide exists and how to capitalise on it is the need of the day for FMCGs and

consumer durables as the urban market is showing signs of saturation.

MEDIA REACH

"The medium is the message" acquires critical importance for advertisers and marketers

in India as different media have varying penetration levels. For example terrestrial TV

has the highest penetration among all types of media with 78 per cent penetration in

urban India and 36 per cent in rural India. It's reach is the highest in the 14 to 19 age

group with 62 per cent. It has an astonishing 91 per cent penetration in urban Himachal

Pradesh.

In contrast satellite TV reaches only 13 per cent of India. The medium's highest

penetration of 52 per cent is in urban Maharashtra. But in the rural parts of the state it has

a penetration of a mere 4 per cent. Similarly in Assam and Orissa satellite TV reaches

only 4 per cent of the population.

Given the high literacy levels it is natural that print media has the highest penetration in

Kerala. It reaches 76 per cent in urban Kerala and 65 per cent in rural parts of the state.

Print media has the lowest reach in Assam with 11 per cent.

Cinema has a high penetration in the southern states of India. In urban Kerala the reach of

cinema is 61 per cent. It varies from 40 - 45 percent in other southern states. Cinema

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reaches more than 30 per cent of the population in the age group of 15- 25 across the

country.

The emergence of new media options like

      DTH & Internet more relevant for the upper SEC class of the population.

      This segment is very difficult to catch and hence innovative media solutions are

the order of the day.

Brand building is the order of the day as it is important to synergise media with brand

objectives

Definition of Rural Marketing :

No other country exists on earth, which offers such a dazzling array of Entertainment

choices as India does!

In India, entertainment encompasses a wide plethora of options. Right from cinema (the

largest of its kind in the world) to television (amongst the fastest growing in the world) to

soothing music (the most diverse in the world) to awesome festivals (richest in culture)

and richest-possible food and finally its fanatical devotion to sports like cricket.

Travel in India constitutes a major component of Indian leisure and entertainment

industry. India offers mind-boggling variety for travel from highest mountain ranges of

the world to serene beaches to historical forts, palaces and temples to beautiful deserts.

Exotic forests and national parks in India are un-comparable in the world. Scenic hill-

stations (mountain resorts) still remain popular Indian travel hot spots.

Music in India is as rich as can be. Music in India is a means for spiritual exploration, a

path of realisation, in addition to deriving aesthetic entertainment.

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Be it classical or the folk or the modern Indian pop-bhangra, Indian music reflects Indian

life, having no predetermined beginning or end, but flowing uninterrupted through the

composer-performer. The purpose of Indian music is to refine one's soul, discipline one's

body, to make one aware of the infinite within one, to unite one's breath with that of

space and one's vibrations with that of the cosmos.

The basic tenets of classical music have been laid down by numerous ancient texts. The

classical music is not pre-conceived but pre-written. While the underlying notes are pre-

written, within the framework of the rules governing the raaga, the musician has

complete freedom to exercise full imagination and creativity.

In tribal societies, from birth to death, songs, dances and musical instruments are used to

mark every occasion. The origins of classical music are also traced back to tribal tunes

and songs.

The music of India is a mosaic of different genres and levels of sophistication. At one

extreme, classical music is performed in the urban concert halls for purely artistic

reasons, and, at the other, many kinds of functional rural music accompanies life cycle

and agricultural rites. In between are many other musical genres of different regions of

the country, reflecting the diversity of its peoples, their life-styles, and their languages

The Indian society is a complex social system with different castes, classes, creeds and

tribes. The high rate of illiteracy added to the inadequacy of mass media impedes reach

almost to 80% of India's population who reside in village. Mass media is too glamorous,

interpersonal and unreliable in contrast with the familiar performance of traditional artist

whom the villager could not only see and hear, but even touch. Besides this villagers are

more conservative buyers then their urban counterparts. Their desire to innovate with

new product is restricted.

Traditional media can be used to reach these people in the marketing of new concept. The

traditional media with its effective reach, powerful input and personalized

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communication system will help in realizing the goal. Besides this when the

advertisement is couched in entertainment it goes down easily with the villager.

Few of the available options in the traditional media are Puppetry, Folk Theater & Song,

Wall Painting, Demonstration, Posters, Agricultural Games, and Post Cards etc.

Puppetry

Puppetry is the indigenous theatre of India. From time immortal it has been the most

popular form and well-appreciated form of entertainment available to the village people.

It is an inexpensive activity. The manipulator uses the puppets as a medium to express

and communicate ideas, values and social messages.

Types of Puppet theatre in India: -

1.      String puppets or Kathputlis of Rajasthan – Contents - Heroic deeds of

Vikramaditya, Prithviraj Chouhan, and Amar Singh Rathore

2.      String puppets of Orissa – Contents - Radha-Krishna

3.      Rod puppets from Bengal: - Contents -Mahabharat, Manas, Radha-Krishna

4.      String and Rod puppets of the south (Tanjavur, Madras and Andhra): -Contents -

Kathakali

5.      Shadow puppets of (a) Orissa (b) Kerala (c) Andhra (d) Karnataka: - Contents -

Ramayana.

6.      Thus in rural India puppetry is a source of livelihood, avenue for entertainment and

creative expression which is ritually sacred and meaningful as a means of social

communication and vehicle of social transformation.

Song and Drama Division of the Government Of India make wide use of puppets in its

campaigns to promote various government projects. Several other organizations,

government, semi-government and private, have also used puppets in support of

individual schemes.

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Life Insurance Corporation of India used puppets to educate rural masses about Life

Insurance; enlisting the help of the literacy house in Luck now. These plays were shown

to the audience in villages in UP, Bihar, & MP. The number of inquires at local Life

Insurance Companies during the period immediately following the performance was

compared with normal frequency and found to be considerable higher. The field staff of

the corporation also reported a definite impact on the business.

Indian Institute of mass communication, N.Delhi made a study of comparative impact of

puppetry and documentary films, in two villages near Delhi. People in both the villages

responded more favorably to the puppet shows then the films.

Folk Theater

Folk theaters are mainly short and rhythmic in form. The simple tunes help in informing

and educating the people in informal and interesting manner. It has been used as an

effective medium for social protest against injustice, exploitation and oppression.

Folk Theater / Songs Forms In India

Andhra Pradesh: Veethi Natakam, Kuchupudi, Burratatha

Assam: Ankiya Nat, Kirtania Natak, Ojapali Bihar: Bidesia, Serikela Chhau, Jat-Jatni

Bidpada, Ramkhelia

Gujarat: Bhavai

Haryana: Swang, Naqqal

Himachal Pradesh: Kariyala, Bhagat, Ras, Jhanki, Harnatra Haran or Harin.

Jammu & Kashmir: Bhand Pathar or Bhand Jashna, Vetal Dhamali

Karnataka: Yakshagan, Sanata, Doddata-Bayalata, Tala Maddle or Prasang, Dasarata,

Radhna.

Kerala: Kodiyattam, Mudiattam, Therayattam, Chavittu Natakam, Chakiyar Kooth,

Kathakali

Madhya Pradesh: Maanch, Nacha Maharashtra: Tamasha, Lalit Bharud, Gondha,

Dashavatar

Orissa: Pala Jatra, Daskathia, Chhau Mayurbhanj, Mangal Ras, Sowang,

Punjab: Nautanki, Naqaal, Swang

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Rajasthan: Khyal, Rasdhari, Rammat, Turra Kilangi, Gauri, Nautanki, Jhamtara

Tamilnadu: Therukuttu, Veethi Natakam, Bhagwat Mela Natakam, Kurvaanji, Pagal

Vasham, Kavadi Chindu

Uttar Pradesh: Ram Leela, Ras Leela, Nautanki, Bhagat, Sang-Swang, Naqqual

Goa, Daman & Diu : Dashavatar, Tiyatra.

Folk songs have been effectively used during revolts of Telangana and Naxalbari and

now a days it's best exploiters are Political Parties.

Government has used this media for popularizing improved variety of seeds, agricultural

implements, fertilizer etc. Punjab Agricultural University produced Two Audio Cassettes.

A) Balliye Kanak Biye - Wheat Cultivation.

B) Khiran Kepah Narme - Cotton Cultivation.

Both were well received by farmers.

BBLIL used Magician quite effectively for launch of Kadak Chhap Tea in Etawah.

Demonstration:

"Direct Contact" is a face-to-face relationship with people individually and with groups

such as the Panchayats and other village groups. Such contact helps in arousing the

villager's interest in their own problem and motivating them towards self-development.

Demonstration may be

A.     i. Method demonstration

ii. Result demonstration

B.     i. Simple Demonstration

ii. Composite Demonstration

The five steps to make any demonstration effective are below:

Information about people

Objectives to be accomplished

Demonstration plan & Execution of the plan

Evaluation of the demonstration

Reconsideration after evaluation.

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In result demonstration, help of audio -visual media can add value. Asian Paints launched

Utsav range by painting Mukhiya's house or Post office to demonstrate that paint does

not peel off.

Haats & Melas

The countries oldest tradition holds the key to solving these problems. The mobile

supermarkets of rural India.

Facts & Figures: -

Over 47,000 haats and 25,000 melas are held annually.

The average daily sale at a Haat is about Rs.2.25 Lacs

Annual sales at melas amount to Rs.3,500 crore.

Over half the shoppers at haats have shopping lists.

More than 10,000 melas draw visitors from all over India.

Nearly half the outlets at melas are for manufactured goods.

Haats is a better opportunity for promotion after brand building has been done at Mela.

Melas are organized after harvest season, so the villager has enough money, which he

will be ready to spend.

Demonstration at Haat is essential to convert customers at haats since their atitude is far

more utilitarian than that of visitors to a fair.

Wall Paintings

Wall Paintings are an effective and economical medium for advertising in rural areas.

They are silent unlike traditional theatre .A speech or film comes to an end, but wall

painting stays as long as the weather allows it to.

Retailer normally welcomes paintings of their shops, walls, and name boards. Since it

makes the shop look cleaner and better. Their shops look alluring and stand out among

other outlets. Besides rural households shopkeepers and panchayats do not except any

payment, for their wall to be painted with product messages. To get one's wall painted

with the product messages is seemed as a status symbol. The greatest advantage of the

medium is the power of the picture completed with its local touch. The images used have

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a strong emotional association with the surrounding, a feet impossible for even a moving

visual medium like television, which must use general image to cater to greatest number

of viewers.

A good wall painting must meet some criteria to generate awareness and remind

consumer about the brand. The most frequented shops can be painted from inside also

one feet above the ground level.

It is courteous to take the verbal permission of owner .The permission is normally given.

However by taking the permission of the rural retailers or house owners, one gets the

owner morally committed to taking care of wall painting.

The message should be simple, direct and clear.

A definite way of arresting is to use bright colors and these do not fade away easily. A

good paint will survive the ravages of dust, sand and rainstorms for about three years.

Paintings must be taken after rainfall.

It should be peaked up during the festival and post harvest season. To derive maximum

mileage their usage needs to be planned meticulously.`

Rural Marketing Strategies

Creation Is A Tradition And Technology A Way Of Life

An appropriate segmentation of highly heterogeneous rural market and identification of

the needs and wants of different segments will form the very basis for rural marketing

strategies.

For the rural market, strategies for the 4P’s of the marketing mix would be an ideal one.

  (A)   Product Strategies

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  (B)   Pricing Strategies

  (C)   Distribution Strategies

  (D)   Promotional Strategies  

A)    Product Strategies

The following are the product strategies for the rural market and rural consumers:

1.      Small unit packing: This method has been tested by products life shampoos,

pickles, biscuits, Vicks cough drops in single tablets, tooth paste, etc. Small packings

stand a good chance of acceptance in rural markets. The advantage is that the price is

low and the rural consumer can easily afford it.

 Also the Red Label Rs. 3.00 pack has more sales as compared to the large pack. This

is because it is very affordable for the lower income group with the deepest market

reach making easy access to the end user satisfying him.

The small unit packings will definitely attract a large number of rural consumers.

2.      New product designs: Keeping in view the rural life style the manufacturer and the

marketing men can think in terms of new product designs.

For e.g. PVC shoes and chappals can be considered sited ideally for rural consumers

due to the adverse working conditions. The price of P.V.C items is also low and

affordable. 

3.      Sturdy products: Sturdiness of a product is an important factor for rural

consumers. The experience of torch light dry battery cell manufacturers support this

because the rural consumers preferred dry battery cells which are headier than the

lighter ones.

For them, heavier weight meant that it has more over and durability.

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Sturdiness of a product either or appearance is an important for the rural consumers. 

4.      Utility oriented products: The rural consumers are more concerned with utility of

the product and its appearance Philips India Ltd. Developed and introduced a low cost

medium wave receiver named BAHADUR during the early seventies. Initially the

sales were good but declined subsequently.

On investigation it was found that the rural consumer bought radios not only for

information and news but also for entertainment. 

5.      Brand name: For identification, the rural consumers do give their own brand name

on the name of an item. The fertilizers companies normally use a logo on the fertilizer

bags though fertilizers have to be sold only on generic names. A brand name or a logo

is very important for a rural consumer for it can be easily remembered. Many a times

rural consumers ask for peeli tikki in case of conventional and detergent washing

soap.

Nirma made a peeli tikki specially for those peeli tikki users who might have

experienced better cleanliness with the yellow colored bar as compared to the blue

one although the actual difference is only of the color.

B)    Pricing Strategies

Pricing strategies are linked to the product strategies. The product packaging and

presentation also keeps the price low to suit the rural consumer.

Some of the pricing strategies are discussed below: 

1.      Low cost/ cheap products: the price can be kept low by low unit packings like

paisa pack of tea, shampoo sachets, vicks 5 grams tin, etc. this is a common strategy

widely adopted by many manufacturing and marketing concerns. 

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2.      Refill packs / Reusable packaging: in urban areas most of the health drinks are

available. The containers can be put to multipurpose uses. Such measures can a

significant impact in the rural market. 

For example, the rural people can efficiently reuse the plastic bottle of hair oil.

Similarly the packages of edible oil, tea, coffee, ghee etc can be reused. Pet jars free

with the Hasmukhrai and Co Tea, Ariel Super Compact. 

3.      Application of value engineering: in food industry, Soya protein is being used

instead of milk protein. Milk protein is expensive while Soya protein is cheaper, but

the nutrition content of both is the same. The basic aim is to reduce the value of the

product, so that a larger segment can afford it, thus, expanding the market

C)    Distribution Strategies

While it is necessary to formulate specific strategies for distribution in rural areas, the

characteristic of the product – whether it is consumable or durable, the life of the product

and other factors have to kept in mind.

The following strategies formulated for the rural category. 

1.      Coverage of villages with 2000 and above population: Ideally, coverage of

villages with up to 2000 and above population could be the break-even point for a

distribution setup. By doing so the percentage of villages covered comes to only 10%

of all the rural population covered will b substantial. With improved communication

facilities it is possible to reach distribution vas to these villages. 

2.      Use of co-operative societies: There are over 3 lacks co-operative societies

operating in rural areas for different purposes like marketing cooperatives, farmers

service cooperatives and other multipurpose cooperatives. These cooperatives have an

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arrangement for centralized procurement and distribution through their respective

state level federation. Such state level federation can be motivated to procure and

distribute consumables items and low value durable items to the members to the

society for serving to the rural consumers. Many of the societies extend credit to the

members for purchases. 

3.      Utilization of public distributory system: The PDS in the country is fairly well

organised. The revamped PDS places more emphasis on reaching remote rural areas

like the hills and tribals. The purpose of PDS is to make available essential

commodities like food grains, sugar, kerosene, edible oils and others to the consumers

at a reasonable price. The shops that distribute these commodities are called fair price

shops. These shops are run by the state civil Supplies Corporation, co-operatives as

well as private entrepreneurs. Here again there is an arrangement for centralised

procurement and distribution. The manufacturing and marketing men should explore

effective utilisation of PDS.

4.      Utilisation of multipurpose distribution centres by petroleum/oil companies: In

order to cater to the rural areas the petroleum/oil companies have evolved a concept

of multipurpose distribution centres in rural areas. In addition to petrol/diesel,

lubricants, these outlets also stock consumables agricultural inputs like fertilizers,

pesticides and seeds. It is estimated that there are about 450 such outlets in operation

in the country. The rural consumer who have tractors, oil-engine pump sets and

mopeds frequent these outlets for their requirement. These outlets can be profitably

utilised for selling consumables and durable items also. 

5.      Distribution upto feeder markets/mandi towns: Keeping in view the hierarchy of

markets for the rural consumers, the feeder markets and mandi towns offer excellent

scope for distribution. The rural customers visit these towns at regular intervals not

only for selling the agricultural produce but also for purchasing cloth, jewelry,

hardware, radios, torch cells and other durables and consumer products. From the

feeder markets and mandi towns the stockist or wholesaler can arrange for

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distribution to the village shops in the interior places. This distribution can be done by

mopeds, cycles, bullock-carts, camelbacks etc. depending upon the township.  

6.      Shandies/Haaths/Jathras/Melas: These are places where the rural consumers

congregate as a rule. While shandies/heaths are held a particular day every week,

Jathras and melas are held once or twice a year for longer durations. They are

normally timed with religious festivals. Such places attract large number of itinerant

merchants. Only temporary shops come up selling goods of all kinds. It can be

beneficial for companies to organize sales of their product at such places. Promotion

can be taken, as there will be ready captive audience. For convincing the

manufacturing and marketing man with regard to the importance of these places from

rural marketing point of view a visit to such places is necessary. It is estimated that

over 5,000 fairs are held in the country and the estimated attendance is about 100

million rural consumers. Biggest fair ‘Pushkar Mela’ is estimated to attract over 10

million people. There are 50 such big rural fairs held in various parts of country,

which attract urbanite also like ‘Mankanavillaku’ in Malappara in Kerela, Kumbh

Mela at Hardwar in U.P. ‘Periya Kirthigai’ at Tiruparunkunaram in Tamil Nadu. 

7.      Agricultural Input Dealers: Fertilizers should be made available to the farmers

within the range of 4-5 km from their residence, as per the essential commodities act.

This is why there are about 2 lakh fertilizer dealers in the country, both in cooperative

& private sector. Example of Varana Nagar in Maharashtra proved an eye opener in

this regard where the sugar and milk co-operatives have totally changed the life style

of people. The supermarket in Varana Nagar caters exclusively to rural consumers.

Similarly a co-operative supermarket called ‘Chintamani’ in Coimbatore (T.N)

arranges free transit of rural consumers to the supermarket of their purchases. 

D)    Promotional Strategies

The promotion measure should be cost effective due to the low literacy rate of

the rural population. Word of mouth is an important message carrier in the rural

areas and “opinion leader” play a significant role in influencing the prospective

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rural consumers about accepting or rejecting a product or a brand. There are

other attributes in the promotion strategy which are explained as under:

1.      Mass media: In the present world mass media is a powerful medium of

communication. The following are the mass media generally used:

Television.

Cinema

Radio

Print media: Handbills and Booklets, posters, stickers, banners, etc.

2.      Personal selling and opinion leaders: In personal selling it is required

that the potential users are identified and awareness is created among them

about the product, its features, uses and benefits. This can be achieved only

by personal selling by highly motivated sales person. In fact the word of

mouth information holds lot validity in rural areas even today. This is the

reason why opinion leaders and word of mouth are thriving among rural

consumers. An opinion leader in rural areas can be defined as a person who

is considered to be knowledgeable and is consulted by others and his advice

is normally followed. The opinion leaders may be big landlords or

politicians or progressive farmers.

3.      Special campaigns: During crop harvest and marketing seasons it is

beneficial to take up special promotion campaigns in rural areas. Tractor

owners (tonee) conducted by MRF Limited is one such example. Brooks

Bond carries out marches in rural areas with band, music and caparisoned

elephants to promote their brand of tea.  

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Super Star Show

Philips India was among the first consumer durables companies to hit the rural

market with its Bahadur brand of Transistors in the 1950s. but somewhere down

the line, the rural focus was gone. However, in the mid-1998, Philips felt the need

to improve its market share in upcountry markets. It decided to launch a special

project in Tamil Nadu and Andra Pradesh at a total cost of Rs. 5 Crore.

Rural consumers need to be seen as ‘different’ and ‘not inferior’. It is with this

belief that Philips approached rural buyers in Tamil Nadu and Andra Pradesh. “the

idea was to present Philips in a relevant manner to the rural consumer, position it

as a truly International brand, the way a rural buyer would understand it,”says

V.Swaminathan, Philips general manager (distribution & rural marketing) at its

consumer electronics department division. So Philips held road shows, van

promotions, merchandising etc. in villages with populations of about 5000.

The Chennai-based Anugrah-Mandison was roped in to help. Together they created

a special campaign “Enga veettu superstar” (the super star of our house) for the

Tamil Nadu market. The word “Super” is an integral part of the Tamil. Even cine

idol Rajnikant is popularly known as a “Superstar”. The campaign became a major

hit. In Andra Pradesh, the campaign was redrafted in Telgu as “Maa inti megastar”.

Popular cine actor Chiranjeevi is referred to as the “megastar” in the state.

Back in Tamil Nadu, promotions revolving around the word “super” were kicked

off. Exhibitions of Philips products titled “Supershows” were organized.

Interactive sessions such as “sit and draw” contests for children to create brand

recognition were held. The participants were asked to copy the Philips logo. They

were also asked to copy the brands “Lets Make Things Better” line English so that

Philips name is recognised irrespective of language. In a karaoke contest villagers

had to sing along with the catchy Philips jingles and win prizes.

During the exercise, Philips painted 1 lakh square ft of wall area in Tamil Nadu

and Andhra Pradesh. 4 ad campaigns- 2 for B&W (Black &White) TV and 1 each

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of C (Colour) TV and audio systems- were created in Tamil and Telugu. These

were executed in cinemas, theatres and through video vans (68% of people in

Tamil Nadu watch films and 81% in Andhra). The electronic media ads were

slickly used. Philips did not compromise on the production values.

The storyboard was created keeping in mind the way of life. Girls in small towns

and villages often embroided the cloth which covers the television sets in the

house. The ad shows one such girl spreading the embroidered cloth waiting for her

in Dubai to return with a C TV. Of course he does not bring the C TV and explains

that Philips makes world-class TVs in India. Predictably, a Philips TV is brought

home and lovingly covered could easily relate to the story.

In the ad film for Andhra Pradesh, Philips used popular singer S P

Balasubramanyam. The ad showed star complementing his son for buying a world-

class Philips TV.

The results of the entire exercise: sales rose by between 25% and 30% in these

states in the last 6 months. Now, Philips is extending the exercise to Uttar Pradesh

and Maharashtra.

Essence or need for middlemen

Middlemen are considered as an unnecessary link in the chain of intermediaries and it is

felt that these middlemen/commission agents must be eliminated. It is observed that the

commission agents in the markets are functioning not so much to the advantages of the

sellers as to those commission agents that the payments to the sellers on behalf of the

buyers are done on the very same day or atleast promptly. It is pointed out that the

commission agents pay the sales proceeds to producer sellers out of their pocket at first

and realize the amt at a later date from the buyers. Hence it can be concluded that till

such time as this function of prompt payment is taken over by another institution, it is not

advisable to eliminate the services of the commission agent in the regulated markets.

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Conclusion

Marketing according to a leading management theorists Peter Druker can be put

in this way " There will be always, one can assume, need for some selling. But

the aim of marketing is to make selling superfluous. The aim of marketing is to

know and understand the customer so well that the product or service fits him

and sell itself. Ideally, marketing should result in a customer who is ready to

buy. All that should be needed then is to make the product or service available."

Through this we feel that the gist of marketing in rural & urban is the same. It is

nothing but teasing the minds of people, their desires, needs, expectations &

playing with their physiology. But the market for a product may vary in rural &

urban area and the marketing strategies to market the product is also different in

urban and rural area.

In rural area we find more of a stereotype because of similar socio-economic

background. But in an urban area it is a multitude of people & personalities &

variance in income, background & lifestyle. It was found that the movies, which

were hit in cities, were doing as well in the rural areas. (E.g. Lagaan, Gadar) But

movies, which are hit in urban areas (metros), may not be successful in rural

areas. (E.g. Dil Chahta Hai) It is also found that people in cities spend more on

entertainment than people in rural areas.

We can see that the purchasing power of the people in a city like Mumbai is

more than a semi rural area like Ambernath and willingness of the people in the

rural area to spend towards movies or any other mode of entertainment is quite

less than that of the people residing in urban area.

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