The Hindu Business Line : Reform farm produce distribution: Study

FARMERS, particularly producers of fruits and vegetables, who take four months of high risk from seed to harvest, compared to the rest of the players down the distribution value chain, get paid only 24 to 58 per cent of the consumer price.

The distributors reap a rich dividend of 42 to 76 per cent by turning around the produce in far less time of within ten days. Incremental cost added on each juncture of the lengthy distribution chain, was disproportionate to the value added, time spent or risk taken at each link of the chain.

According to a study made by Prof S. Raghunath, Professor of Corporate Strategy & Policy Indian Institute of Management, Bangalore and Mr D. Ashok, Guest Faculty IIMB, absence of multiple sales outlets, lack of price transparency at the rural market yards and the resultant compulsion of having to necessarily sell the produce brought to the yard led to poor price realisation.

While calling for reforms in the agricultural produce distribution system, particularly the perishable items like vegetables, the study has highlighted huge mark up in prices of cauliflower and tomatoes at the consumer end. Cauliflower cost as high as Rs 9.50 kg or 73 per cent from its base price of Rs 5.50 at farmers end while for tomato it was a whopping 310 per cent at Rs 8.20 from its base price of Rs 2 per kg.

Disaggregated distribution system under the present regulation of the market yard had only created a new set of regulation, instead of benefiting the farmers and consumers for whom the Agricultural Produce Marketing Committee laws were made.

The State Governments should actively encourage the participation of organised distribution and create aggregators by permitting private companies to enter the distribution chain to curtail wastage of the supply at each stage of supply chain through improvements in handling, packing, transportation and storage, the study said.

Initiatives taken by private and public sector like ITC's e-choupals, Metro and Amul and Mother Diary have demonstrated the benefits that could accrue through reforms to farmers, however large scale intermediaries and lack of proper infrastructure and delay in amendment of the Agricultural Produce Marketing Committee laws have deprived the farmers of better price realisation.

India is the second largest producer of vegetables after China. Fresh fruits and vegetables, which accounted for 10 per cent of the total agricultural production of the country, has the potential to touch Rs 50,000 crore by next year.

However lack of modern management practices to curb waste and logistics facilities were hindering the largest value crating potential for farmers and value appropriation for consumers, the study said.