Reform, so that small farmers benefit

Updated on: Sep 18, 2012
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Besides organising small farmers into groups, a whole set of institutions needs to be created to ensure that they get better prices.

With reforms in the area of agriculture marketing in progress, it is imperative to integrate small and marginal farmers with the emerging new models of marketing.

A working group on agriculture has been constituted under National Advisory Council to focus on enhancing farm income for small holders through market integration.

The Prime Minister’s Economic Advisory Council (PMEAC) has called for urgent reforms in agriculture and agricultural marketing. The PMEAC reiterates the introduction of a sustainable model of contract farming for different commodities and regions. Small and marginal farmers can benefit only if there are fair terms for contracting parties.

Small and marginal farmers constitute 80 per cent of total farm households, 50 per cent of rural households and 36 per cent of total households in India. Integration of small farmers with the market is the only way of ensuring better returns from produce.

The web of 7,700 regulated markets (APMCs) in India is accessible throughout the year and has been handling a range of commodities for decades. However, small and marginal farmers have remained out of the ambit of these markets.


They find it difficult to access regulated markets due to their being situated far away from the market and the small produce for sale. Due to this, small and marginal farmer prefer to access the nearest market, or a rural haat . These rural markets are periodic in nature and do not have enough buyers to offer market-based price for the produce. They are unregulated markets without proper infrastructure. There is no market information system worth the name, due to which farmer has no information about prevailing prices and the price discovery mechanism.

These rural markets receive produce in disorderly manner, leading to high post-harvest losses. The marketing experience of small and marginal farmers in such environment is unremunerative and discouraging.


Effective linkages between small and marginal farmer and market can be established by taking following steps:

Establishing Collection Centres: A viable way of linking farmers to the market is by establishing a number of collection centres. These centres should be equipped with basic infrastructure for taking correct weights and for making payments. Collection centres will help in aggregation of the produce, and thus bring about efficiency in marketing.

These collections centres would be different from wholesale markets where auction takes place. They would operate on the basis of inventory and pre-announced requirement of the products by specifying the product, quantity, grade, size and price. Farmers would gain from this linkage by having better information about the product and price. Farmers receive better prices for their products by accessing the market directly, eliminating middlemen.

Formation of Small Farmer Producer Groups: The formation of farmer producers’ organisations (FPO) at village level needs to be accorded priority. Producer groups, whether in the form of an association, cooperative, society or other formal or informal grouping, can help link farmers with collection centres, thereby consolidating the value chain. A World Bank study shows that farmers’ participation through an association benefits them. The prices they receive in collectively selling produce goes up by an average 4.9 per cent.

An apex-level federation of producers’ companies is required to consolidate the efforts that have been initiated the States like Madhya Pradesh, Punjab, Karnataka and Assam. Promotion of a apex-level federation of producers’ companies in each State would help in providing protection to small and marginal farmers.

Promotion of Direct Purchase and Contract Farming: In order to reduce the handling charges of the produce, direct marketing in rural areas needs to be promoted. Under reforms, efforts have been made to procure produce directly from farmers.

To give a further fillip to small and marginal farmers, a condition indicating procurement of at least 20 per cent produce from small and marginal farmers must also be laid, so that these producers can also get good returns, and be motivated to produce better quality. There should be an incentive to have grade-based prices for direct purchase, so that producers and growers also alter their practices.

In spite of the fact that contract farming has been allowed for strengthening farmer linkages to the market through a Model Act, the actual experience has been mixed. Although small farmers engaged in vegetables and poultry in Andhra Pradesh, Haryana, Delhi have benefited, the real involvement of small and marginal farmers in contract farming is yet to take place.

The main problems attributed to contract farming implementation are contract designs, limited power of small farmers to bargain, lack of understanding of the legal framework, lack of inputs, knowledge for using technology or a new practice, shortage of labour during harvest ,limited resources for risk coverage, etc. In order to link the small farmers to the contact farming, a multi lateral (producer group+ buyer+ input supplier+ bank+ facilitator+ insurance agencies) set-up should be developed.

Public-Private Partnership Programmes: A huge amount of funds would be required to create the requisite infrastructure in agricultural marketing. The Government is relying on the various policy measures adopted, like reforms in agricultural marketing, introduction of various schemes and public private partnerships (PPP), for mobilising funds in the sector.

However, the biggest challenge for the Government and policymakers would be to make infrastructure available at the grassroot level. This would help small and marginal farmers, so that they are integrated with the supply chain and reap the benefits of various schemes of the Government. Roping in a producers’ company as the private entity in the PPP concept may help in creating infrastructure at grassroot level.

Database on Small and Marginal Farmers and Accessibility to Markets: Since the small and marginal farmer comprise almost 80 per cent of the population, it is pertinent to have a intensive database for mapping small and marginal farmers.

The idea is to build a database on location of markets, infrastructure available, price, arrival, income, social parameters, demographic profile, product mix, and non-farm activities.

There is also a need to expand the database of markets covered under municipality/ panchayats and periodic markers and other private markets, where a significant quantity of perishables are being transacted, to enable both the sellers and buyers to get timely market signals.

Besides this, enhancing the capacity of farmers to understand markets and operations, using information and communication technology for dissemination of market price, arrival, weather conditions, and risk management tools will help in linking farmers with markets.

(The author is Deputy Director, National Institute of Agricultural Marketing, Jaipur.)

Published on September 18, 2012

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