Page 19 - DMGT509_RURAL MARKETING

Rural Marketing

Notes Ministry of Disinvestments in the center shows the importance the government of India places
on disinvestments.

1.10 Agricultural Scenario in India

Indian farmers toil throughout the year but their rewards are meagre. Their share of the
consumer’s money paid for purchase of farm produce is less than 20%. US and Thailand farmers
get almost 33% of the final selling price. The rest of the money goes to the numerous middlemen,
transport companies, wholesalers, retailers, that is mainly those bringing the farm produce to
the market. International horticulture trade has got a big boost due to rising incomes and
consumer preference for a variety of fresh fruits and vegetables. India is one of the largest
producers of fresh fruits accounting for 11 per cent of world vegetable produce and 15 percent of
fruit production. India remains a low cost producer having less than half the production cost of
other nations. In spite of these favourable factors our share of the world market is infinitesimally
small, a mere 1.7 per cent of the global trade in vegetables and 0.5 per cent in fruits. A recent
World Bank survey has concluded that the problem of India’s farm sector lies outside of it rather
than within.
Basically there are three major factors that are derailing India’s potential for reaching the
supermarkets across the globe which are given below:
1. High cost of delivery from farm to the markets eats away the benefits of a low cost
producer. The example of grapes can be cited. The transportation of grapes from India to
Netherlands is three times more than that for grapes from Chile although Chile is twice as
far from the destination than India. India’s transport costs are, on an average 20 to 30 per
cent higher than those of other countries mainly due to fragmented Supply Chain which
results from policies inhibiting investment, integration and competition in transport
sector, storage and distributions. As a consequence, India’s largest buyers of horticulture
exports are middle and south Asian countries.

2. Secondly, according to the World Bank survey there exists a huge disparity between the
exacting requirements in health, safety, and quality standards needed by foreign
governments and buyers, especially from richer countries. Consumers from these countries
are imposing high level of quality standards even if their governments may not be involved
in these regulations. It may be of great significance that soon even Indian consumers will
be making for such stringent quality standards demands and then the Indian farmer may
not be able to compete even in India.
3. Thirdly, foreign trade operations are not transparent and often are complex and have
deceptive forms of protection of their own farmers as given below:
(a) Discrimination against efficient delivery.
(b) Quotas that impose harsh tariffs on imports above certain levels.
(c) A system of special safeguards that is a source of great uncertainty for successful
exporters.
(d) Preferential access schemes such as from Turkey to the EU, Mexico to the US
discriminate against imports from other countries.
(e) Tariff escalation clauses further discourage the export of processed fruits by imposing
higher tariff on products that have been through more advanced stage of processing.

These three factors have much greater effect than their sum total. Poor logistics creates delays
and wastage and takes away farmers incentive for improving quality of their produce. Since

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