FINAL PROJECT WORK ON

“Study on Supply chain management of APMC Market”

THE PROJECT SUBMITTED TO THE

UNIVERSITY OF MUMBAI
IN PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD OF DEGREE OF
MASTER OF MANAGEMENT STUDIES (MMS)

BY

MITHBAVKAR ANAGHA SADANAND SNEHAL

PARLE TILAK VIDYALAYA ASSOCIATION’S

PTVA’S INSTITUTE OF MANAGEMENT
VILE PARLE (E), MUMBAI – 400 057.
2015-2017

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 CERTIFICATE

I, Mrs. Shalini Kakkar hereby certify that Ms. Anagha Sadanand Mithbavkar,

MMS student of Parle Tilak Vidyalaya Association’s PTVA’s Institute of

Management, has completed a project titled “Study on Supply chain management

of APMC Market” in the academic year of 2016-2017. The work of the student is

original and the information included in the project is true to the best of my

knowledge.

Mrs. Shalini Kakkar Dr. Harish Kumar S. Purohit

Assistant Professor Director

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 DECLARATION

I, Ms. Anagha Sadanand Mithbavkar MMS Student of Parle Tilak Vidyalaya

Association’s PTVA’s Institute of Management, hereby declare that I have
completed the project titled ‘Study on Supply chain management of APMC
Market’ during the Academic Year 2016-2017.

The report work is original and the information/data and the references included
in the report are true to the best of my knowledge. Due credit is extended on the
work of Literature/Secondary Survey by endorsing it in the Bibliography as per
the prescribed format.

Ms. Anagha Sadanand Mithbavkar

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 Acknowledgement

I, Ms. Anagha Sadanand Mithbavkar express my sincere gratitude to Mrs. Shalini

Kakkar for their valuable guidance and timely suggestions during the entire duration
of our project work, without which this work would not have been possible. We
would also like to convey our deep regards to all other employees and staff of
Hindustan Petroleum Corporation Limited, Mumbai Refinery, who have bestowed
their great effort and guidance at appropriate times without which it would have been
very difficult on our part to finish this project work.
Finally, we would also like to thank our friends and parents for their support, advice
and pointing out our mistakes.

Ms. Anagha Sadanand Mithbavkar

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 Table of Contents

Sr.No. Topic Page No.

1 Introduction 1-2
2 Features 3
3 Function of APMC 4
4 Legal Background of APMCs 5
5 Purpose of APMC 6
6 Why APMC Act? 7
7 Industry overview 8
8 Components of an Agri supply chain 9
9 Supply Chain Management 10
10 Need for a supply chain in vegetable marketing 11
11 Literature Review 12
12 Present scenario of supply chain in India 13
13 Objectives & Needs 14
14 Research Methodology 14
15 Analysis of Data 15
16 Case Study – Mumbai Vashi APMC 15
17 Current Model of distribution network for APMC – Vashi 16
18 Shortcomings in current APMC System 17-18
19 Observation 19
20 Proposed Model of distribution network for APMC – Vashi 19
21 Suggestions for the current model of distribution 20-21
22 Four important measures needed to strengthen the APMC network 22
23 Some other observation 23
24 System of Sale 23-25
25 Methods of sale 26
26 Cold Storage 27-28
27 Agricultural wastages in the food supply chain 29
28 Role of cold storages 30-31
29 Recommendation 32-33
30 Conclusion 34
31 References 35

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 Table of Figure

Sr.No. Topic Page No.

1 Fruits and Vegetables arrival quantity 2
2 Current Model of distribution network for APMC – Vashi 16
3 Shortcomings in current APMC System 17
4 Proposed model of distribution network for APMC – Vashi 19

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Introduction:

In Mumbai APMC market is situated in Navi Mumbai, Vashi area. It is very old market and one
of the biggest agriculture market in Asia.

Mumbai Agriculture Produce Committee (MAPMC) is autonomous body constituted under the
Maharashtra Agricultural Produce Marketing Regulation Act, 1963 in the year 1977 for the
purpose of regulating the marketing of different kinds of Agricultural Produce. It was primarily
set up to carter to the market needs of the farmers and provides them a platform for selling
agricultural produce in various markets and at competitive prices. It also provides infrastructural
facilities for marketing of agricultural produce including maintenance and management of
markets.

The MAPMC complex at New Bombay is spread over an area of 122 hectares. There are five
markets based here: Fruits, Vegetables, Grains and Pulses, Sugar & spices and Onion & Potato.
The sixth market: Oil is operated from a remote location.

There are over 5000 traders operating in these markets. Over 12000 tones ofagri-commodities
arrive daily into the market place and get to wholesaler and sale agents. The market provides direct
and indirect employment to 60000 peoples. The entire market complex was constructed at a cost
of nearly 100 million dollars.

APMC is a marketing board established by a state government in India. The Maharashtra State
Agricultural Marketing Board runs 295 APMCs in Maharashtra, under the APMC Act enacted by
the Government of India. In July, 2016, the Maharashtra State Government removed fruits and
vegetables from the purview of the APMCs. The state government has urged the farmers to directly
bring their produce for sale in Mumbai. Of the 307 APMCs in the state, 219 are operating, the
government has granted 148 Direct Marketing Licenses of which 91 are for fruits and vegetables.
The Pune APMC, meanwhile, appealed to the farmers from the state as well as from outside to
bring their produce to the market and sell those directly.

This market works throughout 24 hours, main market starts were various vegetables and fruits
arrived in the market from different areas of the Maharashtra like Pune, Sangli, Satara and many
more come to unload fruits and vegetables.
Here the transaction between the farmers, coolies, truck drivers, small sellers, agents, etc. take
place to buy and sell fresh vegetables, fruits etc. Market buys and sells vegetables on the whole
sale rates.

MAPMC market constitute of storage place in form of godowns for storing different fruits and
vegetables.

The commodities under regulation of MAPMC are food grains, fruits, vegetables, spices, dry-
fruits, pluses, edible oil and oilseeds.

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The following table gives the details about the fruits and vegetables arrive in the MAPMC different
market.

Market Truck Tempo Daily Arrivals (In Quintals)

Onion & Potato 146 54 25215
Fruits 130 210 12000
Vegetables 115 315 12080
Dry-fruits & spices 175 55 21000
Foodgrain& Pluses 300 41 53220
Total 866 675 123515
Source: www.ampc.com
Fig.1 Fruits and Vegetables arrival quantity

The objectives of APMC which are ensure that farmers are not exploited by intermediaries (or
money lenders) who compel farmers to sell their produce at the farm gate for an extremely low
price.

All food produce should first be brought to a market yard and then sold through auction.

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Features:

Each state which operates APMC markets geographically divided the state and markets
(mandis) are established at different places within the state. Farmers are required to sell their
produce via auction at the mandi in their region. Traders require a license to operate within a
mandi. Wholesale and retail traders (e.g. shopping mall owners) and food processing companies
cannot buy produce directly from a farmer.

Some of the salient features of the APMC Model Act 2003 are as follows:

1) Facilitates Contract farming model

2) Special market for perishables

3) Farmers, private persons can setup own market

4) Licensing norms relaxed

5) Single market fee

6) APMC Revenue to be used for improving market infrastructure

However, not all States have passed the bill. Some States have passed but neither framed rules nor
notified it. Thus, inter-state barriers continue. Further, Union Budget 2015 proposed to create
United National Agriculture Market with the help of State Government and NITI Ayog.

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Functions of APMC:

 Grant, renew, refuse, suspend or cancel license.

 Provide the necessary facilities for the marketing of agricultural produce within the market.
 Regulate and supervise the auction of notified agricultural produce in accordance with the
rules and the bye-laws.
 Regulate the entry of persons and of vehicular traffic into the market.
 Supervisor the behavior of those who enter the market for transacting business.
 Maintain and manage the markets, including admissions to, and conditions for the use of
markets.
 Regulate the making, carrying out and enforcement or cancellation of sales, weighment,
delivery and payment to be made thereof.
 Promote and organize grading and standardization of the agricultural produce.
 Take measures for the prevention of purchases and sales below the minimum support price
as fixed by the government from time to time.
 Collect, maintain, disseminate and supply information in respect to production, sale,
storage, processing, prices and movement of notified agricultural produce including
information relating to crops statistics and marketing intelligence.
 Carry out publicity about the benefits of regulation, system of transaction, facilities
provided in the market area etc.
 Provide for selling of disputes arisingout of any kind of transactions connected with the
marketing of agricultural produce.
 Receive charges, fees, rates and other sum or money to which the Market Committee is
entitled.
 Inspect and verify the books of accounts and other documents maintained by the licensees.
 Provide storage and warehousing facilities in the market area.

Legal Background of APMCs

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 Under Constitution of India, agricultural marketing is a state (provincial) subject. While
intra-state trades fall under the jurisdiction of state governments, inter-state trading comes under
Central or Federal Government (including intra-state trading in a few commodities like raw jute,
cotton, etc.). Thus, agricultural markets are established and regulated mostly under the various
State APMC Acts.

Most of the state governments and Union Territories have since enacted legislations (Agriculture
Produce Marketing Committee Act) to provide for development of agricultural produce markets
and to achieve an efficient system of buying and selling of agricultural commodities. Except the
States of Jammu and Kashmir, Kerala, Manipur and small Union Territories such as Dadra and
Nagar Haveli, Andaman and Nicobar Islands, Lakshadweep, etc. all other States and UTs in the
country have enacted such State Marketing Legislations. The purpose of these Acts is basically
the same i.e. regulation of trading practices, increased market efficiency through reduction in
market charges, elimination of superfluous intermediaries and protecting the interest of producer-
seller.
The whole geographical area in the State is divided and each one is declared as a market
area which is managed by the Market Committee (APMC) constituted by the State Government.
States also constitute a Market Board which supervises these market committees. APMCs
generally consist of representatives of farmers, traders, warehousing entities, registrar of
cooperative societies etc. Market Boards generally consists of chairmen of all APMCs,
representatives from the relevant Government Departments etc.
Once a particular area is declared as a market area and falls under the jurisdiction of a
Market Committee, no person or agency is allowed to freely carry on wholesale marketing
activities. APMC Acts provide that first sale in the notified agricultural commodities produced in
the region such as cereals, pulses, edible oilseed, fruits and vegetables and even chicken, goat,
sheep, sugar, fish etc., can be conducted only under the aegis of the APMC, through its licensed
commission agents, and subject to payment of various taxes and fee. The producers of agricultural
products are thus forced to do their first sale in these markets.

Purpose of APMC

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 The purpose of these Acts is basically the same i.e. regulation of trading practices,
increased market efficiency through reduction in market charges, elimination of superfluous
intermediaries and protecting the interest of producer-seller.

APMC is a statutory market committee constituted by a State Government in respect of

trade in certain notified agricultural or horticultural or livestock products, under the Agricultural
Produce Market Committee Act issued by that state government.
APMCs are intended to be responsible for:

 ensuring transparency in pricing system and transactions taking place in market area;
 providing market-led extension services to farmers;
 ensuring payment for agricultural produce sold by farmers on the same day;
 promoting agricultural processing including activities for value addition in agricultural
produce;
 Publicizing data on arrivals and rates of agricultural produce brought into the market area for
sale; and
 Setup and promote public private partnership in the management of agricultural markets

There are about 2477 principal regulated markets based on geography (the APMCs) and 4843
sub-market yards regulated by the respective APMCs in India.
The typical amenities available in or around the APMCs are: auction halls, weigh bridges,
godowns, shops for retailers, canteens, roads, lights, drinking water, police station, post-office,
bore-wells, warehouse, farmers amenity center, tanks, Water Treatment plant, soil-testing
Laboratory, toilet blocks, etc.

Why APMC Act?

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The model APMC Act provides some freedom to the farmers to sell their produce directly to the
contract-sponsors or in the market set up by private individuals, consumers or producers but this
act is not enough for setting a common agriculture market even at state level.

• The reason is that the model APMC Act retains the mandatory requirement of the buyers having
to pay APMC charges even when the produce is sold directly outside the APMC area either under
contract farming or private markets set up individuals.

• In some states minimum limit of setting up a private market was too high say 10Crore and act as
barrier for small farmers to come together and form a market.

• Also many states have not amended their APMC act in line of Model APMC Act 2003 and even
some states adopted this act in partial manner only.

To improve the marketing system in India the Department of Agriculture, Government of India
has launched a National Agricultural Market with the Cabinet Committee on Economic Affairs
approving a scheme of Rs. 200 cr. through Agri-Tech Infrastructure Fund. This will serve as a
common electronic platform for trading agricultural commodities. This will integrate 585
wholesale markets across India. The plan will cover 250 mandis in the current fiscal, 200 mandis
in 2016-17 and 135 mandis in 2017-18. The NAM will facilitate the emergence of value chains in
major agricultural commodities across the country and help to promote scientific storage and
movement of agri goods.

Industry overview:

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The Indian food industry is poised for huge growth, increasing its contribution to world food trade
every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its
immense potential for value addition, particularly within the food processing industry.

The efficiency of marketing for fruits and vegetables in India has been of significantconcern in the
recent years. Poor efficiency in the marketing channels and inadequatemarketing infrastructure are
believed to be the cause of not only high and fluctuating consumerprices, but also too little of the
consumer rupee reaching the farmer. Indian farmers typically depend heavily on middlemen
particularly in fruitsand vegetable marketing. The producers and the consumers often get a poor
deal and themiddlemen control the market, but do not add much value. There is also massive
wastage,deterioration in quality as well as frequent mismatch between demand and supply
bothspatially and over time.

Indian Scenario of Fruits and Vegetables Production:

In India per capita availability of fruits and vegetables is quite low because of postharvest
losses which account for about 25% to 30% of production. The projected domestic demand of
fruits and vegetables in India for the years 2010, 2015 and 2020 with 2010 as base year. Besides,
quality of a sizable quantity of produce also deteriorates by the time it reaches the consumer. Most
of the problems relating to the marketing of fruits and vegetables can be traced to their
perishability. Perishability is responsible for high marketing costs, market gluts, price fluctuations
and other similar problems. There is a rise of about 4% in the production of fruits and vegetables
but there is significant increase in production area also which results in low per hectare production.
Table 3 which show the total production of various fruits and vegetables in different states of India
along with the area of production in the year 2013-14. This phenomenon is caused due to various
factors in which economic and technological factors lead the race. State needs to educate the
producers of the latest technology available and also help them by granting support to acquire them
and proper supply chain management should be there in the country which would help prevention
of exploitation of farmers and help increase their income.
Components of an Agri supply chain

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Agribusiness, supply chain management (SCM) implies managing the relationshipsbetween the
businesses responsible for the efficient production and supply of products fromthe farm level to
the consumers to meet consumers’ requirements reliably in terms ofquantity, quality and price. In
practice, this often includes the management of both horizontaland vertical alliances and the
relationships and processes between firms.

Agri-supply chains are economic systems which distribute benefits and apportionrisks among
participants. Thus, supply chains enforce internal mechanisms and develop chainwide incentives
for assuring the timely performance of production and deliverycommitments. They are linked and
interconnected by virtue of shared information andreciprocal scheduling, product quality
assurances and transaction volume commitments.Process linkages add value to agricultural
products and require individual participants to coordinatetheir activities as a continuous
improvement process. Costs incurred in one link inthe chain are determined in significant measure
by actions taken or not taken at other links inthe chain. Extensive pre-planning and co-ordination
are required up and down the entirechain to affect key control processes such as forecasting,
purchase scheduling, production andprocessing programming, sales promotion, and new market
and product launches etc.

Following are the components of an organized agri- supply chain:

1. Procurement or sourcing

2. Logistic management
a. Transportation
b. Material management
c. On the premise of supplying mostly from production not stock
d. Warehousing
e. Logistics Network modeling

3. Organizational management
a. Contracting
b. Strategic alliances and partnerships
c. Vertical integration
i. Long term storage
ii. Packaging technology
iii. Cold chain management
iv. Energy efficient transport
v. Quality and safety

4. Application of Efficient Consumer Response (ECR) System

a. Electronic scanning of price and product at the point of sale
b. Streamline the entire distribution chain

Supply Chain Management

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Improving supply chain can help to tackle the food inflation which is due to rise in prices of food
items. These comprise perishable items such as fish, meat, vegetables and fruits and all of which
required advanced and effective supply chain management.

Farmers need to increase their production, trading and marketing with the time. As the demand for
fruits and vegetables and other produce like oil, livestock etc. will go to increase. Demand can be
met only through efficient and effective supply chain management.

Demand for the high quality, safe and easy available food item is increasing day by day. This can
only be done by the handling supply chain properly.

Agriculture market is inefficient in India, due to poor infrastructure and negligence of supply
chain. The factors which affect the supply chain and the agricultural business in India are due to
lack of accessibility to regulate markets, poor infrastructure, lack of competition under the
Agricultural Produce Market Committee (APMC) Act, and absence of a nationwide common
agriculture market. These are challenges that run across the various channels through which the
supply chain and agri-business models operate.

As there is middleman it lead to increase the price of the agricultural produce, which is then pass
to the customers. Other charges are also applied like entry tax/octroi tax that varies across states
as well as across commodities. These charges prevent the emergence of a nationwide common
market for agricultural produce. Moreover, restrictions on the movement of goods under the
Essential Commodities Act remain in place in various states. These had inhabited free access of
agriculture markets.

Transactions in agricultural business mainly occur as cash transaction, so it is very critical to

maintain the record of cash management. As the level of middleman is increasing, to maintain the
record of cash transaction is difficult.

The country needs a single point market fee system for facilitating free movement of produce,
bringing price stabilization, and reducing price differences between the producer and consumer
market segments. Use of Information and Communication Technology (ICT) solution. (For
example, pre-paid card based payment at octroi posts) would facilitate easy movement of
agricultural produce.

Need for a supply chain in vegetable marketing

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Supply chain development not only benefits the private sector but also creates spin-offs that
stimulate social, economic and environmental sustainable development in the region (employment
generation, added value, minimization of product losses etc.) The specific gains are:

 Reduction of product losses in transportation and storage.

 Increasing of sales.
 Dissemination of technology, capital and knowledge among the chain partners.
 Better information about the flow of products, markets and technologies.
 Transparency of the supply chain.
 Tracking and tracing to the source.
 Better control of product safety and quality.
 Large investments and risks are shared among partners in the chain.
 Productivity Improvement
 High customer satisfaction
 Increased profit
 On time delivery

Literature Review

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Supply chains are principally concerned with the flow of products and information between supply
chain member organizations—procurement of materials, transformation of materials into finished
products, and distribution of those products to end customers. Today’s information-driven,
integrated supply chains are enabling organizations to reduce inventory and costs, add product
value, extend resources, accelerate time to market, and retain customers.

The real measure of supply chain success is how well activities coordinate across the supply chain
to create value for consumers, while increasing the profitability of every link in the supply chain.
In other words, supply chain management is the integrated process of producing value for the end
user or ultimate consumer.

The supply chains of different agricultural commodities in India, however, are fraught with
challenges stemming from the inherent problems of the agriculture sector. The agri-supply chain
system of the country is determined by different sartorial issues like dominance of small/ marginal
farmers, fragmented supply chains, absence of scale economies, low level of processing/value
addition, inadequacy of marketing infrastructure etc.

Early processing-based supply chain management success included improvedrelationships

between warehousing and transportation within companies as a result ofreduced inventory and
better response time to customer requests for products and services.Supply chain management then
entered a logistics stage where other functional areas withincompanies joined forces to incorporate
manufacturing, procurement, transportation,distribution, and marketing to effectively compete in
the marketplace. This stage was aidedby the use of telecommunications, electronic data interface,
and other technological advancesthat made the transfer of information more transparent across the
functional areas between companies.

Food supply chain Networks

A processing-based and organized agri-supply chain functions as a part of a very complex network.
Figure 1 depicts a generic supply chain at the organization level within thecontext of a complete
supply-chain network. Each firm is positioned in a network layer andbelongs to at least one supply
chain, i.e. it usually has multiple (varying) suppliers andcustomers at the same time and over time.

Present scenario of supply chain in India

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It has been found that 30 – 40 percent of fruits and vegetables are wasted due to post harvest losses.
Table 4 shows the estimated waste percentages in each step of the food supply chain in India which
is the cause of low availability of fruits and vegetables for consumers and the need for import of
them in spite of India being second largest producer.

There is lack of basic as well as specialized infrastructure such as cold storages, refer vans, cool
chains, ripening chambers etc. Also there is a missing link between production and research system
and consumers. The system lacks in capacity building market information, research and
intelligence. I

India is short by 10 million tons of cold storage capacity due to which over 30 percent of
agricultural produce goes waste every year, more than 20% of produce from fields is lost to poor
post harvesting facilities and lack of cold chain infrastructure. India, the world’s second largest
fruit and vegetable producer encounters a waste of close to 25% worth of produce.

India has a huge opportunity to become a leading global food supplier if only it has an agile,
adaptive, responsive and efficient supply chain. Some of the problems that are to be mentioned in
Indian food supply chain are the presence of numerous stake holders which are working in isolation
and the infrastructure connecting these partners productivity Improvement, high customer
satisfaction, and increased profit and on time delivery.

Objectives & Needs

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  Provide remunerative price to farmers.

 Reduce uncertainties in production & consumption of farming products.

 Ensuring that end customers are charged fair price even while producers get fair
compensation.

 Strengthening efficiency of supply chain network from producer to consumer via APMC.

 Strategically change in the middle man centric present system to farmer and consumer
centric system.

 Use of efficient information system with a robust IT backbone to achieve supply chain
improvements using effective distribution and stabilizing demand by using efficient cold
storage facilities.

 MSP (Minimum Support Price) effective usage for normalizing and balancing demand-
supply.

 Include ‘Facilitating organization of farmers markets’ under the permitted list of corporate
social responsibility (CSR) activities under companies Act 2013, to encourage companies
engaged in agri-allied activities, food processing etc. to take up this activity under CSR
and also help in setting up supply chain infrastructure. This would be similar to the e-
Choupal initiative of ITC ltd, but under CSR.

Research Methodology

The research methodology is based on case study method which is given as follow.

Analysis of Data

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Case Study – Mumbai Vashi APMC

 The APMC Vashi market, one of the largest markets in India is in and around Sector
19 of Vashi.

 There are a staggering 3700 godowns, 1500 commercial blocks, 4large auction halls, 2
giants’ warehouses, and 5 large wholesaler market yards. Apart from this, there are big
processing centers –a vapor heat treatment plants, ripening facilities, cold storage
facilities, an export facilitation center and so on.

 Every day, nearly 1800 tone of vegetables – enough to provide 90 grams to each the
2.02 crore residents of Mumbai, Thane and Navi Mumbai –roll into the yard from
vegetable producing area like Sindhudurg, Ratnagiri, Nashik, Pune, Satara, Sangli and
other parts of Maharashtra as well as from outside the state.

 The produce is sold by auction and the prices are noted and managed by the APMC. It
is the committee’s responsibility to ensure that sales do not take place below the
minimum price fixed by the government. They are also responsible for ensuring fair
measurement and weighting, and fair charges for labor.

 As per rules, the farmer has to pay APMC’s sum ranging from 0.2% to 2% as fee for
facilitating the sale of his produce. After separation, the stock is then sold with the help
of commission agents, who charges anywhere 8% to 15% from the farmer for helping
him sell his produce, as against the allowed two to eight per cent.

 The wholesalers who buy the produce then ferry the produce to the retailer who then
sells it to consumers. Along the chain, the farmer seems to come off as the worst
affected. By the time the produce reaches the consumers, the price is inflated by almost
90% and the middle men at various stages take the cut.

Current Model of distribution network for APMC – Vashi

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Source:https://www.slideshare.net/balajir161/evolution-of-apmc-supply-chain

Fig 2: Current Model of distribution network for APMC –Vashi

 In the current model of distribution, the farmers are sold their produce to purchaser or
Kaccha vyapari (Retailer).

 The Purchaser sold that produce to the end purchaser or pakka vyapari (Wholesaler), who
is connected with APMC market or having godown in APMC market.

 APMC market sold farmer’s produce to Supermarket or hotels as well as consumer.

 After that, Consumer level wholesaler purchase produce from APMC market and selling
to the consumer level retailer.

 Retailer sold produce to the distributers at local mandi’s and from where consumer can
buy the farmer’s produce.

Shortcomings in current APMC System

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 High
Commission,
taxes &
levies

Monopoly &
Cartelization
restrictive

Shortcomings
in current
APMC system

Inherent
Other
Manipulation
Conflict of
Interest

Entry
Barriers

Fig.3: Shortcomings in current APMC System

1. Cartelization:

 Cartelization seems to be the order of the day where agents get and deliberately restrain
from higher bidding.
 Produce is procured at manipulatively lower price and sold at higher price to the market.
Spoils then shared by participants, leaving farmers in lurch.

2. High commission, taxes and levies:

 Farmers are forced to pay commission, marketing fee etc. which pushes up costs.
 Besides this many states also impose Value Added Tax.

3. Monopoly & restrictive:

23
  Monopoly of any trade (barring few exceptions) is bad, whether it is by some MNC
corporation by government and here by APMC.
 It creates an artificial barrier & deprives farmers from having better customers, and
consumers from original suppliers.

4. Inherent conflict of interest:

 APMC play dual role of regulator and the market, consequently, its role as regulator is
undermined by vested interest in a lucrative trade.
 In addition, member and chairman are nominated/ elected out of the agent operating in that
market. Politics plays a large role and despite inefficiency they won’t let go any control.

5. Entry barriers:

 License fee in these markets are highly prohibitive and in many markets farmers are
restricted from operating. In addition, license fee, rent/ value for shops are kept quite high
to keep away competition.
 At most places only a group of village/urban elite operators in APMC.

6. Other Manipulation:

 Agents have tendency to block a part of payment for unexplained or fictitious reasons to
farmers. In several instances, Farmer are refused payment slip (acknowledging sale &
therefore payment).
 Farmers require these payment slips to get loan from Banks. Hence they are forced to go
to private money lenders, who work in unison with the agents or political bosses.
Ultimately farmers resort to extreme methods like suicides to avoid recovery agents.

Observation

Proposed Model of distribution network for APMC – Vashi

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Source:https://www.slideshare.net/balajir161/evolution-of-apmc-supply-chain

Fig.4: Proposed model of distribution network for APMC – Vashi

 In this model, Farmers are contact to Panchayat/village level information centers.

 The Panchayat/village level information centers are connected with the distribution center
(taluka or district level) authorized by APMC which does packaging and in inventory
management.

 APMC market having IT support with computerized auction system and warehouse
facilities for fruits & vegetables.

 With the help of IT support APMC market connected with supermarket or hotels as well
as the local distributers

Suggestions for the current model of distribution

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Non-perishable agriculture commodities are less volatile and are supported by strong institutional
mechanisms to ensure farmers get remunerative prices. Moreover, the large network of the pubic
distribution system, which makes available food grains to poor at highly subsidized prices, is
relatively more effective in controlling food grain inflation. Therefore, the regulatory framework
for marketing of food grains can be retained.

The issuance of negotiable warehouse receipts under the Warehousing Development and
Regulatory Authority (WDRA) is underway and should be successfully implemented by the next
Kharif season. When this happens, a large number of farmers who used to sell to arathiyas would
migrate to this new system. The farmers would have an option of storing in accredited warehouse
and availing finance through negotiable warehouse receipts and selling these receipts at the
appropriate time, when prices are high. This will be a major step in deepening food grain markets.

Food grains, pulses, oil seeds and other non-perishables could continue with the existing
regulations of the APMC Act. However, fine tuning some elements in the current regulations could
make the system more robust, especially in the context of recent notified warehousing
(development and regulation) Act 2007.

Some Suggestions are:

1. Single License System:

The person/trader/company that is permitted to operate in a state through a single license

should be given a unique identification code. It should be made mandatory to quote this
unique registration code during every transaction.

2. Single Point Levy System:

The system of multiple levies should be discontinued in order to avoid the cascading effect
on prices. Further, the mandi fee/market fee should be paid at a central location by quoting
the details of the transaction, the unique registration code and the mandi area under whose
jurisdiction the transaction was done. This would enable the central agency to disburse the
mandi fee to respective mandis in a regular and hassle free manner.

3. Promoting Electronic Auctions and Electronic Spot Markets:

Although, trade in food grains takes place predominantly at MSP, the sale of
producethrough electronic auction platforms should be made mandatory. Similarly, the
electronicspot exchanges that have recently emerged as successful alternate marketing
models needto be leveraged to ensure better prices for the farmers.

In this context, it is important to note that there is a need for an efficient information
technology (IT) system for APMC to capture the transactions happening at various
warehouses and also through sale of negotiable warehouse receipts. To put in place an
efficient IT system to capture all transactions, it is appropriate to move towards a policy

26
 with the above mentioned framework that is IT friendly and capable of enhancing the
efficiency of data capture.

Putting in place the above mentioned policies and framework would result in higher Mandi
tax collections, efficient price discovery, and ease of doing business in both food grains
and non-perishables.

4. Contract Farming
Presently, contract farming is mostly perceived from the point of view of a company
purchasingfrom the farmer at a pre-determined price. However, the true spirit of contract
farming isthe engagement of a company with farmers during all stages of the crop cycle by
way of providing the right information and right inputs till final procurement at the pre-
determined price. While the government is wary as a result of a few sporadic cases of
companies failingto honor the contracts with the farmers, denying the farmers an
opportunity to fruitfully engage with the companies is not justified. The government should
put in place a well-conceived framework that would ensure safety for farmers. The central
regulator could beentrusted with the task of facilitating contract farming through an
appropriate framework

For registration and redressal mechanism:

 Registration of Contract Farming Sponsor:All the companies engaged in

contractfarming should be mandatorily registered with a designated authority
at the state.They should provide complete details of all the farmers with whom
they plan toengage for the next season.

 Claims/Redressal Mechanism: Once the procurement season is over, if there

areno complaints against the sponsor, there is no issue. In case of complaints, a
thirdparty independent audit could be commissioned and the sponsor could be
penalized,if found guilty.

Four important measures needed to strengthen the APMC network

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  Independent Market Regulator:

The Director of Agricultural Marketing in a state plays the role of policy maker and regulator. It
is observed that in many of the states, Director (Marketing) also holds the post of Head of
Agriculture Marketing Board. It is essential to make segregation and clear cut role differentiation
between the regulators and operators, so as to develop a confidence level with private
entrepreneurs about the neutrality of the Regulator.

 Capacity building of APMC Functionaries:

With stiff competition from the private sector and fast changing consumer preferences, APMC
functionaries need to constantly upgrade their skills. Hence, the government of India should
facilitate capacity building of APMC functionaries on a regular basis.

 Mandi Modernization:

Most of the APMC mandis lack basic facilities such as proper electronic weighment, grading and
sorting systems and minimal warehousing facilities. In order to provide efficient service to the
farmer, these mandis need to be equipped with better infrastructure. The government of India needs
to infuse more capital in developing the mandi infrastructure.

 Farmer Cooperatives/Farmers Marketing Associations:

Encouraging farmers to form producer associations and aggregating the produce of small and
marginal farmers would go a long way in improving the bargaining power of the
farmers.Additionally, these cooperatives should be given trader license in all mandis, so that they
can directly sell in mandis and not be at the mercy of the arathiyas (wholesale dealers).

Some other observation:

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System of Sale:

1. Farmer – Direct selling – Customer

Direct marketing is an innovation concept, which involves marketing of produce that is
vegetables by the farmer directly to the cities agents and company without any middlemen.

Direct marketing enables producers and processors and other bulk buyers to economize on
transportation cost and improve price realization. It also provides incentive to large scale
marketing companies i.e. is processors and exporters to purchase directly from producing
areas.

Benefits:

 It increases profit of the producer.

 It helps in market oriented production.
 It helps in better marketing of grapes.
 It minimizes marketing cost.
 It encourages distribution efficiency.
 It promotes employment to the producer.
 Direct marketing enhances the consumer satisfaction-since the farmer brings the produce
in a manner acceptable to consumer.
 It provides better marketing techniques to producers.
 It encourages direct contact between producer and consumer.
 It encourages the farmer for retail sale of their produce.

2. Farmers – Direct selling – Agents – APMC market – Wholesaler – Retailer –

Customer
Farmers or producer sells their products to the agents or APMC agents and then they sell
product to the wholesaler like Dadar market, Thane market, and Borivali market. These
wholesalers sell the product to their retailers, who in turns sell to the customer.

As this is the longest chain, the price of the product increase to many folds due to the
middlemen.

3. Farmers – Direct selling – Agents – APMC market

Producer sells their product to the agents of APMC markets and here the customer can
directly buy from the market, as a result they remove the middlemen i.e. Wholesaler and
Retailer.

4. Farmers – Village Mandi – Agents – APMC market – Wholesalers – Retailers –

Consumers

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 The producers sell their product in the village mandi, from here the product is then send to
the APMC market and then they sell product to the wholesalers like Dadar market, Thane
market, Borivali market. These wholesalers sell the product to the retailers, who in turns
sell to the customers.

5. Farmers – Village Mandi – Agents – APMC market – Customer

The producers sell their product in the village mandi, from here the product is sells to the
agents of the APMC markets and here the customer can directly buy from the market, as a
result they remove the middleman i.e. Wholesaler and the Retailer.

6. Farmers – APMC market – Wholesaler – Retailer – Customer

Farmers directly sell their product to the APMC market and then they sell product to the
wholesalers like Dadar market, Thane market, and Borivali market. These wholesalers sell
the product to the retailers, who in turns sell to the customers.

7. Farmers – APMC market – Customers

Farmers directly sell their product to the APMC market and here the customer can directly
buy from the market, as a result they remove the middleman i.e. Wholesaler and the
Retailer.

8. Farmer – Co-operative farming – APMC – Wholesaler – Retailer – Customer

“Co-operative marketing” is the system of the marketing in which a group of producers
join together and register them under respective Sate Co-operative Societies Act to market
their produce jointly. The members also deal in the number of co-operative marketing
activities i.e. purchasing the produce, grading, packing, processing, storage, transport,
finance etc. Co-operative societies market the members produce collectively and secure
advantages of economy of scale to its members.

The Co-operative marketing structure in the different state consists of;

1. PMS (Primary Marketing Society) at the Mandi level

2. SCMF (State Co-operative Marketing Federation) at the state level

3. NAFED (National Agriculture Co-operative Marketing Federation of India Ltd.) at the

national level

Benefits:

 Remunerative price to producers.

 Reduction in cost of marketing.
 Reduction in commission charges.
 Effective use of infrastructure.
 Credit facilities.
 Provide facilities of cold storage.
 Marketing information. ¾ Help in export to other countries.

30
  Supply of agricultural inputs.
 Collective processing.
 Timely and easy transportation service.

9. Farmers – Co-operative farming – APMC – Customer

Farmers sell the products to the APMC market and here the customer can directly buy from
the market, as a result they remove the middlemen i.e. Wholesaler and Retailer.

10. Farmers – Co-operative farming – Customer/Company

Farmers sell the product directly to the customer i.e. company by forming a formal or
informal groups like Co-operative groups, so that they can get the benefit of the economy
of the scale.

It was observed that, due to the complexities of the system, the farmer ends up selling his
produce at an unfavorable place, time and place. Large chain of middleman mainly that of
agents, traders, wholesalers, retailers, inadequate market information malpractices,
unregulated and unorganized markets have contributed to a highly complex system.

11. Farmers – Contract Farming – Company/Customers

Contract Farming is a system of farming, where selected crop is grown for marketing by
farmers under a “buy-back” agreement with an agency (entrepreneur or trader or processor
or manufacturer). Contract farming is beneficial to both the parties i.e. farmers and the
contracting agencies.

Methods of sale

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There are 5 types of selling methods

 Sale by sample Method

In this method, provide free sample for retailer. Retailer tries the product, like it and decide
to buy it.

 Open Auction Method

An auction is a process of buying and selling goods or services by offering them up for bid,
taking bids, and then buying the item to the highest bidder. The open ascending
price auction is arguably the most common form of auction in use today.

 Moghum Sale Method

The produce is sold on the basis of verbal understanding between the buyer and the seller
without any pre-settled price. Prospective buyers gather at a commission agents shop,
where a heap of agricultural produce is assembled, examined and shout out their bids the
produce is sold to the higher bidder

 Dara sale Method

Dara Sale Method is another form of selling agricultural produce where the produce is
mixed and then sold as one lot.

Example: Onion and Potato market

 Hatta Sale (Under Cover) Method

 Legally not permitted to be practiced in the regulated markets.

 Fruits and vegetable market.
 Maintaining confidentially of wholesalers prices

 Codes:
 1 Finger = Rs.10
 1 Tapping = Rs.1
 Fist = Rs.100

Example: Holding 3 fingers and then tapping the finger 2 times would communicate
price of Rs.32/kg.

If the prices are acceptable to both the parties, lapping hands signals the deal was done.

Cold Storage

Status of cold storage and its potential in India

32
It has been found that 30 – 40 percent of fruits and vegetables arewasted due to post harvest losses.
Table 4 shows the estimated wastepercentages in each step of the food supply chain in India which
is thecause of low availability of fruits and vegetables for consumers and theneed for import of
them in spite of India being second largest producer.There is lack of basic as well as specialized
infrastructure such as coldstorages, refer vans, cool chains, ripening chambers etc. Also there is
amissing link between production and research system and consumers.The system lacks in
capacity building market information, research andintelligence. India is short by 10 million tons
of cold storage capacitydue to which over 30 percent of agricultural produce goes wasteevery year,
more than 20% of produce from fields is lost to poor post-harvestingfacilities and lack of cold
chain infrastructure. India, theworld’s second largest fruit and vegetable producer encounters a
wasteof close to 25% worth of produce.

The estimated annual production of fruits and vegetables in the country is about 130 million tones.
This accounts for 18% of our agricultural output. Due to diverse agro climatic conditions and better
availability of package of practices, the production is gradually rising.Although, there is a vast
scope for increasing the production, the lackof cold storage and cold chain facilities are becoming
major bottlenecksin tapping the potential. The cold storage facilities now available aremostly for
a single commodity like potato, orange, apple, grapes,pomegranates, flowers, etc. which results in
poor capacity utilization.

Storage of fruits and vegetables and storage conditions

33
Fruits and vegetables and many other commodities can be preserved by storage at low temperature,
which retards the activities of microorganisms. Microorganisms are the spoilage agents and consist
of bacteria, yeasts and molds. Low temperature does not destroy those spoilage agents as does high
temperature, but greatly reduces their activities, providing a practical way of preserving perishable
foods in their natural state which otherwise is not possible through heating. The low temperature
necessary for preservation depends on the storage time required often referred to as short or long
term shortage and the type of product. Table 5 shows desired storage environment of fruits and
vegetables in the cold storage.

India has around 6,300 cold storage facilities, with a capacity of 30.11 million tones. However,
some 75-80 per cent of these refrigerated warehouses are suitable only to store potatoes, a
commodity that produces only 20 per cent of agricultural revenue. India needs expansion of cold
storage infrastructure in an affordable, reliable and sustainable way to increase the contribution of
agriculture to the economy.

Cold chain investment

India’s investment in cold chain is projected to be $15 billion over the next five years, IME pointed
out. The report said that approximately 60 per cent of the total number of facilities is located only
in Uttar Pradesh, Gujarat, West Bengal and Punjab. Only 4 million of the 104 million tons of fresh
produce are transported through a cold chain.

Wastage of fruits and vegetables

It is reported that only 10-11 per cent of the fruits and vegetables produced in India use cold
storage. Storage capacity needs to be increased by 40 per cent to avoid wastage. There is more
wastage of fruits and vegetables in the southern and western regions of India due to the tropical
and humid climate.

Agricultural wastages in the food supply chain

34
Agricultural/ Food waste or loss refers to the decrease in edible food product throughout the part
of the supply chain and hence unavailable for human consumption. Food losses take place at
production, marketing, post-harvest and processing stages in the food supply chain. Food losses
occurring at the end of the food chain (retail and final consumption) are called “food waste”, which
relates to retailers’ and consumers’ behavior.

Loss of agricultural crops in the Food supply Chain occurs as follows:

Agricultural production:

Losses due to mechanical damage and/or spillage during harvest operation (e.g. threshing or fruit
picking), crops sorted out post-harvest, etc. Post-harvest handling and storage: including losses
due to spillage and degradation during handling, storage and transportation between farm and
distribution.

Marketing: Including losses and waste in the market system, at e.g. wholesale markets,
supermarkets, retailers and wet markets.

Processing:Including losses due to spillage and degradation during industrial or domestic

processing, e.g. juice production, canning and bread baking. Losses may occur when crops are
sorted out if not suitable to process or during washing, peeling, slicing and boiling or during
process interruptions and accidental spillage.

Retail: Packaging protects food from damage during its transportation from farms and factories
via warehouses to retailing, as well as preserving its freshness upon arrival. Although it avoids
considerable food waste, packaging can compromise efforts to reduce food waste in other ways,
such as by contaminating waste that could be used for animal feedstocks.

Consumption: including losses and waste during consumption at the household level.Empirical
evidence show that drivers of consumer food waste, even in a low-middle income context, include:

(1) Stocking too much food;

(2) Over-preparing or not cooking it properly (e.g. burning food);

(3) Leaving food on dishes after meals or not willing to consume leftovers; and

(4) Decaying of prepared food after long or inappropriate storage.

Role of cold storages

The importance of cold storage of fruits and vegetables has to achieve following objectives

35
  Seasonal production

The production of fruits and vegetables is highly located in favored situations of soil and climate.
While the demand for fresh fruits and vegetable continuous almost throughout the year, their
supplies are only seasonal. For e.g. apples grown in Jammu and Kashmir and Himachal Pradesh
find markets all over the county. Therefore, cold storages have more importance in storing and
supplying the seasonal fruits and vegetables.

 Spoilage:

A crucial problem faced in the case of fruits and vegetables is that of the huge enormous losses
that occur on account of spoilage. The loss of spoilage on different stages on marketing estimated
20% to 33% of the total production. There is an urgent need to minimize the present spoilage loss
through cold storages.

 Losses in transit

Most of the fruits and vegetables are of extremely perishable nature and cannot be kept long under
ordinary conditions of storage. Refrigerated trucks and air-cooled wagons which will help in
minimizing losses is transport.

 Better distribution and fair prices

The prices paid by the consumer to the producer is very low ranging from 40%-60% one of the
principal reasons for this is prevalence of various malpractices in the fruits and vegetables in
terminal markets like Mumbai, Chennai, Delhi, Calcutta etc. These markets receive large
quantities of fresh fruits from outside the state. The producer never knows at what price his product
was in the nearest cold stores and gets fair prices with better distribution.

 Stabilizing market prices

36
Besides the role of stabilizing market prices and also distributing both on demand basis and time
basis. The farmers get opportunity of producing cash crops to get fair prices at the same time; the
consumers get the supply of perishable fruits and vegetables with minimum prices i.e. cold
storages stabilizing market prices of fruits and vegetables.

 Maintain quality

Cold storages will help to maintain the quality of product for some period of time. It gives a chance
to protect the quality of perishable goods for long time whenever it needed to store.

 Wastage reduction

The cold storage system will greatly help in reducing the wastage of perishable goods. Generally
the perishable goods wastage is more due its nature of short life and lack of storing facilities.

Therefore the cold storage has a greater role in reduction of wastage. Though India has lot many
positives in the vegetable production and marketing sector, it has several disadvantages too. The
country lacks an efficient supply chain for the distribution of the fruits and vegetables and cold
storage being the central point. Cold storage helps in increasing the consumption life and
processing helps in preservation of fruits and vegetables which can be consumed during off season.

Recommendation

37
Improving supply chain is beneficial to both for the producer and final consumer as producers
would get remunerative price for his produce and consumer would be benefitted from the lower
price. Therefore, increasing efficiency of supply chain could help in bringing food inflation down
and increase the efficiency of our food markets and make our agriculture sector sustainable and
viable.

Improving supply chain can help to tackle the food inflation which is due to rise in prices of food
items. These comprise perishable items such as fish, meat, vegetables and fruits and all of which
require advanced and effective supply chain management.

It is important to strengthen the supply chain by:

 Enhancing the capabilities of farmers,

 Strengthening infrastructure, and
 Legislative interventions.

Farmers are encourage to form groups like cooperative, growers groups, self-help groups, producer
groups etc. so that they can be benefited by streamlining supply chain as well as to reduce the
transportation cost.

Investment across the entire agro-value chain spectrum, such as creation of cold chains, rural
godowns, new agriculture marketing infrastructure, and modernization of existing markets should
be promoted by providing them incentives through various schemes.

The transparency should be present between the producer and the consumers. It is very important
to improve the infrastructure and facilities of the mandi. The existing system of fragmented
handling of various supply chains should be converted into integrated handling system so as to
ensure better realization to the farmers.

More and more alternative farming technique should be implied so as to stream line the supply
chain like contract farming, co-operative farming, direct selling to company or supermarket
procurement etc. Virtual market platform should be developed to improve and the transparency
and efficiency and reduce the communication gap between the producer and the consumer.

APMC market should encourage activities of small farmers by allowing them to freely trade their
products. Small scale farmers involvement is must so as improve the profit margin of the farmers
and even benefit to the customer. There should be quality between the large scale and the small
scale farmer.

Government need to take some initiatives like the one in Argentina by the company EI Tejar where
the small and marginal farmers are pooled together by taking the land on rent and providing them
wage employment could be experimented.

In some countries, public-private relationships have been instrumental to the success of new supply
chain arrangements, for example, in providing extension and technical assistance to improve the
quality and safety of produce and accreditation of farmers. The country needs a convergence

38
platform at national, state and district level where private player join hands with large number of
farmers through various ongoing schemes and programmed of Central and State Governments.

Infrastructure need to be developed, employed latest technology so as to improve the supply chain
of the APMC market. So that there is fair competition among the farmers and the buyers so both
can improve their profit margin.

By facilitating formal or informal groups to meet the volume requirements and strengthen farmer’s
bargaining power or establishing collection centers to reduce the transaction cost involved in
sourcing from small scale farmers.

Agricultural technique training like a pre and post-harvest should be provided to increase the
farmer’s capacity and to meet higher quality standards.

Farmers need to be educated with the bank facility like short term production loans for farms
improvement like micro-irrigation, greenhouse, grading, or cooling facilities and acquire essential
national and international certifications.

Institute should be developed to provide training to farmers and buyers about their rights and
obligation under contract farming arrangements and in the design of contracts; and even to settle
contract disputes, such as, commodity and market associations.

National Bank for Agriculture and Rural Development (NABARD) is developing for potato in
West Bengal, Uttar Pradesh, onion in Maharashtra and tomato in Punjab and Haryana. These
projects, are funded by the banks, the State Governments and the research institutes, are
comprehensive in nature and are expected to help the farmer in better sorting/packaging,
warehousing and marketing apart from helping at production stage by adopting better agriculture
practices, involving quality input and R&D support.

Small farmer should encourage becoming an entrepreneur. For example, farmer can sell different
white and brown goods; it may result in additional income of farmers.

Farmer can have tie up with the companies and can sell their product directly to the company and
in turn can have dealership for that company, which lead to additional source of income.

The difference between the price level at the wholesaler and the retailer should be minimizing by
making supply chain more efficient and effective.

Conclusion
The storage of supply of agricultural commodities with increase in demand as a result increases in
prices, so productivity need to increase.

39
Improvement in the management of supply chain would be a bottleneck for overall growth of the
economy.

Efficiently functioning markets add to welfare of producers as well as consumers. Efficient

agricultural markets can also be a potent tool for poverty reduction.

Alternative mode of supply chain like virtual market, direct selling, contract farming, etc. need to
be implementing to remove the middleman and increase the profit margin of the farmers and
benefits to the customer.

The current fragmented marketing system and lack of infrastructure are the serious constraint to
the efficient functioning and competitiveness of supply chain in India.

The difference in price at wholesaler and retailer level leads to increase in price of the commodity.

References

 “Supply Chain ManagementConcepts and Cases” By Rahul V. Altekar (Prentice Hall

India, New Delhi)

40
 “Supply Chain Management-Strategy, Planning and Operation” By Sunil Chopra and Peter
Meindi (Pearson Education, New Delhi)

 https://www.ccsniam.gov.in/images/research/2013_agri_waste_mgmt_by_dr_saswati_bo
se.pdf

 http://www.livemint.com/Politics/kejX5POEUKK1l7qz05c0VL/How-Maharashtra-is-
changing-the-way-farmers-sell-their-produ.html

 https://www.omicsonline.org/open-access/scope-of-supply-chain-management-in-fruits-
and-vegetables-in-india-2157-7110-1000427.php?aid=41037

 https://en.wikipedia.org/wiki/Food_waste#Food_processing

 https://en.wikipedia.org/wiki/Agricultural_produce_market_committee

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