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Estimation of Marketing Efficiency of Horticultural Commodities Under Different Supply Chains in India

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Title Estimation of Marketing Efficiency of Horticultural Commodities Under Different Supply Chains in India
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Creator M B Dastagiri
 
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The study on “Estimation of Marketing Efficiency of Horticultural Commodities under Different
Supply Chains in India” was conducted in 7 states viz Andhra Pradesh, Karnataka, Tamil Nadu,
West Bengal, Manipur, Rajasthan and Punjab and Innovtive Models in Horticulture Marketing in
India study by NCAP. The main objective of the study are to estimate marketing cost, market
margin, price spread and producer share in consumer rupee and suggest suitable strategies for
improvement of marketing efficiency of different horticultural commodities. The executive
summary of these states is furnished below.
The study was taken up in Ranga Reddy, Medak and Hyderabad districts of Andhra Pradesh. The
crops included were Potato, Tomato, Baby corn, Roses and Grapes. A sample of 90 farmers each
for all the selected crops except for grape was selected. The data pertaining to grapes could not be
collected from more than 50 farmers due to limitation of availability of required sample size and
thus the total sample size was 410 farmers.
In terms of supply chains, in the case of potato, the preferred channel was producer-wholesalerretailer-consumer
(PWRC).The preferred supply chain for tomatoes on the other hand was
producer-middleman-wholesaler-retailers-consumer (PMWRC). The supply chains for baby corn
were producer-middlemen-retailer-consumer (PMRC).Producers of roses preferred producerwholesaler-retailer-consumer
(PWRC) supply chain, and subsequently roses and grapes followed a
similar pattern, with producer-middleman-wholesaler-retailers-consumer (PMWRC) supply chain.
With respect to marketing costs, the farmer-producer of potato was seen to incur the highest
marketing cost compared to that of producers of the other crops studied. In addition, it was evident
that the market cost incurred by the retailers was lower than that of the wholesalers and
commission agents. In terms of price spread it was evident in the marketing of all the crops that
marketing margins at wholesalers and retailers level and also the market cost was relatively high at
the intermediary level. The data supports the argument that the intermediaries play a crucial role in
realizing better margins to all the crops compared to that of growers. In the case of the share of
different agencies during marketing of fruits and vegetables the highest share was accrued by
retailer followed by wholesalers. In terms of marketing efficiency, it was clear that in the supply
chain model of producer-retailer-consumer (PRC) efficiency was 90% followed by the producerwholesaler-retailer-consumer
(PWRC) and in the producer-middleman-wholesaler-consumer
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(PMWC) it was 75%. The information indicated that the more intermediaries there in the supply
chain systems, the lower was the market efficiency. The chief constraints for farmers were
malpractices in auction and faulty weighing; wholesalers cited inadequate storage facilities and
retailers referred to exploitative middlemen and inadequate marketing facilities. Other complaints
by farmers included high market fees. Thus it could be concluded that the marketing cost,
marketing margin, transport cost, labor wages and the length of the market channel had negative
influence on the marketing efficiency.
Bangalore urban and rural districts, which form the most important horticultural belt of Karnataka
state, have purposively been selected as the study area. Data on month wise procurement of
different fruits and vegetables by SAFAL, Bangalore was taken as the primary focus for crop
selection. Banana (Robusta) and tomato formed the ones that are dealt with throughout the year
hence were selected as the crops for this study. Total sample size worked out to 130 and above for
each crop.
Marketing of horticultural crops includes a number of marketing channels involving the traditional
as well as modern marketing networks. In Karnataka several models of marketing networks
involving backward and forward linkages have emerged in marketing of horticultural crops. This
study analyzed the performance of some of these marketing networks on the basis of their
performance and marketing efficiency. The study specifically evaluated three modern systems
Viz., SAFAL, Namdharis and HOPCOMs in comparison to the traditional marketing networks for
banana and tomato crops in the state.
Several channels of marketing could be identified in banana (Robusta) marketing in Karnataka.
Field sale is the most common, followed by self marketing by the producer at the nearby wholesale
market. Sale at the HOPCOMs society is also popular, while the sale to the newly established
corporate house, SAFAL is the latest.
It could be seen from the analyses that producers share in consumers rupee has the largest in the
co-operative channel (62.3%) followed by the traditional wholesale network (51%). Despite all the
hype, the SAFAL network fetches the farmer only 50 percent of the consumers’ rupee.
Total marketing costs incurred in Banana sale was in the range of Rs.2.77 to Rs. 5.1 /kg, with
SAFAL outlet sales taking the largest chunk. Total margins of the different market intermediaries
were in the range of Rs. 2.65/kg in the co-operative channel to Rs. 4.82/kg in the traditional
channels. Marketing efficiency measured in terms of modified Acharya’s formula was the highest
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for the co-operative channel at 1.65 followed by the 1.05 in the traditional wholesale channel while
SAFAL registered an efficiency of 0.99, which is better than the field sale channel. Price spread
ranged from Rs 4.90 in the cooperative channel to Rs 8.80 in SAFAL outlet route.
Yelaki banana is most popularly grown in and around Ramnagar region of Mandya district,
Karnataka. This has received a boost from the extension of co-operative marketing network of
HOPCOMs at the district.It could be seen from the analyses that producers share in consumers
rupee was the largest in the co-operative channel (70%) in comparison to the 46 .5% in the
traditional wholesale network. Total marketing costs incurred in Banana sale was in the range of
Rs.2.76 to Rs. 4.95 /kg, with co-operative network and wholesale market network. Total margins
of the different market intermediaries were in the range of Rs. 5.42/kg in the co-operative channel
to Rs. 16.39/kg in the traditional channels. Price spread ranged from Rs 4.90 in the cooperative
channel to Rs 8.80 in SAFAL outlet route.The marketing network of tomato included the
traditional marketing channel of sale through Kolar wholesale market, sale through SAFAL and its
outlets, HOPCOMs and their outlets and contract cultivation for Namdhari seeds private limited.
Net farm price varied from Rs. 4.05 /kg in the Namdhari fresh channel to Rs. 5.93/kg in the
channel 3, i.e., the distant market sale. While the procedure adopted by the SAFAL network is
similar to that for Banana, the Namdhari fresh offers farm gate procurement. Producers share in
consumers rupee in case of tomato among the six channels studied was the highest in the cooperative
network involving HOPCOMs at 435 followed by distant market channel and SAFAL.
The lowest was for the producers dealing with Namdhari. Total marketing costs incurred in tomato
marketing ranged from Rs. 2.45/kg in Namdhari sale to Rs. 6.28/kg in Kolar marketing. Total
margins of the different market intermediaries were in the range of Rs. 2.55/kg in the co-operative
channel to Rs. 9.00/Kg in the namdhari market network
Marketing efficiency measured in terms of modified Acharya’s formula was the highest for the cooperative
channel at 0.75 followed by the 0.73 in the traditional distant market channel. Price
spread ranged from Rs 7.15 in the cooperative channel to Rs 11.45 in Namdhari.
In Tamil Nadu data was collected from farmers and market intermediaries for the four selected
vegetables viz brinjal, potato, tapioca and gherkin. The data were based on respondent recall and
as per existing practices and pertain to the year 2009-10. For each of the four vegetables covered
under the present study samples of 120 farmers were selected, and hence the total sample size is
630.
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Lessons from the study of the vegetables, brinjal, potato, tapioca and gherkins indicate that
marketing issues were larger than mere reduction in the number of middlemen or promoting
adhoc measures. Number of tapioca processing industries in Salem District are said to be
declining in number due to gradual reduction in area under tapioca cultivation in surrounding
districts. Similarly, gherkins processors have been facing major problems since the economic
slow down in the west which is the major importing countries. On the contrary, brinjal and
potato farmers have been reaping greater benefits in recent year due to escalating vegetable
prices. Similar increases in market prices have been observed for commonly consumed
vegetables.
Results presented in the study indicated that in the most common marketing channels for the
studied vegetables the marketing cost was a reasonable 15 per cent of the consumer price and
marketing margins of the intermediaries constituted again a reasonable 10 per cent. Producers get
about 75 per cent of the consumer rupee. However, problems arise to the producers mostly
because of the wider price fluctuations due to production cycles. While production and
marketing costs for the farmers remain fixed, abnormal down trends in prices inflicts heavy
damages in terms of income loss for them. Market intermediaries only suffer loss of turnover
with their margins and fees fixed.
Study has been conducted in three coastal districts of West Bengal, viz, South 24 Parganas,
North 24 Parganas and East Midnapore. Three vegetables, brinjal, bhindi (ladies finger) and
tomato have been selected. Among flowers and fruits, marigold and guava respectively have
been selected. The sample size number of farmers interviewed are 272 and number of
middlemen interviewed are 113, and hence the total sample size is 385.
Brinjal and bhindi are marketed through same marketing channels, in the study area. Marketing
channels for tomato are frequently changing depending on season and local supply. Tomato is
marketed through more number of marketing channels and also passes through more long
channels as compared to other vegetables under study (brinjal and bhindi). Dominating
marketing channels for guava is shorter in length because it has to reach to final consumer as
quick as possible after harvesting to fetch better prices. Guava looses its flavour, vigor
glossiness, freshness and taste very quickly. Marigold is also highly perishable and requires
quick disposal after harvesting. It has to reach to final consumer in quickest possible time,
preferably within a day to realize better prices. Majority of marigold and guava are marketed
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through wholesale marketing, at Mullick Ghat Ful Bazar, and Machna Ful Patty of Kolkata,
respectively.
Marketing cost for brinjal incurred by farmers has been calculated to be Rs. 80/q, and the same
was Rs. 70/q for bhindi, Rs. 90/q for tomato, Rs. 105/ 1000 no. of guava and Rs. 110/100 no. of
garlands. Total marketing margin has been calculated to be Rs. 990/q for brinjal and the same
was Rs. 778/q for bhindi, Rs. 894/q for tomato, Rs. 1138/1000 no. of guava and Rs. 4458/100
unit (kuri) of garlands. For brinjal the price spread (Consumers’ price – producers’ price) has
been calculated to be Rs. 955/q, and the same is Rs. 850/q for bhindi, Rs. 1055/q for tomato, Rs.
985/1000 no for guava, and Rs. 2800/100 unit (kuri) for marigold marketing. In case of brinjal
the producers’ share in the consumers’ price was estimated to be 44 percent and the same was 37
percent under bhindi, 26 percent under tomato, 45 percent under guava and 60 percent under
marigold. The marketing efficiency has been estimated as 0.79 for brinjal, 0.58 for guava and
1.51 for marigold marketing.
The study was taken up in Bishnupur, Imphal-West, Ukhrul, Thoubal, Churachandpur and
Senapati districts of Manipur and Aizawl district of Mizoram state. The crops included were
Tomato, Cabbage, Passion fruit and Anthurium. Data were collected from 480 farmers and 155
middlemen (wholesaler, retailers and traders) and hence the total sample size was 635.
It was observed that the maximum quantity of tomato in the sample area was marketed through
retailers. As tomato is highly perishable, losses consumed highest share in the total marketing
cost. Most of the farmers in hilly region of Manipur market their cabbage through village traders,
while those in the plain regions market their produce through wholesalers. The passion fruit
growers of Churachandpur district market their produce through the Passion Beekeeping
Development Association of Churachandpur district, Manipur. About one third of the total cut
flowers of anthurium produced in the Mizoram have been sold outside the state through
Bangalore based exporter, ZOPAR Export Ltd. and the remaining consumed in the state.
Transportation cost consumed the highest share in the marketing cost of these produces.
Marketing cost and marketing margin vary considerably from channel to channel and were
related directly to the length of the channel, i.e., longer the channel, more were the marketing
cost and marketing margin. The price paid by the consumer increased with the increase in the
length of the marketing channel or with the increased in the numbers of intermediaries involved
between the producer and the ultimate consumers. As the length of channel increases the price
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spread also increases and vice-versa. The marketing efficiency increased with the decrease in
marketing margin and open market price and with the increase in volume of the produce handled
and length of market channel.
The major constraints of marketing horticultural crops include lack of market to absorb the
production, low price for the products, large number of middlemen in marketing system, lack of
marketing institutions to safeguard the farmers’ interest and rights over their marketing (e.g.
cooperatives), lack of coordination among producers to increase their bargaining power, poor
product handling and packaging, imperfect pricing system and lack of transparency in market
information system.
Present study was conducted in Jaipur and Sriganganagar districts of Rajasthan. Sriganganagar
district was selected for study of kinnow and carrot crop while, Jaipur district was selected for
aonla and tomato crop. These districts were selected based on significant area under selected
fruits and vegetables crop. Sample size was kept uniform for all fruits and vegetable crops. For
each crop 120 farmers were selected. Beside this, information was also collected from 30
wholesalers/ traders/ contractors and 30 retailers for each fruit and vegetables crop studied.
There were three important marketing channels through which kinnow produce were sold by
farmers in Sriganganagar district. The marketing channel- I was most famous as about 71 percent
produce was sold through it. In channel-II farmers directly brought produce in the mandi and
sold it through commission agents either in local or distant markets in same or other states. In
channel III producers sell the produce after grading and processing. The produce was either
processed by farmers himself at his processing plant or on payment basis at grading plants
situated around Ganganagar city. Total marketing cost of about Rs 807 was observed in channelI
when sold to distant markets in south particularly Bangalore city. The cost was shared by
contractors (65.30%), commission agents (3.72 %) and retailers (30.98%). The maximum cost of
marketing was shared by contractors as he arranges labour for fruits harvesting, packing and
pays the cost of packing material and transportation cost. Total marketing cost had 29.49 and
15.67 percent share in consumer price in channel I and II, respectively. There were three
important marketing channels through which aonla produce were sold by farmers in Jaipur
district. The marketing channel-I was the major one as about 87 percent produce was sold
through it. In channel-II, farmers directly brought produce in the mandi and sold it through
commission agents. The marketing cost in channel II was lower than channel I as produce was
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directly brought by farmers in the mandi and sold through retailers to consumers after paying
taxes of market and fee of commission agents.
There were two important marketing channels through which carrot produce were sold by
farmers in Ganganagar district. The marketing channel-I was the largest one as about 85 percent
produce was sold through it. Traders from adjoining states like Punjab, Haryana and other parts
of Rajasthan were participating in the auction which takes place on the banks of Ganga canal.
The total marketing cost was lower in channel II compared to I because produce was not taken to
distant places and number of intermediaries were also fewer .There were two important
marketing channels through which tomato produce were sold by farmers in Jaipur district.
Produce procured in channel I was sold in different markets of Rajasthan, viz. Jaipur, Sikar,
Ganganagar, Hanumangarh, Sardarshahar, Churu and various cities in Punjab and Haryana etc,
while in Channel II produce is directly procured by retailers and sold in Chomu or Jaipur city.
The total marketing cost was lower in channel II compared to I because produce was not taken to
distant places and number of intermediaries were also fewer.
Strategies to enhance marketing efficiency of fruits and vegetables vary according to nature of
produce and kind of marketing facilities in a particular region. Discussions were held with
farmers, contractors, wholesalers, processors and retailers to get the idea about improvement in
marketing system so that efficiency of the whole marketing system is improved and farmers get
adequate returns from this enterprise to remain in horticulture crops farming. Regarding fruits
both kinnow and aonla are important fruit crops of Rajasthan. More than 50 percent produce of
both fruits are transported outside state for further processing or for direct consumption. There is
not a single fruit processing industry for kinnow in the production region.
In Punjab, five important vegetables were studied in the study. These are potato, tomato, green
peas, brinjal and okra. Jalandhar district was selected for potato, Kapurthala for tomato,
Hoshiarpur for green peas, and Jalandhar for brinjal and okra based on area under these crops.
The convenience sampling technique was used for selection of different types of respondents in
the study. For each vegetable, the sample consisted of 120 farmers except 93 farmers for brinjal.
Further, for each vegetable, 30 wholesalers, 30 retailers and 30 farmers from Apni Mandi were
selected. Thus, the total sample consisted of 573 farmers, 150 wholesalers, 150 retailers and 150
farmers from Apni Mandi. For the present study, the total number of all types of respondents was
1023.
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The study brought out that the net price received by the producer was about Rs 554/q which in
percentage terms was about 46 per cent of the consumer’s purchase price in supply chain I in
Kapurthala market. The expenses borne by the wholesaler and retailer were Rs 68 and Rs 84/ q.
These respective expenses were about 6 and 7 per cent of the consumer’s purchase price. The
margin of the wholesaler and retailer was 11 per cent and 26 per cent of the purchase price of
consumer. The producer’s net price received was Rs 579/q in supply chain II. This was about 48
per cent of the consumer’s purchase price. The expenses and margins of the retailer were about
12 per cent and 36 per cent of the consumer’s price. The retailer’s margins were comparatively
less in supply chain I as compared to supply chain II. For sale of tomato in supply chain III (Apni
Mandi), the net price received by the producer was Rs 1024/q which was 93 per cent of the
consumer’s purchase price. The marketing efficiency in supply chain III was 13.42 as against
1.01 in supply chain II and 0.92 in supply chain I. The marketing efficiency in supply chain III
was high on account of the fact that no middleman was involved and produce was directly sold
to consumers. As compared to supply chain I, the marketing efficiency of tomato was marginally
high in supply chain II due to less number of the intermediaries in the latter.
In case of potato, market margins and costs were the major explanatory variables significantly
affecting the marketing efficiency. It infers that with one percent increase in marketing margin
and cost, the resultant marketing efficiency declined by 0.61 and 0.37 percent respectively. In
case of tomato, the coefficients of marketing margins and costs were significantly and negatively
related with the marketing efficiency. The coefficient indicated that one percent increase in these
variables resulted into fall in the marketing efficiency by 0.69 percent and 0.38 percent
respectively. In case of green peas, market margins and costs were the major explanatory
variables significantly affecting the marketing efficiency. It infers that with one percent increase
in these variables the resultant marketing efficiency declined by 0.45 and 0.44 percent
respectively. In case of brinjal, the various explanatory variables included in the model were
significantly affecting the marketing efficiency. The coefficients of market margins and costs
were significantly negatively related with the dependent variable. It can be inferred that with one
percent increase in these variables, the marketing efficiency declined by 0.57 percent and 0.32
percent respectively. In case of okra, the various explanatory variables included in the model
were significantly affecting the marketing efficiency. The coefficients of market margins and
costs were significantly negatively related with the dependent variable. It can be inferred that
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with one percent increase in these variables, the marketing efficiency declined by 0.54 percent
and 0.37 percent respectively.
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Date 2016-12-02T05:55:54Z
2016-12-02T05:55:54Z
2010-01-01
 
Type Project Report
 
Identifier Not Available
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http://krishi.icar.gov.in/jspui/handle/123456789/806
 
Language English
 
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Publisher Not Available