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Rural Marketing

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Published in: Management Subjects
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Concepts of Rural Marketing

Ayon R / Kolkata

13 years of teaching experience

Qualification: MBA/PGDM (L.P.U. (PUNJAB) - 2014), CS (I.C.S.I. (INSTITUTE OF COMPANY SECRETARIES OF INDIA) - 2013), B.Com (UNIVERSITY OF CALCUTTA - 2010), Integrated PG (C.I.M.A. (U.K) - 2013), PG Diploma (PRACHEEN KALA KENDRA CHANDIGARH - 2014)

Teaches: CA - CPT, CMA Foundation, CS - Foundation, ICWA & ICWAI, Accountancy, Business Studies, Commerce Subjects, Economics, B.Com Tuition, BBA Tuition, Bank Clerical, IBPS, BBA Subjects, Management Subjects, Tabla

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  1. NOTES ON RURAL MARKETING (50 MARKS) CHAPTER 3 RURAL CONSUMER l. THE CLASSIFICATIONS OF THE RURAL CONSUMERS. The Rural consumers can be classified under the following categories based on their economic status:- The Affluent Group They are mostly cash rich farmers and are very few in number. They have affordable but do not form a demand base large enough for marketing firms to depend on wheat farmers of Punjab and rice merchants of Andhra Pradesh fall in this group. The Middle class This is one of the largest segments for manufactured goods and is fast expanding — farmers cultivating sugar cane in UP and Karnataka fall in this category. The Poor This constitutes a huge segment. Their Purchasing power is less, but strength is more. They receive the grants in various ways from government and reap the benefits of many such schemes and may move towards the middle class. The farmers of Bihar and Orissa fall under this category. SPECIAL CHARACTERISTICS OF RURAL CONSUMERS Consumer behaviour is a complex phenomenon that is influenced by various factors such as income, occupation, education, lifestyle and geographical location. To use a single factor to understand rural consumer behaviour would be misleading. Also, the assumption of urban marketers that the rural consumer is no different from his urban counterpart is a mistake that has led to many a failure in rural marketing. 3.4.2 1.Age and Stages Of the Life Cycle The purchase of products and services and their forms and nature is influenced by age and life-cycle stages of the consumer. This gives direction to the estimation of demand, segmentation, targeting of markets and product mix decisions.
  2. 2.0ccupation and Income:- In the rural sector, a range of goods and services beyond the very basic ones are bought by a consumer, influenced by the occupation and income of the individual. Fishermen buy a boat and large nets, whereas a farmer opts first for a tractor and pump set. The same buying behaviour and choice of products cannot be expected from a cultivator, salary earner (teacher) and petty shopkeeper, all of whom may have identical incomes. A farmer has to allow for variations in income during pre-harvest and post-harvest periods. The shopkeeper (baniya) behaves differently as he is in a position to adjust his income according to demand in village by adjusting inventory and credit, without this affecting the purchase of goods. On the other hand, a salary earner has a fixed and assured income. 3.Economic Circumstances The purchasing power of an individual plays a significant role in choice of products. People's economic circumstances, are dictated by their disposable income, savings and debts, credit worthiness and attitude towards spending and savings. The patterns of income of a farmer, is linked to the harvest and stability of income from produce and is also largely dependent on the monsoons. His urban counterpart however, enjoys a stable monthly inflow of income. The purchasing power of a daily wage earner, on the other hand, is redefined every day. The fact that a majority in the rural sector are selfemployed increases the risk of stability of income. 4.LifestyIe Lifestyle deals with everyday behaviorally oriented facets of consumers, as well as their values, feelings, attitudes, interests and opinions. It embodies the patterns that develop and emerge from the dynamics of living in a society. There is a vast difference in the lifestyles of rural and urban consumers, because of the differences in the social and cultural environment, values and daily mode of living. Extensions of urban positioning therefore can become totally irrelevant. The typical lifestyle dimensions are: A. Activities: Allocation of time by the consumer/family (work, hobbies, social events, entertainment) B. Interests: Consumer preferences and priorities (food, fashion, family, recreation) C. Opinions: Consumer attitudes to events / issues (politics, education, social issues, future, culture) D. Demographics: Age, education, income, occupation, family size, geography, dwelling.. 5.PersonaIity and Self-Concept :- Personality is the sum total of the unique individual characteristics that determine and reflect how a person responds to his/her environment. It provides a framework within which consistent and long-lasting behavior can be developed. Self- concept or self-image is the way we perceive ourselves in a social framework. There is a natural tendency to buy those products and services that we think fit or match with our personality. In order to relate personality to the products people purchase, there are two aspects to be considered : situation and person. When in social gatherings, rural youth prefer to buy pan masala, tea, and namkeen, whereas urban youth enjoy popcorn and coffee/cold drinks.
  3. 6.PersonaIity and Psychological Factors The rural consumer, unlike his urban counterpart, is quite content to satisfy his basic needs relevant to his environment. He is less adventurous, averse to taking risk and prefers to stay with the tried and tested. A lot of persuasion by an influencer, whose achievements he respects is required to convince him to try new products. For products which are higher on the involvement scale (not necessarily more expensive), opinion leaders to play a significant role. 2. THE RURAL CONSUMER BUYING PROCESS Rural consumer behaviour is different as to its counterpart in many aspects. Rural consumers are highly influenced by several demographic factors and personal factors, which leads to prefer basic offerings, durable products and brand loyalty based on past experience. The one of the most important problems in rural market is non-availability of wide variety of products specifically with reference to consumer durables. Consumer in rural India is expecting better quality product at reasonable price and considered opinion of the retailer and experience of present user of product in determining brand of the product. By and large, rural consumer's income is seasonal which is reflected in their purchase behavioural also. Following detailed explanation of various typical factors affecting consumer behaviour specifically for rural area gives understand about rural buying pattern and other aspects. Stages in Buying Process Consumers pass through five stages while making a purchase decision. In low-involvement purchases, rural and urban consumers may skip some of these stages. A woman buying her regular brands of daily-use groceries will identify the need and purchase from the shop, skipping two stages. It is in the purchase of high-involvement products that a rural consumer displays different motives relating to problem recognition, sources of information, evaluation procedures, collective decision, and different post purchase behaviour. This creates the need to treat each stage of the marketing process differently for rural and urban consumers. Stages in Buying Process Problem recognition Information search Evaluation of alternatives Purchase decision Post-purchase behavior
  4. 3. BUYING BEHAVIOUR AND PATTERENS OF THE RURAL CONSUMERS ARE INFLUENCED BY THE FOLLOWING FACTORS. To understand the buying behavior of rural consumers, we must go to the factors that influence their buying behavior. The factors include: 1. Socio-economic environment of the consumer 2. Cultural environment 3. Geographic location 4. Education/literacy level 5. Occupation 6. Exposure to urban lifestyles 7. Exposure to media and enlarged media reach. 8. The points of purchase of products. 9. The way the consumer uses the products 10. Involvement of others in the purchase. 11. Marketers effort to reach out the rural markets Some of these points are discussed in some detail below: A. Influence of culture: Culture and tradition influence perception and buying behavior. For example, the preference in respect of color, size and shape is often the result of cultural factors. Rural consumerså€TM perception of products is strongly influenced by cultural factors. B. Geographic locations: Rural consumer behavior is also influenced by the geographic location of the consumers. For example, nearness to feeder towns and industrial projects influence the buying behavior of consumers in the respective clusters of villages. We are discussing this aspect in detail in the section on market segmentation in rural markets. To cite one more example of how geographic location affects buying behavior, we can point out the fact that the lack of electricity in many rural households acts as a barrier to the purchase of certain consumer durables. C. Exposure to urban lifestyles: Extent of exposure of rural consumers to urban lifestyles also influences their buying behavior. An increased exposure and interaction with urban communities has been the trend in recent years.
  5. D. The way the consumer uses the products: The situation in which the consumers utilize the product also influences their buying. The example of lack of electricity affecting buying behavior illustrates this point as well. Lack of electricity automatically increases the purchase of batteries by rural consumers. Similarly, since rural consumers cannot use washing powders/detergent powders that much, as they wash their clothes in streams or ponds, they go in more for washing bars and detergent cakes. E. Places of purchase: Buying behavior of rural consumer also varies depending on the place of purchase. Different segments of rural buyers buy their requirements from different places/outlets. Some buy from the village shopkeepers; some from village markets/fairs; others buy from the town that serves as the feeder to the rural area. It is also seen that the same buyer buys different requirements from different laces. For understanding the buying behavior of the rural consumer correctly, the marketer must ask the question: Where from do they buy the products and why? F. Involvement of others in the purchase: Involvement of others in the purchase in the purchase decision is yet another relevant factor in this regard. There has been a change here in recent years. In the past, the head of the family used to make the purchase decision all by himself. In contrast, the involvement of the other members of the family in the purchase decision has been growing in recent years. An increase in literacy coupled with greater access to information has resulted in this development. The marketer has to reckon the role of the influencers while sizing up the buying behavior of rural consumers. 4. INFLUENCING OF RURAL CONSUMERS Influencing the Rural Consumers The biggest challenge faced by marketers today is to develop a model to influence the rural consumers' mind over a large going. This needs to be achieved in a minimum budget. That's where the marketers who really markets and advertising agencies can make a communication model. period of time and keep it of limited or a reasonable need to understand rural difference and develop a
  6. The mass media has the drawback that the time gap between the point of exposure and the time of purchase is long. So it is very difficult and risky to use it in rural communication. The most important element in rural communications is that the marketer has to integrate the following three things in communication — , Exposure of a message Trial or demonstration Final sale There is minimal brand loyalty in rural consumers. This is mainly due to a bigger problem of brand recognition. There are a lot of looks alike in the rural market. The challenge is to create communication that would help the rural consumer in recognizing brands, logos, visuals, colors, etc., so that he or she actually buys the actual brand and not something else. *** NOTES OF CHAPTER 4 HAS BEEN GIVEN
  7. 1. CHAPTER 5 . PROMOTION AND DISTRIBUTION IN RURAL MARKETS. PROMOTION IN RURAL MARKETS. Let us now understand the different promotion strategies involved in rural marketing. Personal Selling It is a process of face to face interaction between the salesperson and the prospective customer. Through a proper training and guide, a salesman can be a valuable medium between the marketer and the prospective customer. A good salesperson is the one who has thorough knowledge about the product he is about to sell and tries to strike a common point of link between the product and the customer needs. Personal Selling in Rural Region Most of the marketers think personal selling is not feasible in rural areas because of various reasons ranging from scattered population to a large number of villages to be covered. Though still not a prevalent practice adopted by the national level marketers, personal selling is widely done by the local manufacturers of utensils, garments, edible good etc. For the marketer to adopt personal selling as a tool of promotion in rural area, following are few of the basic requirements that need to be present in their salesperson — Familiarity with the Rural Area — It is difficult for the salesperson to be familiar with rural area. As the population of rural region is scattered, it becomes a lot more important for the salesperson to have sufficient knowledge about rural area which he is supposed to cover. Proficiency in Local Language — Fluency in the local language is another key skill that must be present in the salesperson. It acts as a
  8. major communication point in converting prospective customer into an actual one. Acquaintance with the Rural Folks — It is a common tendency among rural people that they only pay attention to those people whom they can consider as a part of their social group. Thus, if the salesperson belongs to the particular rural district, in that case his job not only becomes easy but also chances of success in achieving his sales target increase strongly. Be Persuasive but not Pushy — A good salesperson is one who is persuasive but not pushy in nature. Rural people are always skeptical in nature about the new product and strongly hesitate to purchase it due to lack of faith. Here a salesperson needs to remove the doubts of the prospective customer and make him believe to purchase the product. But being too pushy in his approach can ruin the chances of sale of the product. Public Relations — Public relations in case of marketing promotions in case of rural areas are highly important so as to create the formal relationship with the newly acquired customers. Also, dissemination of information concerning the rural folk is possible only through effective public relations. Educating rural people about the importance of administering polio drops to children, vaccination to mother and child, sanitation, hygiene etc. has become possible only through the publicity health campaigns. Sales Promotion It is a short term tool adopted by the marketer to increase the sales of the particular product / service in a particular area for a particular period of time. According to marketers, sales promotion includes those sales activities that supplement both personal selling and advertising, and coordinating. It also involves making the advertisements effective, such as displays, shows and exhibitions and demonstrations.
  9. Types of Sales Promotion The following are the different types of sales promotion — Push-up Sales Promotion is the technique where marketers persuade third parties i.e. intermediaries like dealers, retailers etc. to stock the products of the respective company and push them towards the ultimate customers. Marketers started providing various incentives, pop material etc. to the intermediaries which encourage them to sell the products to the customers. To increase product sales ratio push-up sales promotion is the important part of promotion efforts taken up by the companies. In case of rural marketing the companies also follow push-up sales promotion strategies. The commonly followed push-up sales promotion strategies include — Free display materials — Free display materials like banners, sign boards, neon lights etc. are distributed among dealers to attract and inform the customers about the products. Storage materials — Storage materials like racks, shelves, refrigerators etc. are distributed among shopkeepers who help in visual merchandising and also aid in storing the product. Demonstrations — Important technique of push-up sales promotion, free demos at dealers' shops inform the consumers about the handling of the product. Incentives to dealers — Under the push-up sales promotion special incentives are provided to dealers on the number of units sold to the ultimate consumers. Lucky draw contest — It is to motivate dealers to stock the company's products and promote sales, and lucky draw contest are organized among dealers.
  10. Free gifts — It is a common strategy adopted by the companies and free gifts are often distributed among dealers during festive seasons to increase the consumer base. Pull-up sales promotion — As the name suggests, pull-up sales promotion is the tool where marketer pulls the customers towards their product through various promotional strategies and advertising. Free Distribution of Samples Distributing free samples among rural people not only popularize the product but also gain huge acceptance among them. When the company decides to enter into new market and launch the new product, in such cases free distribution of samples is an effective pull-up sales promotional activity. As compared to urban consumers, the tendency to try the new product is low in case of rural consumers because they have lack of faith about the new products. Free samples encourage trial purchase among consumers. With-pack Premiums Here, a free product is given either inside the pack or outside the pack. This attracts the rural customers to purchase the product. This is successful only when the free product is either complementary or useful to the consumers. For example, a free toothbrush that comes complementary with toothpaste. Price-off Premiums This refers to the cut-price technique for a product. This is useful not only in case of FMCGs but also in case of consumer durables if the discount is appropriate. 2. DISTRIBUTION CHANNEL AND LOGISTICS IN RURAL MARKETS. A. Seqment villaqes before expandinq: With numerous villages in India, it is impossible for an organization to hit the rural market all at once. Ideally, coverage of villages with up to 2000 and above population could be the break-even point for a distribution set-up. By doing so the percentage of villages covered comes to only 10%,
  11. however the percentage of all the rural population covered will be substantial. B. Use of co-operative societies: There are over 3 lacks co- operative societies operating in rural areas for different purposes like marketing cooperatives, farmers service cooperatives and other multi-purpose cooperatives. These cooperatives have an arrangement for centralized procurement and distribution through their respective state level federation. Such state level federation can be motivated to procure and distribute consumables items and low value durable items to the members to the society for serving to the rural consumers. C. Utilization of public distributory system: The PDS in the country is fairly well organised. The revamped PDS places more emphasis on reaching remote rural areas like the hills and tribals. The purpose of PDS is to make available essential commodities like food grains, sugar, kerosene, edible oils and others to the consumers at a reasonable price. The shops that distribute these commodities are called fair price shops. These shops are run by the state civil Supplies Corporation, co-operatives as well as private entrepreneurs. Here again there is an arrangement for centralized procurement and distribution. The manufacturing and marketing men should explore effective utilization of PDS. D. Utilisation of multi-purpose distribution centres by petroleum/oil companies: In order to cater to the rural areas the petroleum/oil companies have evolved a concept of multi-purpose distribution centres in rural areas. In addition to petrol/diesel, lubricants, these outlets also stock consumables agricultural inputs like fertilizers, pesticides and seeds. It is estimated that there are about 450 such outlets in operation in the country. The rural consumer who has tractors, oil-engine pump sets and mopeds frequent these outlets for their requirement. These outlets can be profitably utilized for selling consumables and durable items also.
  12. E. Distribution upto feeder markets/ mandi towns: Keeping in view the hierarchy of markets for the rural consumers, the feeder markets and mandi towns offer excellent scope for distribution. The rural customers visit these towns at regular intervals not only for selling the agricultural produce but also for purchasing cloth, jewellery, hardware, radios, torch cells and other durables and consumer products. From the feeder markets and mandi towns the stockist or wholesaler can arrange for distribution to the village shops in the interior places. This distribution can be done by mopeds, cycles, bullock-carts, camel-backs etc. depending upon the township. F. Shandies/Haaths/Jathras(Melas: These are places where the rural consumers congregate as a rule. While shandies/heaths are held a particular day every week, Jathras and melas are held once or twice a year for longer durations. They are normally timed with religious festivals. Such places attract large number of itinerant merchants. Only temporary shops come up selling goods of all kinds. It can be beneficial for companies to organize sales of their product at such places. Promotion can be taken, as there will be ready captive audience. Logistics for Rural A business challenge as 'access' is still limited Some of the salient points on rural distribution: — Vast potential for business but collection and delivery points are too many Producers of agricultural produce and the users of consumer products are dispersed — Transport is unviable — no return loads Agri produce is seasonal, bulky, perishable and not of standard sizes — Intermediaries in various forms are a major el erne n t Of cost 20
  13. Overview of rural logistics market Rural logistics is a regional logistics concept relative to urban logistics market. Rural logistics mainly refer to logistics activities in rural areas and covers transportation, loading, unloading, packaging and storage activities provided for production, life and other economic activities of peasant household. According to the flow direction, rural logistics can be divided into two parts: input logistics and output logistics, including the logistics which inputs from peasant households or agricultural product operators and flows to consumers. Rural logistics market is composed of two parts: rural logistics supply market and demand market. The components include logistics include logistics service provider and service demander. The former includes the third-party, first-party and second-party logistics. Logistics service personnel from leading enterprises or professional logistics companies often provide corresponding logistics services. The latter generally covers peasant households, township enterprises, large and medium-sized circulation processing enterprises, production enterprises, wholesalers and trading market etc. Main features Of rural logistics Market Compared with urban logistics market, urban logistics market has the following outstanding features: 1) urban logistics market demand has regional feature. Rural residents live dispersedly. The distance between the operation and consumption units and peasant households is remote, while villages are disperse. This is a distinct difference between rural market and urban market. Thus, rural logistics market has dispersity, wide coverage and small scale. 2) Rural logistics market has the feature of demand subjectivity. Rural producers and consumers have basically fused together. Some agricultural products are directly provided to vast producers. The production behavior and consumption behavior will to some extent coincide. Peasant households are not just the producers of agricultural products, but also the consumers. Large quantities of logistics are completed in rural. CHAPTER 4 .RURAL MARKETING STRATEGIES. 1. SEGMENTATION OF RURAL MARKETS. Market Segmentation Rural India accounts for a total of 55% of the manufacturing GDP. They were host to nearly 75% of the new factories built in the last decade. Rural consumption per person has increased by 19% yearly between 2009 and 2014. Rural marketing strategies include the following This includes heterogeneity in • Segmentation — for effective market prerequisites segmentation, rural market, degrees of
  14. segmentation, basis of segmentation and approaches to rural market segmentation. The following are the degrees of segmentation — Mass Marketing — In this, all the consumers are being treated the same. It allows the company to target the maximum number of consumers. For example, HUL has offered only one detergent that is "Surf" to all consumers but Norma entered the market and grabbed a sizeable market share because of which HUL woke up and introduced wheel. Segment Marketing Marketers determines the potential of the market and its consumers segments which are substantial enough to target and respond by offering low-priced products and products that are designed appropriately. 2. PRODUCT PLANNING FOR RURAL MARKETS. Product Strategies for Rural Market — Indian Perspective A prime need for any firm to emerge as a strong player in the rural market is by carefully identifying gaps in the rural market and crafting the right product offering for consumers. Chalking out a product strategy for rural market differs in many aspects when compared to urban counter parts. Needs and demand of rural consumer might be contrasting to that of urban consumer and therefore its necessary to hit the right chord when entering the rural market. The prime objective is to design products to suit rural requirements. Conventional wisdom on rural marketing states that the needs of the rural consumers are similar to those of the urban consumers. Hence, the products made to urban specifications should suit the requirements of the rural consumers. However, this is not true in many cases, as there is a market difference between rural and urban environments. For instance, Kerosene or LPG gas stoves, where the flame can be controlled, are used for cooking in
  15. 3. urban areas, while an open fire or 'Chulha' is used in rural areas. Pressure cookers with handles on one side suit the urban consumers, but not the rural consumers for use on an open fire or a 'chulha'. Perhaps, a wide- bodied cooker within handles on opposite sides may suit rural requirements. Therefore, while designing and developing products, the requirements of the rural consumers are to be considered and rural-specific products developed. PACKAGING OF PRODUCTS. During the late eighties, shampoo sales boomed when it was introduced in sachet pack, because it suited the consumers in low income groups. Hindustan Motors (HM) launched a utility vehicle the R TV (rural transport vehicle), aimed at rural market. Hence, product development for rural consumers is necessary. Though marketers are still trying and experimenting ways to successfully tap the rural arena, below are few product strategies which have been widely adopted and have proved themselves to work in the rural landscape: Small unit packinq: This method has been tested by products life shampoos, pickles, biscuits, Vicks cough drops in single tablets, tooth paste, etc. Small packings stand a good chance of acceptance in rural markets. The advantage is that the price is low and the rural consumer can easily afford it. Another example is the Red Label tea Rs. 3.00 pack which has more sales as compared to the large pack. This is because it is very affordable for the lower income group with the deepest market reach making easy access to the end user satisfying him. The small unit packings will definitely attract a large number of rural consumers.
  16. 4. 5. PRODUCT DESIGNS. New product desiqns: Keeping in view the rural life style the manufacturer and the marketing men can think in terms of new product designs. For e.g. PVC shoes and chappals can be considered sited ideally for rural consumers due to the adverse working conditions. The price of P.V.C items is also low and affordable. Sturdy products: Sturdiness of a product is an important factor for rural consumers. The experience of torch light dry battery cell manufacturers support this because the rural consumers preferred dry battery cells which are heavier than the lighter ones. For them, heavier weight meant that it has more over and durability. Sturdiness of a product either or appearance is an important for the rural consumers. Utility oriented products: The rural consumers are more concerned with utility of the product and its appearance Philips India Ltd. Developed and introduced a low cost medium wave receiver named BAHADUR during the early seventies. Initially the sales were good but declined subsequently. On consumer research, it was found that the rural consumer bought radios not only for information and news but also for entertainment. BRANDING OF PRODUCTS. Brand name: For identification, the rural consumers do give their own brand name on the name of an item. The fertilizers companies normally use a logo on the fertilizer bags though fertilizers have to be sold only on generic names. A brand name or a logo is very important for a rural consumer for it can be easily remembered.
  17. Many times rural consumers ask for 'peeli tikki' (Yellow Bar) in case of conventional and detergent washing soap. Nirma made a 'peeli tikki' (Yellow Bar) specially for those peeli tikki users who might have experienced better cleanliness with the yellow colored bar as compared to the blue one although the actual difference is only of the color. 6. Brand Decisions (Rural markets) Branding too needs skilful handling in the rural markets. The rural consumers have already graduated from generic products to branded products. Today, the brand name is the surest means of conveying to rural consumers. To them, buying an established and well spoken of brand is the sure way of reducing risk. In other words, brand is the key to confidence building among the rural consumers. Besides quality it conveys that the manufacturer is going to show sustained interest in those products and markets. Whether same brand should be used in both urban and rural markets and appropriate variants of the brand must be adopted for the rural market is a matter of conscious decision by individual firms depending on the context. In quite a few cases the same brand is proving right and cost-effective. Pre-conceived notions have no place: While specific research studies may provide useful insights on the rural markets, no one can make any sweeping generalizations. Using the example of CTV, illustrates that pre-conceived notions have no place in rural marketing. Physical Distribution: Let us first see the special problems, which marketers have to face in physical distribution in the rural context.
  18. 7. PRICING DECISIONS OF RURAL MARKETS. Factors that influence the pricing decisions of Rural Markets. Rural customers do not want to spend money on buying products and services because they feel that they can do without these products and services. The self-sufficient economy and the close community of villages have allowed rural consumers to carry on with their lives without much help from the outside world. Low prices of products and services are just inducements to get over this reluctance and inertia of rural consumers. Marketers have to do much more than offer products and services at lower prices to keep rural consumers in the marketplace. Most rural consumers do not have a steady and regular source of income. They get their income when they sell their crops after the harvest. Therefore most rural consumers receive money in lump sum a few a times a year depending upon the number of crops they are able to grow. This money is normally controlled by the eldest male member of the family. Other members of the family do not have cash and they have to route their requirements through this eldest male member. Though the major part of the harvest is sold in bulk, all rural households always have some grains in the house. This grain is the currency of other family members besides the one who controls the cash of the family. CHAPTER 6 - MARKETING OF AGRICULTURAL PRODUCTS. GOVT. MEASURES TO IMPROVE AGRICULTURAL MARKETING IN INDIA. 1. 1. Grading and Standardization: The grading stations have been established to grade and standardize many agricultural goods. The graded goods are stamped with the seal of the Agricultural Marketing Department- 'AGMARK'. The goods bearing the 'AGMARK' command better prices in the market.
  19. 2. 2. Provision of Warehousing Facilities: The warehousing facilities have been provided in the villages to prevent distress sale by the farmers. Apart from Central and State Government, Food Corporation of India has constructed its godowns and warehouses. 3. Marketing Surveys: The market survey of agriculture products are conducted and published to benefit farmers. The surveys also discuss the problems and measures to tackle the problems associated with the marketing of agro-products. The prices of agriculture products in major markets are published widely. Further, for dissemination of information all sorts of media like radio, television, display board etc are used. 4. Cooperative Movement in Agriculture Marketing: Government has helped to establish multi-purpose cooperative societies with emphasis on credit and marketing. NAFED has been established as an apex cooperative marketing society at national level. Funds and credit facilities are provided to these cooperatives. The training facilities are provided for cooperative personnel. 5. Encouragement of Exports of Agricultural Products: The export of agricultural products has shown an increasing trend in the recent years. The trade policy of the Government has evolved various schemes to improve agro exports. The Agro Export Zones are established to encourage agriculture exports. 6. Setting up of Special Boards: The Government has set up number of special commodities boards like rice, pulses, jute etc to specifically formulate policies for these commodities. The exports councils have been established to suggest measures to improve exports of agricultural commodities. 7. Setting up of Regulated Markets: The government has set up markets for agriculture products which are regulated under the Agricultural Produce Market Act. The management of these markets rest with the committees on which different interests are represented so that cultivators get fair price for their produce. Agricultural Pricing policy. Agricultural Price Policy Agriculture price has significant impact on producers and buyers of agriculture products. The agriculture price offers incentives to improve
  20. production and marketable surplus to the cultivators and affect the allocation of resources. Nature of Agriculture Price in India Agriculture prices depict large fluctuations and except for few years in the beginning of planning since 1951 there has been an almost continuous uptrend in the agriculture prices. The causes of such fluctuations are as follows: (i)Dependence on Rainfall: The production of agricultural goods is more dependent upon vagaries of nature. A good rainfall results into higher production and scarce or excessive rains/ floods have an adverse impact on agricultural output. The erratic natural conditions thus give rise to the sharp variations in the agricultural output supply. These variations in the output gives rise to the large price variations. (ii) Low price Inelasticity of demand of Agricultural Goods: The demand for agriculture goods particularly food crops don't change with the change in its price. The overproduction in agriculture leads to price crash as demand doesn't increase and under production causes prices to rise as demand doesn't fall. Objective of Agriculture Price Policy The stability of agriculture price is essential since the higher agriculture prices affect purchasing power of consumers and greater input cost to the industrial users. The reduction in the purchasing power of the consumer has implication on demand for industrial goods. The broad objectives of agriculture price policy in India are: To set remunerative prices with a view to encourage higher investment and production in the agriculture. To set the prices at levels so that the consumers are not adversely affected. Agriculture prices should be such that the terms of trade between agriculture and non-agriculture sector is not adversely affected.
  21. To set price in such a manner so that optimal crop mix can be achieved. Thus, theoretically, Agriculture Price Policy (APP) accounts for various economic factors such as the rate and quality of economic growth, in identifying and promoting the optimal crop mix. This consequently ensured appropriate allocation of resources, capital formation in the agriculture sector and fair inter-sectoral terms of trade. Major Instruments of Agriculture Price Policy (APP) in India APP includes the following instruments: (i) Minimum Support Price (MSP) & Procurement prices (ii) Buffer Stocks (i) MSP and Procurement Prices: The price support policy was initiated by the Government to provide protection to agricultural producers against any sharp drop in farm prices. If there is a good harvest and market prices tend to dip, the government guarantees an MSP or floor price to farmers, which covers not only the cost of production, but also ensures a reasonable profit margin for the producers. MSP is announced each year and is fixed after taking into account the recommendations of the CACP (Commission for Agricultural Costs and Prices). CACP is an agency which advises the Government on a continuing basis about the level of MSP. Procurement prices are the prices of Kharif and Rabi cereals at which the grain is to be domestically procured by public agencies (for example, FCI [Food Corporation of India]) for release through public distribution services (PDS). (ii) Buffer stocks and Public Distribution System: Buffer stock operations are an integral component of agriculture price in India. It is used as an instrument to minimize the fluctuations in the prices of agriculture products. Buffer stocks have a price stabilizing impact on the economy. Under the buffer stock policy, government builds up stock of agricultural commodities either through purchases from domestic market or through imports and release these stocks in the domestic market when the prices are rising. The government supply thus moderates the sharp increase in the price of agricultural
  22. products. In the event of bumper crop, the market price is substantially reduced. In this situation government make procurements at MSP or procurement price and prevent fall in price. This helps to prevent distress sales among farmers. Appraisal of Price Policy The policy has been instrumental in creating a fairly stable price environment for the farmers to induce them to adopt new production technology and thereby increase the output of food grains. The subsidized distribution of food grains has helped in improving economic access to food. Owing to the decline in the real prices (prices vis-å-vis the income) of basic staple food, the organized sector and the industry could keep their wage bills low. The benefits of price policy and input/ food subsidies, have, thus been shared by all the sections of society. However, the present price policy has certain shortcomings discussed as follows: (i) The price policy has to evolve a qualitatively superior crops mix i.e. to provide incentive for growth of crops which are nutritionally superior or the crops where the country has comparative advantage. In India this aspect of agricultural price policy has remained largely neglected. (ii) During the last few years, lack of prudence in fixing the level of support prices of rice and wheat led to not only accumulation of excessive stocks but also raising the public cost of food grain policy. During these years, the government fixed MSPs of rice and wheat at much higher levels than that recommended by CACP. Currently however the stocks are below or almost close to the minimum prescribed levels. (iii) The farmers in the new emerging states could not get the minimum support prices for their produce. This happened mainly because the nodal agency (FCI) and state agencies in the new emerging surplus states are not geared to undertake price support operations. The FCI remains occupied with large volumes of purchases traditional surplus producing states (like Punjab, Haryana, and western U.P)
  23. 3. 4. Co-operative Marketing. An agricultural cooperative, also known as a farmers' co-op, is a cooperative where farmers pool their resources in certain areas of activity. A broad typology of agricultural cooperatives distinguishes between agricultural service cooperatives, which provide various services to their individually farming members, and agricultural production cooperatives, where production resources (land, machinery) are pooled and members farm jointly.[l] Examples of agricultural production cooperatives include collective farms in former socialist countries, the kibbutzim in Israel, collectively governed community shared agriculture, Longo Mai co-operatives[2] and Nicaraguan production co- operatives. CO-OPERATIVE MARKETING, PROCESSING s AND STORAGE Cooperative Marketing The basic aims of cooperative marketing are to arrange for the marketing of agricultural produce of the agricultural members at a reasonable and remunerative price, to distribute farm inputs to the agriculturists, to advance loans on the pledge of agricultural produce, to undertake processing of the agricultural commodities and to help in better recovery of loans through linking of credit with marketing. These objectives are fulfilled through 113 primary co-operative marketing societies functioning in Tamil Nadu. Tamil Nadu Cooperative Marketing Federation is the apex institution of cooperative marketing societies in all the districts except Nilgiris, Thanjavur, Tiruvarur and Nagapattinam. Thanjavur Cooperative Marketing Federation is functioning as apex society for the cooperative marketing societies in Thanjavur, Tiruvarur and Nagapattinam districts. PROBLEMS IN AGRICULTURAL MARKETING. Agricultural marketing system is an efficient way by which the farmers can dispose their surplus produce at a fair and reasonable price. Improvement in the condition of farmers and their agriculture depends to a large extent on the elaborate arrangements of agricultural marketing. The term agricultural marketing include all those activities which are mostly related to the procurement, grading, storing, transporting and selling of the agricultural produce.
  24. Present State of Agricultural Marketing in India: In India four different systems of agricultural marketing are prevalent: 1. Sale in Villages: The first method open to the farmers in India is to sell away their surplus produce to the village moneylenders and traders at a very low price. The moneylender and traders may buy independently or work as an agent of a bigger merchant of the nearly mandi. In India more than 50 per cent of the agricultural produce are sold in these village markets in the absence of organized markets. 2. Sale in Markets: The second method of disposing surplus of the Indian farmers is to sell their produce in the weekly village markets popularly known as 'hat' or in annual fairs. 3. Sale in Mandis: The third form of agricultural marketing in India is to sell the surplus produce though mandis located in various small and large towns. There are nearly 1700 mandis which are spread all over the country. As these mandis are located in a distant place, thus the farmers will have to carry their produce to the mandi and sell those produce to the wholesalers with the help of brokers or 'dalals'. Defects of Agricultural Marketing in India: Following are some of the main defects of the aqricultural marketinq in India:
  25. 1. Lack of Storage Facility: There is no proper storage or warehousing facilities for farmers in the villages where they can store their agriculture produce. Every year 15 to 30 per cent of the agricultural produce are damaged either by rats or rains due to the absence of proper storage facilities. Thus, the farmers are forced to sell their surplus produce just after harvests at a very low and un-remunerative price. 2. Distress Sale: Most of the Indian farmers are very poor and thus have no capacity to wait for better price of his produce in the absence of proper credit facilities. Farmers often have to go for even distress sale of their output to the village moneylenders-cum-traders at a very poor price. 3. Lack of Transportation: In the absence of proper road transportation facilities in the rural areas, Indian farmers cannot reach nearby mandis to sell their produce at a fair price. Thus, they prefer to sell their produce at the village markets itself. 4. Unfavourable Mandis: The condition of the mandis are also not at all favourable to the farmers. In the mandis, the farmers have to wait for disposing their produce for which there is no storage facilities. Thus, the farmers will have to lake help of the middleman or dalal who lake away a major share of the profit, and finalizes the deal either in his favour or in favour of arhatiya or wholesalers. A study made by D.S. Sidhu revealed that the share of middlemen in case of rice was 31 per cent,
  26. in case of vegetable was 29.5 per cent and in case of fruits was 46.5 per cent. 5. Intermediaries: A large number of intermediaries exist between the cultivator and the consumer. All these middlemen and dalals claim a good amount of margin and thus reduce the returns of the cultivators. 6. Unregulated Market's: There are huge number of unregulated markets which adopt various malpractices. Prevalence of false weights and measures and lack of grading and standardization of products in village markets in India are always going against the interest of ignorant, small and poor farmers. 7. Lack of Market Intelligence: There is absence of market intelligence or information system in India. Indian farmers are not aware of the ruling prices of their produce prevailing in big markets. Thus, they have to accept any un- remunerative price for their produce as offered by traders or middlemen.

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