Agricultural marketing and agricultural finance

1. Meaning of agricultural marketing

Agricultural marketing covers all the operations involved in moving farm produce from the farm to the consumer: assembling, grading, standardisation, storage, transport, processing, financing, bearing risk, and sale. A good marketing system gives the farmer a fair price, keeps the consumer’s price reasonable by reducing the number and margin of middlemen, and supplies the market signals that guide what farmers grow.

Indian farmers sell in three ways: in the village itself to moneylenders and traders; at weekly markets (haats and shandies); and in regulated markets (mandis) set up under State Agricultural Produce Marketing Committee (APMC) Acts, through commission agents. Government procurement at minimum support prices is a fourth channel for selected crops.

2. Defects (problems) of agricultural marketing

• Forced or distress sale: small farmers sell immediately after harvest, when prices are lowest, to repay debts and meet expenses.
• Too many intermediaries: village traders, commission agents and wholesalers take a large share of the consumer’s price.
• Malpractices in markets: false weights, arbitrary deductions for “samples” and charity, secret bidding under a cloth (hatha system), and delayed payment.
• Lack of storage: inadequate warehousing and cold storage causes loss and forces sale at harvest.
• Poor transport: many villages are poorly connected, so farmers sell in the village at low prices.
• No grading and standardisation, so good produce does not get a better price.
• Lack of market information about prices in other markets.
• Inadequate credit for holding stocks.
• Few regulated markets in relation to the area served, and restrictions under APMC laws that confined sales to notified markets in many States.

3. Measures to improve agricultural marketing

1. Regulated markets under State APMC Acts, with market committees, licensed traders, open auction, standard weights and fixed charges.
2. Warehousing: the Central Warehousing Corporation (1957) and State Warehousing Corporations; the Warehousing (Development and Regulation) Act, 2007 created the Warehousing Development and Regulatory Authority, and negotiable warehouse receipts allow farmers to borrow against stored produce.
3. Grading: AGMARK grading under the Agricultural Produce (Grading and Marking) Act, 1937.
4. Co-operative marketing societies and NAFED (1958) at the national level.
5. Minimum support prices recommended by the Commission for Agricultural Costs and Prices, with procurement by the Food Corporation of India and State agencies.
6. e-NAM (National Agriculture Market), launched in April 2016, an online trading platform linking APMC mandis so that buyers in other markets can bid.
7. Model laws: the Centre circulated a model APMC Act (2003) and the Model Agricultural Produce and Livestock Marketing Act (2017) to widen private markets and direct sale. Three farm laws passed in 2020 to allow trade outside APMC yards were repealed by the Farm Laws Repeal Act, 2021 after farmer protests.
8. Farmer Producer Organisations (FPOs), which pool the produce of small farmers to gain bargaining power.
9. Infrastructure: rural roads, cold chains and the Agriculture Infrastructure Fund (2020) for post-harvest facilities.

4. Need for agricultural finance

Farmers need credit because farm income comes once or twice a year while expenses are spread over the year, and because the small farmer has little saving. Credit is classified by period:

Credit is also needed for marketing (to avoid distress sale), for repaying old debts and, in practice, for consumption and social expenses. Adequate and cheap credit is required for adopting new technology; without it the small farmer cannot buy the Green Revolution package.

5. Sources of agricultural finance

Non-institutional: moneylenders, landlords, traders and commission agents, relatives. These are easily available and flexible but charge very high interest, keep poor or fraudulent accounts, and often take land or labour in repayment. Their share has fallen but they remain important for small and marginal farmers.

Institutional: the “multi-agency approach”:

• Co-operative credit societies: a three-tier short-term structure of primary agricultural credit societies (village), district central co-operative banks and State co-operative banks; and long-term co-operative agriculture and rural development banks.
• Commercial banks: after nationalisation (1969) banks were required to open rural branches and lend to the priority sector; under RBI directions domestic banks must lend 18 per cent of adjusted net bank credit to agriculture.
• Regional Rural Banks, set up from 1975 (Regional Rural Banks Act, 1976) to lend to small farmers, labourers and artisans; they have been amalgamated in stages to make them viable.
• NABARD (National Bank for Agriculture and Rural Development), established in 1982 on the recommendation of the CRAFICARD (Shivaraman) committee, the apex body that refinances co-operatives, RRBs and banks for rural lending and supervises co-operative and regional rural banks.
• Government: taccavi loans in distress, and schemes such as interest subvention on short-term crop loans.

Important schemes. The Kisan Credit Card (1998) gives farmers a revolving credit limit for crop needs. PM-KISAN (2019) pays Rs. 6,000 a year in three instalments to landholding farmer families. The Pradhan Mantri Fasal Bima Yojana (2016) gives crop insurance at a low premium. Microfinance through self-help groups linked to banks (NABARD’s SHG–Bank Linkage Programme, 1992) reaches the landless and women.

6. Problems of agricultural credit

Small and marginal farmers and tenants without title deeds still find institutional credit hard to get; co-operatives suffer from overdues, political interference and weak management; loan waivers damage repayment discipline; and credit is unevenly spread between regions. Digitised land records and Aadhaar-linked accounts have improved access.

How this is examined

“Problems of agriculture marketing in India” was a short note in the June/July 2025 100-mark paper; “Need for agricultural finance” a 6-mark note in January/February 2025. For a 10-mark essay, combine meaning, the defects and the government measures; for finance, give the need, the three types by period, and the sources.