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Agri. Business Management

1.1) Agriculture:-
Agriculture may be defined as the art of science & the business of
producing crops and livestock for economic purposes.

Agri. Business:-
Agric business is defined as “the sum total of all the operations
involved in production activities on the farm, storage, processing & distribution
of farm commodities.

Any physical activity undertaken by people with the aim of making
maximum profit.

Is defined as a process by which a co-operative group directs actions
towards common goals.

Agri. Business:-
Agri. Business can be defined as all the activities concerned with
agriculture including farming’ management, financing, processing, marketing,
growing of seeds & the nursery stock, manufacture of fertilizers, chemicals,
implements, processing machinery, transportation etc.
Agri. Business can be defined as co-coordinating science of supplying
agricultural production inputs & subsequently producing, processing &
distribution of goods.

1.2) Role of Agriculture In Indian Economy: -

1) Share in national Income
2) Largest employment providing sector.
3) Provision of food surplus to the expanding population.

4) Contribution to capital formation.
5) Providing raw materials to industries.
6) Market for Industrial products.
7) Importance in International trade.

1) Share in National Income :-

About 30% of our GDP comes from agri. alone. It was around 57%
in the beginning of 1950 with gradual economic development in
industry & service sector the share of agri. has been declined.
Agriculture is the backbone for any country’s economic
development. It is popular belief that economic development takes
place because of rapid industrialization. But industrial developments
itself cannot take place without agriculture
Specifically agriculture contributes to economic development in
four ways:
a) Product contribution (i.e. Making availability of raw materials)
b) Market contribution (i.e. Provides market for the goods of
industrial sectors.
c) Factor contribution (i.e. making available labour & capital to the
non agril. Sector.
d) Foreign exchange contribution.

2) Largest Employment Providing Sector :-

Agriculture has been a major source of livelihood for our people. A
large percentage i.e. 70% of working population is engaged in
agriculture. As there is economic development in Industrial &
service sector the dependence on agril for livelihood must decline &
more & more people must get absorbed in industrial & service
sector i.e. secondary 8 tertiary sectors. But this has not happened
in our country.
In the year 1951, 70% of working popl n was engaged in agril & in
the year 2000, 60% of the working popln is engaged in agril.

Due to rapid increase in popl n the observate number of people
engaged in agril is increasing by day by day to satisfy the demand
of food & the problem of unemployment.

3) Provision of food surplus to the expanding popln:

Because of the heavy pressure of popl n there is rapid increase in the
demand for food at a faster rate & this demand could be satisfied only if there
is development in agril. Sciences & agril industries.

4) Contribution to capital formation:

Unless the rate of capital formation increases to a sufficiently high
degree economic development cannot be achieved. As agril. Is the largest
industry in many development countries it plays an important role in pushing
up the rate of capital formation & if it fails to do to the process of economic
development will suffer a setback.

5) Providing raw materials to industries:

Agril. cultural Provides raw materials to various industries of national
importance for economic development like sugar industry. Jute Industry
Cotton textile inds. Vanaspati ghee. & other food processing industries.

6) Market for industrial products:

As more than 2/3 of the popl n of developing countries lives in rural
areas the rural consumption of industrial goods is nearly three times more
than the urban consumption there is direct relationship of industrial products &
the popln that is staying in the village. If the agril productivity is less there will
be less income of the people & this will adversely affect the marketing of
industrial products so as to boost the process of industrial development the
income of the rural sector should be increased causing in turn an increased
demand for industrial products.

7) Importance in International trade:

Agriculture Plays an important role in our international trade. The main
agril. Commodities which are exported are tea, oil cakes, fruits & vegetables,

spices, tobacco, cotton, coffee, cocoa, sugar etc. At present agril. Export now
amount to Rs. 10,000 crore per annum. The share of agril. In total exports is
around 18.5%.
1.3) Opportunities in Agri. Business:
Since agri. business includes agril. In traditional sense an attempt is
made here to point out the opportunities in the agril.
1) Yield per hectare of principal crops in India.
2) Water Resources
3) Fallow Lands
4) Forest Resources of India
5) Live Stock & Poultry
6) Fisheries
7) Animal husbandry
8) Horticulture

1) Yield per hectare of principal crops in India.

There is no doubt not that during the planning era (i.e. from 1951 –
2002) yield of principal crops per hectare has been rising in India.
India is the second largest producer of produces of rice in the
world with a 20% share in world Production Basmati rice is popular in
the world for it’s distinct aroma & taste wheat, maize & millets like
jowar, bajra & ragi. are also among India’s principal crops primary
milling of rice, wheat & pulses is the most important activity in the food
grains sector & there are over 91,000 rice hullers & 2,60,000 small flour
mills engaged in this activity. There are about 43,000 modernized rice
mills. The quantity was 34 lakh tons in the years 1999-2000 with
respect to ground 820 large flourmills in the country convent about 10.5
million ton’s of wheat into wheat products.

Chart showing total area under food grain cultivation, prod n & productivity per
No. Year Hectares Million Tons Kg/ ha
1 1950-51 97.3 50.8 522
2 1960-61 115.6 82.0 710
3 1970-71 124.3 108.4 872
4 1980-81 126.7 129.6 1023
5 1990-91 127.8 174.4 1380
6 1997-98 123.8 192.3 1552
7 1998-99 129.6 203.5 1571
8 1999-2000 130.1 208.9 1697

Productivity per hectare has increased from 522 kg/hec. In 1950-51 to

1697 kg/hec in 1999-2000. But still that is not enough. To satisfy the
increasing needs of food grains of increasing population efforts should be
taken to increase the production per hectare by use of modern day

2) Water Resources:
India has some of the largest rivers in the world (Length in km)
i) Brahmaputra - 2,900 km.
ii) The Ganga - 2,510 km.
iii) Godavari - 1,450 km.
iv) Yamuna - 1,376km.
v) Narmada - 1,240km.
vi) Krishna - 1,200 km.
vii) Mahanadi - 890 km.
viii) Kaveri - 760 km.

The rivers those originate in Himalaya’s (i.e Brahmaputra, Ganga, yamuna)

are perennial (flowing all the year round). All the rivers get flooded during
monsoon seasons & destroying standing props from agril. Lands & flooding
villages with great damage to house & properties since independence almost
every year a thousand crores are being spent on rehabilitation of this affected

area by such floods. No. attempt has been made to stop nearly 95% of water
from flooded rivers flowing into the area. It was sir Henny cotton who had
suggested as long ago as 1860 to link Ganga & Cauvery in the South. After
the Independence the project for joining the rivers of North India to South
India was developed but this project remained only on paper because of huge
project cost & disputes regarding sharing of water of rivers flowing through
two or three states water management. Is the biggest problem in India & at a
jume time offers a great opportunity of resolutioning Indian agril. If adequate &
timely water supply is assured farmers in India can shift to double or multiple
cropping using water high yielding varieties of seeds, chemical fertilizers &
It has been noticed that in India at the time of sowing & harvesting of
crops there is almost full employment in rural areas. With double & triple
cropping not only the prod n of agril produce grow up by 3-4 times, but that will
solve the problem of seasonal unemployment & underemployment in rural
areas. If Govt. takes right steps towards efficient use of water by building
small dams all across the country. India can achieve the top position in the
world in the agril, sector. Hence there is a great opportunity in Indian’s agril

3) Forest Resources of India:

In the year 1986-87 total area calculated under forest amounted to 67
million hectares or nearly 22% of the geographical area of the country.
A number of processing industries based on forest produce can be
started & offer opportunities for development.
The policy of a social forestry & new forest policy announced by the
govt. should go a long way in preserving & extending area of forests in India &
become a good supplement to conventional agril. By the establishment of
hundreds of industries based on vast forest resources in the country.
Forest products indudes wood for paper pulp, newsprint, canes,
grasses, essential oil, gums, tanning material, dyes, medicinal plants etc.

4) Livestock & poultry:

Livestock resource in India (1990)
1990 In million
1) Cattle 194
2) Buffaloes 77
3) Sheep 45
4) Goats 110
5) Others 12
Total 438

India has the largest number of livestock in the world nearly one sixth
of total livestock population of the world china is second largest in livestock
prodn in the world.
Because of very large number of milk cattle they are not adequately &
properly fed. Therefore an Indian cow yields annually an average of 220 litres
of milk compared to 3,000 to 5,000 litres peryear in developed countries of the
Livestock provides milk, meat, eggs, poultry & skins.
With crossbreed of cows & Buffaloes with scientific attitude livestock
population offers great opportunities for a number of industries like milk
products, meat & meat packing, leather & leather goods like footwear, purses
belts etc.
Leather based goods offer great opportunities to meet increasing
demand of local & export markets in the world for leather manufactures such
as footwear, leather travel goods leather garments etc.
With concerned efforts India can increasingly exploit international
market for leather & leather manufactures that would be provided by vast
livestock population in India.

5) Fisheries: (marine & Inland)

India has vast potentialities both in inland fishery & marine fishery. The
length of major Indian rivers is together around 7,000 miles & length of
subsidiary water channels is around 15,000 miles.

1.4) Problems of Agril. Sector:-

Agril sector is full of serious problems. They are as follows.
i) Productivity in the primary sector is very low (i.e. these
sector refers to the products which are directly grown from
the soil) due to traditional use of farming, low quality of
seeds, also lack technical advice, decrease in soil fertility
due to use high close of chemical fertilizer, in adequate
irrigation facilities etc.
ii) Though the total output has increased the output of crops,
other than rice & wheat has stagnated that means there is
only growth in rice & wheat & the growth of other crops
remain same.
iii) There as been decline in public investment in agril.
Resources for higher public investment can only become
available if the current large subsidies on agril. Inputs are
sealed down.
iv) Sometimes due to some unfavourable conditions or reasons
there is less output from the farms which leads to inflation of
rates which adversely affects the standard of living of the
people having low or medium income eg. onion.
v) Due to lack of storage facilities if there is more production of
agril. products formers don’t even get there cost of prod n due
to low prices. Eg. Tomato & onion
vi) Agril suffers from high pricing of critical inputs such as power,
water, fertilizers & credits which reduces the profits of the
vii) Agril right from the beginning enjoyed high priority but agril
exports were discouraged which had the effect of reducing
farmers income.

viii) Many agril reforms such as special support programmes for
small farmers, strengthening of rural credit, reformation of
agril co-operatives panchagats & other local bodies remains
only on paper & if they are implemented, they are not
implemented in a proper way.
ix) There are various inherent structural problem affecting the
agril for e.g. agril is dominated by small & marginal farmers
which account for 78% of holding but operate only 32% of
the area. Such small holdings, marginal holdings &
fragmented holdings do not encourage much investment on
x) Finally there is very high wastage of foodgrains during
storage, transportation, harvesting threshing etc.

1.5) Action plan or steps taken to solve the problems of agril. Sector:
To solve the problems of agril. Sector & to abolish the poverty from
rural areas following actions can be implemented.
i) Building institutions for people participation.
ii) Freeing up agril. Markets.
iii) Carving an investment policy.
iv) Restructuring rural credit.
v) Irrigation
vi) Dry land farming
vii) Encouraging research

i) Building institutions for people participation:

People participation at different levels of developmental activity is
needed urgently. In particular their representation in the decision
makes bodies of critical input supplying agencies or sectors such as
irrigation, electricity, seeds & extension activities marketing boards etc.
ii) Freeing up agril. Markets:
Govt. should try there best to remove the barriers of agril. Markets such
as dalals in the markets, leveis on rice & Sugar should be removed
there should not be any limits on stocks etc. The inputs of agril. Such

as seeds fertilizers, farm machinery & pesticides should be operated
through co-operative institutions.

iii) Carving an Investment policy:

While building of institutions on the lines of participatory development
models it is expected to attain higher efficiency in the use of existing
resources, freeing up of agril markets would make Indian agril. More profitable
thus inviting greater levels of private investment for promoting higher growth
rates in agril. In order to ensure that this growth remains constant & to accede
rate government should carve out a comprehensive investment policy clearly
defining the role of public & private sector investment in agriculture.

iv) Restructuring Rural Credit:

There is a need for restructuring rural credit. As agril industry is one of
the biggest industries it deserves 18% of the total lending by commercial
banking. But the actual lending still remains lower than 15% this is because of
concessional rate in agriculture. To solve this problem of concessional rates of
interest & high default rate in agril Govt. has taken the following steps.
a) Provide finance to only group of people to check defaults.
b) Loans may be lent to women where defaults tend to be less.
c) Local NGO’s may be involved in lending process to exercise moral
pressure on borrowers.

v) Irrigation:
Lakh of adequate water is one of the major problem of the farmers our
country has an ultimate irrigation potential of about 153.5 million hectares.
During the year 1951-90 India has added 55 million hectares to its irrigation
taking the total irrigated area from 23 to 78 million hectares. This means that
there is still ample scope for tapping the remaining irrigation potential since
crop yields on irrigated lands are higher than the yields on unirrigated lands
there fore there is ample scope for increasing agril production in the years to
Following steps can be taken to improve the irrigation facilities in our

a) Improve maintenance of existing canal Network.
b) Involve farmers in maintaining the canal systems from distributing
level onwards
c) Leave the work of distribution of water & collection of dues to the
farmer’s co-op. organizations.
d) Introduce volumetric pricing of electricity for ground water irrigation.

Vi) Dry Land Farming:

One third of our cultivated area depends on monsoon. The rain fed
areas are characterized by cropping patterns dominated by cereals, pulses
oilseeds, cotton etc. The yields of these crops are generally low & fluctuate
creating a high risk factor one way of overcoming the above problems is to
develop water harvesting & soil conservation programmes in the rain fed
areas & soil conservation programmes in the rain fed areas through
employment generating schemes such as jawahar Rojgar Yojana in rural
areas. Development of markets in the rural areas so that the farmers can be
assured of reasonable returns on their investment. A policy of crop insurance
can also be introduced to encourage investment on dry land farms. It has
been proved that dry land areas are more suitable for horticultural crops which
require less water but more investments. New credit lines can be developed
to encourage the prodn of horticultural crops; Development of livestock has a
huge scope in dry land areas.

Vii) Encouraging Research:

Govt. should encourage agril. Universities & Junior scientists to do
research on modern agril. techniques with low cost, high yielding variety of
seeds for cultivation, development in livestock prod n etc.

Agricultural Marketing
Defn: - It is a place where buyers & sellers come together to buy & sell
the goods.
It may be an open space or ground or a large building.

Defn: - All the activities that are carried out in the flow of goods
from producers to consumers are called marketing.

2.1) Agencies (Functionaries) in Agriculture marketing:

The peculiar characteristic of agril produce is small & scattered prod n,
seasonality, perishability of products, transportation, communication etc. It
requires a large number of intermediary’s bet n the produces & the ultimate
consumer. All the agencies or functionaries more or less participate in
assembling & distribution of agril products.
Agencies in agril. Marketing are as follows:
1) Big cultivators.
2) Itinerant traders.
3) Village merchants ( balias)
4) Katcha arhatias ( small commission agents)
5) Pucca Arhatias ( wholesale commission agents)
6) Co- operative mktg. societies.

1) Big Cultivators:
These are the cultivators with large holding & mainly include old
zamindars. The small cultivators sell there surplus produce either to them or
through them. They purchase grain in the season & sale it in near by markets.
This is their side business to increase their income. They are well trained in
market practices due to constant touch with the market.

2) Itinerant Traders:
They are small merchants who move from village to village & purchase
the agril. produce from cultivator’s house. They offer a lower price than the
actual selling price in the nearby market & while settling the transactions the
cost of transportation & market charges are taken in to consideration. They
generally pay the cultivators with in a few days after the produce is disposed
in the market & the payment is received from arhatias.

3) Village merchants (Banias)

He is an important figure in the collection of produce & more so when
the mandi is situated at a considerable distance from the village. He advances
finance to the cultivators & also supplies grocery articles from his shop either
on credit or for exchange of foodgrain. The quantities of agril produce so
collected is either disposed of in the mandi or retained for resale in the
villages itself.

4) Katcha, Arhatias :- ( small commission agents )

He operates in wholesale market. He is an important link between the
village cultivators/ sellers on one hand and big traders from the market
on the other hand. His main business is to establish contact between
the cultivators/ sellers & the buyer in the assembling market. He also
gives money in advance to the cultivators & village banias on the
condition that the produce will be disposed of through him alone &
charges a very nominal rate of interest on the money advanced katcha
Arhatias charges commission for service rendered by him. As soon as
the commodity is sold he pays cash to the cultivators/ sellers, where as
he may receive payments from the buyers after a few days.
5) Pucca Arnatias: (Whole sale commission Agents)
He is the real purchaser in the whole sale market on his own behalf or
acting as an agent for some businessmen or firms in consuming
markets for eg. Supplying tomatoes for tomato processing units, rice
processing mills etc. pucca arhatia trades on his own he disposes of
his agril. produce brought by him through different dealers or retailers
in the different part of the city or country.

6) Co-operative marketing societies:
In recent period co-operative mktg. societies plays a very important
role in the marketing of agril. produce. They act as a commission
agents in selling the agril. produce of there members. They also
undertake outright purchases, provide storage facilities for storage &
grading & save cultivators from exploitation by traders & help farmers
in getting fair price for their produce.

2.2) Classification of markets

There are various dimensions of a market. Any market may be
classified on the basis of these dimensions. These dimensions can be taken
as criteria for classification.

1) On the basis of free intercourse or degree of competition

a) Perfect markets
b) Imperfect markets.
Imperfect markets can be further classified in to:-
i) Monopoly market.
ii) Duopoly Market.
iii) Oligopoly market.

2) On the basis of time (time span)

a) Very short period markets.
b) Short period markets.
c) Long period markets.

3) On the basis of nature of commodities; or’ type of goods transacted:-

a) Commodity market:-
i) Produce exchange market.
ii) Manufactured goods markets.
iii) Bullion markets.
b) Capital market:-
i) Money market.

ii) Foreign exchange market.
iii) Stock exchange market.

4) On the basis of area or coverage:-

a) Village markets.
b) Regional markets (District)
c) National markets
d) World markets.

5) On the basis of location or importance:

a) Village markets
b) Primary wholesale markets.
c) Secondary wholesale markets
d) Terminal markets.
e) Seaboard markets.

6) On the basis of nature of transaction:

a) Spot or cash markets
b) Forward or future markets.

7) On the basis of volume of transaction:-

a) Wholesale markets.
b) Retail markets.

8) On the basis of number of commodities in which transation taken

a) General markets
b) Speialised markets
9) On the basis of stage of marketing:
a) Producing markets.
b) consuming markets
10) On the basis of extent of public intervention:
a) Regulated markets.
b) Unregulated markets.

1) On the basis of free intercourse or degree of competition:
a) Perfect markets:
A market is said to be perfect when all the buyers & sellers are
properly aware of the prices at which transaction takes place. Any buyer can
purchase from any seller.

The principles of perfect markets:

i) There must be a uniform price for any one standardised commodity
at a particular time at any one place.
ii) There should not be restriction on the movement of a commodity.
iii) There must be a good number of buyers & sellers.

b) Imperfect markets:
Imperfect markets are where buyers or sellers or both are not aware of
the offers made by others. There is restriction for movement of goods.
Different prices rule in the market for the same commodity at a particular time.
Imperfect markets are classified in to following types:
i) Monopoly market:-
It is market situation where there is only one seller of a
ii) Duopoly Market:-
It has two sellers of a commodity in the market.
iii) Oligopoly market:-
In this market there are more than two but still a few sellers of

2) On the basis of time (time span):

a) Very short period markets:-
These are for few hours and are mostly for highly perishable
commodities like fruits, vegetables, fish etc.
b) Short period market:-
eg. Foodgarins & oilseeds

Here some attention is paid to adjust supply to meet demand. The time
span available to do so is longer. Commodities are non perishable or less
perishable & can be traded for some time.
c) Long period markets:-
eg. Machinery prodn, vehicles, manufactural goods.
Time span available is long to adjust supply to meet element even by
managing for prodn under such circumstances supply governs demand factor
& in the long run. These markets can be for machinery & manufactured goods
(durable goods)

3) On the basis of nature of commodities :- ( type of goods transacted)

a) Commodity markets:
i) Produce exchange markets:-
There are big & well organized markets for raw produce (eg.
Wheat, cotton, coal etc) observed in cities. Commodities are produced & not
manufactured. Generally one market deals in one commodity.
Eg. i) Cotton exchange market at Bombay.
ii) Onion exchange market at Lonand in satara district & Lasalgaon in
Nasik district.

ii) Manufactured goods markets:-

These are the markets of manufactured & semimanufactured
goods eg. leather exchange market at kanpur & Gunny trade exchange
market at Calcutta.

iii) Bullion markets:-

These markets are concerned with purchese & sale of gold,
silver & precious stones. These are highly specialised & well organized
markets of the world & localized in every developed centre (cities) of the
country eg. Bullion market of Bombay, Calcutta etc.

b) Capital market:-
i) Money market:-
It is a broad term & includes a number of agencies providing
finance to business & industrial concerns. These are at large trading centre
like Bombay. London, Calcutta.
ii) Foreign exchange market:-
It is an international market largely concerned with export &
import trade of a country. It is understood as bill of exchange, banker’s draft
payable in foreign currencies etc.

iii) Stock exchange market:-

This market is concerned with purchasing & selling of shares in
different parts of the country.
Eg. Bombay stock exchange.

4) On the basis of area or coverage:-

i) Village markets:-
Buying & selling activities are done among buyers & sellers of
the village or near by village mostly for perishable commodities.

ii) Regional markets:-

These types of markets are generally located at a district
places. Buyers & sellers for a commodity are drawn from larger area than the
local markets in India. They generally exist for foodgrains.

iii) National markets:-

Buyers & sellers gather together at national level eg. jute, tea.

iv) World markets:-

Buyers & sellers are drawn from the world. These are the
biggest markets from area point of view & exist for commodities having world
wide demand. Eg. coffee, gold, silver.

5) On the basis of location or importance:-
i) Village markets:-
It is a market located in a village where major transitions take
place among buyers & sellers of a village.

ii) Primary wholesale markets:-

These are located in big towns near the centres of prod n of agril.
Commodities, major part of produce is brought for sale by farmers &
transactions mostly take place between farmers & traders.

iii) Secondary wholesale markets:-

There are generally located at district places produce is handled
in large quantities.

iv) Terminal markets:-

These markets are located in metropolitan cities like Bombay
madras, Calcutta & Delhi. Here produce is either finally disposed of to the
consumers or processors.

v) Seaboard markets:-
These are located near seashore & are mainly meant for import
& export of goods. In India they are at madras, Bombay & Calcutta.

6) On the basis of nature of transaction:-

i) Spot or cash markets:-
Here goods are exchanged for money immediately after the sale
of goods.
ii) Forward or future markets:-
Here a transaction takes place for a standardized commodity
with a promise to pay & deliver a commodity at some future date.

7) On the basis of volume of transaction:-
i) Wholesale markets:-
Here commodities are brought and sold in large lots or in bulk.
Transation takes place generally between traders.

ii) Retail markets:-

Here commodities are brought & sold to the consumers as per
their requirements.

8) On the basis of number of commodities in which transaction takes

a) General markets:-
In these markets almost all types of commodities such as
foodgrains, oilseeds, gul, fiber crops etc. are brought & sold.

b) Specialised markets:-
In this market transaction take place only in one or two
commodities for every group of commodities, separate market exist eg. wheat
market at Hapur, Gunny cloth or bags trading at Calcutta.

9) On the basis of stage of marketing:-

a) Producing markets:-
These markets are mainly engaged in distribution of goods for
prodn purpose. They are located in producing areas.
Eg. Trading of Gunny bags & cloth is done in Calcutta & there are
markets engaged in supplying of raw material, chemicals, machinery required
for manufacturing of Gunny cloth.
At Taluka & District place there are some markets engaged in selling of
agril. Seeds fertilizers, insecticides & pesticides, agril implements that are
essential for prodn for agril produce.

b) Consuming markets:-
Here produce is collected for final disposal to the consuming
population these markets are located in thickly populated areas.

10) On the basis of extent of public intervention:-
a) Regulated markets:-
These markets are located at district places & are governed by
agril. Produce market committee. Here business is done as per the rules &
regulations by the markets organizations market charges are standarlised &
fixed & all the business practices are regulated by agril. Produce market

b) Unregulated markets:-
Here business is conducted without any set of rules &
regulations. Traders frame there own rules & conduct business.
Eg. Mango traders, Garlic traders & onion traders

2.3) Defects in Agril. Marketing:-

Agril. marketing have direct bearing on the standard of living of the
cultivator. Agril. mktg in its widest sense comprises of all the operations
involved in the movement of agril. produce from the field to the final
consumers & includes the handling of product at the farm, initial processing,
grading & packing in order to maintaing quality & avoid wastage. The system
of mktg. of agril produce in India is unfortunately defective & needs
The various defects are as under:-
1) Lack of organisation.
2) Forced sales
3) Surplous middle
4) Multiplicity of market charges.
5) Malpractices in markets.
6) Multiplicity of weights & measures
7) Adulteration.
8) Inadequate storage facilities.
9) Transportation means not well developed.
10)Absence of grading & standardsation of Agril produce.
11) Lack of sufficient market information.
12)Lack of financial facilities at cheaper rates.

1) Lack of organisation:-
The producers of the agril commodities are mostly small
cultivators. They are scattered & not organized purchasers on the other hand
are generally organized. Under this circumstance it is commonly seen that
producers of agril commodities are being exploited by the purchasers.

2) Forced sales:-
The farmer generally sells his produce at an unfavorable place,
time & receives unfavorable price. The poverty, unstatisfactory nature of
commn lack of staying power & the need for finance makes the producers to
sell his produce when there is a low price in the market. This result not only in
forced sales but larger proportion of produce is sold in the villages itself. The
producer often borrows money from money lenders before crop is taken up
with a condition that he would repay the loan immediately after the harvest.

3) Surplous middlemen:-
In the process of mktg. of agril. produce from the field of the
producer to final consumer there is an interference of a large number of
middlemen. They comprise village merchanes, itnirant traders, dalals, katcha
arhatias etc. They function at different stages in the process of assembling &
distribution of the agril produce. Every middleman charges for it’s own service.

4) Multiplicity of market charges :-

Marketing charges to be paid by the producers are numerous &
varied in unregulated markets & which are reduced from the payment of the
farmers after the sale of his agril. produce. In addition to the commission
charges of the market committee there are also deductions for weigning
charges ( tolai), labour charges for loading & unloading of agril. produce from
the vehicles, charges for holding the gunny bags while filling agril. produce
5) Malpractices in markets :-
In all the markets malpractices tend to be common until recently
there had not been standard weight & therefore scales & weighted are
manipulated or adjusted against the seller. There are various kinds of unlegal

deductions for religious & charitable purposes, large quantity of agril. produce
is taken as a sample, bargains are done under cover where there is a
possibility of getting unfavorable price to the cultivator. Broker would like to
take side of the buyer as he has to day contact with him.

6) Multiplicity of weights & measure :-

The presence of multiplicity of weights & measures gives better
chance of cultivator being cheated. It also creates uncertainty in trades.

7) Adultration :-
There are a variety of ways in which the agril. produce of
commercial & food crops is adultrated for eg. Tomato sauce is mostly
adultraated with red pumpkin, superior rice is adultrated with inferior quality of
rice etc.

8) Inadequate storage facilities :-

Generally in both rural & urban areas there are inadequate
storage facilities. The indigenous methods of storage adopted in the villages
as well as in most of the country markets do not adequately protect the
produce from dampness, moisture absorption due to excessive heat; insects,
mites, bird etc.

9) Transportation means not well developed :-

India with her vast distances, the existing means of transport
are inadequate. Bad roads from the field to the village & from villages to the
market are often extremely poor & defective bad roads not only increase the
transportation charges but also lead to the multiplication of small deals &
intermediaries. Railways also have not been able to afford the maximum
possible facilities for quick & safe transport of perishable products such as
fruits, vegetables & dairy products.

10) Absence of grading & standardisation of Agril produce:-
This is another defect. Because of this reputation of country’s
product in competitive world market is ranked low ungraded agril products
gets less prices in the market.

11) Lack of market information :-

Absence of market information is still another defect. The
villagers have practically no contact or have very little knowledge of the
outside world. There fore they are in very little touch with price trends of agril.

12) Lack of financial facilities at cheaper rate :-

Though various financing agencies & institutions have taken up
this work cultivator is still being financed by village money lenders, small
commission agents etc.

2.4) Co-operative Agril marketing :-

Co-operative agril marketing is the formation of an association by agril

producers which helps in marketing of agril produce collectively.
The main objective of co-operative mktg. is to sell member’s produce
directly in the best market at best price for achieving this objective co-
operative mktg may provide facilities for storage & pay advance to its
members. It also introcduce the system of grading & pooling the produce of
the members in order to secure better price.

Importance of co-operative mktg.

i) Co-operative mktg. of Agril produce help in reducing

malpractices in marketing.
ii) Fair prices are received by the members.
iii) Co-operative credit societies depend on the co-operative mktg
societies .
iv) Marketing efficiency is improved.

v) They render services like grading, packing canning etc.

2.5) Public Agencies in Agril marketing :-

Public agencies involved in agril mktg are as follows :-

A) Food corporation of India ( FCI)
B) National Agril co-operative marketing federation ( NAFED)
C) State Trading corporation ( STC)

A) Food corporation of India : - ( FCI)

FCI was established on 1st Jan 1965. The operation of FCI is in almost
all the states. It is divided into four zones. FCI has now four zonal offices, 18
regional offices & 128 district offices. It is one of the largest Public sector
undertaking with an turnover of over 7000 crore rupees.

Functions & Objectives :-

1) To purchase foodgrains & other agril comoities from farmers on
behalf of the central & state governments.
2) To make timely release of stock through Public distribution on
system to avoid unnecessary price rise.
3) To minimize seasonal price fluctuation.
4) To build up bufferstock of foodgrains to meet scarcity situations.
5) To conduct & encourage research in preventing storage losses.
6) To encourage other forms of food such as poultry & fishery.
7) To provide adequate storage facilities.
8) To encourage & undertake all kinds of food industries including
packing, processing, preservation.

B) National Agril co-operative mktg Federation (NAFED):-

NAFED was established in October 1958. The head office is at Delhi &
It’s branch offices are located at Bombay, Calcutta & Madras.

i) To promote interstate & international trade in agriculture.
ii) To act as an agent of the govt. for the purchase, sale, storage &
distribution of agricultural products.
iii) To co-ordinatinate & promote the marketing & trading activities of its
affiliated co-operative institutions.

Activities :-
i) NAFED is engaged in interstate trade in agricultural commodities.
ii) Export of agricultural commodities particularly vegetable, chillies,
onion, potato, Ginger etc.
iii) NAFED arranges for import of pulses, fertilizers, machinery etc.
iv) Maintain expert staff which conduct market research.

C) State Trading corporation


i) To supply essential commodities of agril at reasonable price
ii) To ensure a fair price of the produce for the farmers
iii) To minimize the seasonal price fluctuation.
iv) To supply inputs such as fertilizers & insecticides
v) To maintain buffer stock.
vi) To check black marketing.


Marketing channels are routes through which agricultural products
move from producers to consumers. The length of the channel varies
from commodity to commodity, depending on the quantity to be moved,
the form of consumer demand and degree of regional specialization in

A marketing channel may be defined in different ways. According to
Moore et the chain of intermediaries through whom the various food,grains
pass from producers to consumers constitutes their marketing channels have
defined marketing channel as alternative routes of product from producers to

Factors affecting Length of Marketing Channels

Marketing channels for agricultural products vary from product to
product, country to country, lot to lot and time to time. For example, the
marketing channels for fruits are different from those for foodgrains.
Packagers play a crucial role in the marketing of fruits. The level of the
development of a society or country determines the final form in which
consumers demand the product. For example, consumers in developed
countries demand more processed foods in a packed form. Wheat has to be
supplied in the form of bread. Most eatables have to be cooked and packed
properly before they reach the consumers. Processors play a dominant role in
such societies. In developing countries like India, however, most foodgrains
are purchased by consumers in the raw form and processing is done at the
consumer's level. Again, the lots originating at small farms follow different
route or channels from the one originating in large farms. For example, small
farms usually sell their produce to village traders; it may or may not enter the
main market. But large farms usualy sell their produce in the main market,
where it goes into the hands of wholesalers. The produce sold immediately
after the harvest usualy follows longer channel than the one sold in later
With the expansion in transportation and communication network,
changes in the structure of demand and the development of markets,
marketing channels for farm products in India have undergone a considerable
change, both in terms of length and quality.

a) Marketing Channels for Foodgrains
Marketing channels for various cereals in India are more or less similar,
except the channel for paddy (or rice) where rice millers come into the picture.
For pulse crops, dal mills appear prominently in the channel
Some common marketing channels for wheat have been identified as
(i) Farmer to consumers;
(ii) Farmer to retailer or village trader to consumer;
(iii) Farmer to wholesaler to retailer to consumer;
(iv) Farmer to village trader to wholesaler to retailer to consumer;
(v) Farmer to co-operative marketing society to retailer to consumer;
(vi) Farmer to a government agency (FCI, etc.) to fair price shop-owner to
(vii) Farmer to wholesaler to flour miller to retailer to consumer.

The channels for paddy-rice and pulses are broadly the same, except
that the rice millers or dal millers come into the picture before the produce
reaches retailers or consumers.

b) Marketing Channels for Oilseeds

Marketing channels for oilseeds are different from those for foodgrains,
mainly because the extraction of oil from oilseeds is an important marketing
function of oilseeds.
The most common marketing channels for oilseeds in India are :
(i) Producer to consumer (who either directly consumes the oilseeds or gets
it processed on custom basis);
(ii) Producer to village trader to oil retailer to consumer;
(iii) Producer to oilseed wholesaler to processor to oil wholesaler to oil
retailer to oil consumer;
(iv) Producer to village trader to processor to oil consumer; (v) Producer to
government agency to processor to oil wholesaler to oil retailer to oil

c) Marketing Channels for Fruits and Vegetables
Marketing channels for fruits and vegetabels vary from commodity to
commodity and from producer to producer. In rural areas and small towns,
many producers performs the functions of retail sellers. Large producers
directly sell their produce to the processing firms. Some of the common
marketing channels for vegetables and fruits are :
(i) Producer to consumer;
(ii) Producer to primary wholesalers to retailers or hawkers to consumer;
(iii) Producer to processors (for conversion into juices, preserves, etc);
(iv) Producers to primary wholesalers to processors;
(v) Producers to primary wholesalers to secondary wholesalers to retailers or
hawkers to consumers;
(vi) Producers to local assemblers to primary wholesalers to retailers or
hawkers to consumers.

d) Marketing Channels for Eggs

The prevalent marketing channels for eggs are :
(i) Producer to consumer;
(ii) Producer to retailer to consumer;
(iii) Producer to wholesaler to retailer to consumer;
(iv) Producer to co-operative marketing society to wholesalers to retailers to
(v) Producers to egg powder factory.
Sometimes, the wholesaling and retailing functions are performed by a single
firm in the channel.

e) Marketing Channels for Pulses

Most of the studies on the identification of marketing channels for
agricultural commodities have concentrated on a concept of marketing
channel which defines the flow of the produce from the producer (farmer) to
the consumer. But as the commercialization (market orientation) of agriculture
is increasing and as the farmers and consumers are located in different states
or different countries, the marketing channels that are emerging go across
state or even national boundaries. This apart, unless quantities flowing into

various channels are estimated, the relative importance of alternative
channels cannot be assessed. Such an anslysis was done by Acharya for
grains in Rajasthan. According to this study, there are three points of entery of
grain in the marketing channel viz; farmer level, wholesaler level (from outside
the state) and processor level (also from outside the state.)

f) Marketing of Fertilizers
Fertilizers are produced only at selected locations and imported
fertilizers arrive at seaports. The marketing system has to carry out the
functions of storage, transportation and selling to the farmers spread
throughout the country. Over .' time the marketing system for fertilizers has
undergone rapid change both in terms of its capacity and mode of operation.
Its evolution has been mainly guided by the public policy. Since fertilizer was a
new input for the farmers, the spread of know-how and incentives had to
accompany the marketing of fertilizers. In fact, initially the demand for fertilizer
had to be created. But the objective of demand creation was not to sell more
fertilizers and earn profit but, was to increase agricultural production. Up to
the end of the First Five Year Plan (1951-56), the sale of chemical fertilizers
was the sole responsibility of co-operative societies and State Agriculture
Departments. During the Second Five Year Plan (1956-61), the sale of
fertilizers became almost the monopoly of co-operative societies. This step
aimed at popularising the co-operative movement and achieving a higher
efficiency of the distribution system. The village panchayats were also given
this responsibility wherever the Co-operatives did not exist. Later the
Government allowed the fertilizer production units, which had been licensed
before December 31, 1967, to sell 70 percent of their produce through their
own agencies for a period of seven years from the date of commencement of
production. The remaining 30 percent of the production was required to be
sold through public or co-operative agencies. At the end of March 1970, the
number of sale points of fertilizers were 71652, out of which 53 percent were
in the private sector and 47 percent were in the co-operative or public sector.
During the early seventies, the proportion of private sector sale points
increased at a faster rate but slowed down in the later half of seventies.
However, during the eighties, the private sector fertilizer outlets have

expanded at a rate higher than that of the co-operative or the public sector. At,
the end of March 1995, there were 2.59 lakh sale points of fertilizers in the
country, out of which 69 percent were in the private sector and remaining 31
percent were operated by either co-operative societies or other public sector
institutions like State Agro- Industries Corporations. In order to make available
the fertilizers to farmers, the temporary sale points are also provided in some
areas during a part of the year.


Notwithstanding the fast expansion of sale points of fertilizers, the defects in
the marketing system of fertilizers are identified as follows :
(i) The number of sale points are still inadequate. Although, at the
country level, the average cropped area per sale point is 714 hectares,
farmers in hill and desert areas have to travel long distance to buy the
(ii) Quite often, the supplies of the fertilizers at many sale points are
not sufficient to meet the demand for fertilizers in the area.
(iii) At many sale points, the fertilizers are not stocked at a time when
farmers want to purchase. For example, if the supplies to the sale point
do not reach before the sowing of crops, the farmers are not able to
buy the fertilizer which they wish to use as basal dose,
(iv) Quite often, the makes and grades of the fertilizers which the
wish to buy are not available at the nearest sale point,
(v) Fertilizers are prone to adulteration and several cases of adulteration ,
have been reported.
(vi) Sometimes, the quantity of fertilizers in the bags is less than the
specified one. Although, this happens because of mishandling but it is
deliberate also.
(vii) When the supply is less than the demand for fertilizers in an area,
during a specified season, the dealers charge a price higher than the
statutory; or normal price.
(viii) Sometimes, the farmers are forced to buy another kind of fertilizer
along with the kind desired by them. For example, at some sale points

farmers are forced to purchase some phosphatic fertilizer along with
nitrogenous fertilizer. Technically, this may be a right practice, but
farmer as a buyer feels this practice as undesirable compulsion.
(ix) Farmers in many areas do not have cash to pay for the fertilizers.
Short-term loan or crop loan from the banks is meant to meet this
requirement But if credit proposals are not processed in time to enable
the farmers to buy the fertilizers on credit, the sale of fertilizers gets a
set-back in such.. ,areas. many areas, the salesman do not possess
the requisite know-how on the use of fertilizers which farmers wish to
seek from them,
(xi) During the last few years, there has been a considerable ad hocism
in fertilizer pricing policy which came in the way of adequate
availability of fertilizers to the farmers in time.


Suggestions for improving the fertilizer marketing system are as

(i) There is a need to increase the number of sale points specially in hilly,
tribal and desert areas so that the farmers have not to travel much
distance to buy the fertilizer. This will save time and also minimize the
travel cost.
(ii) There is also a need to develop proper distribution arrangements
involving a combination of co-operatives, government and private
agencies, depending on the potential of the area. Restriction on the
entry of marketing arms should be relaxed by making the fertilizer
licensing policy liberal so as to increase competition and efficiency in the
fertilizer trade. Wherever, co-operative institutions have not been
successful, private dealers should be encouraged to supplement the
sales efforts. The basic objectives of the policy should be to make
fertilizer available to all the farmers at the time of need at reasonable
prices rather than the strengthening of the co-operative organization.
(iii) Sales points should be developed into good agro-service centres. Such
centres should provide advice to the farmers on different aspects of

fertilizer application in addition to making the fertilizer, other inputs and
services available to them.
(iv) Packing material and technology for fertilizers should be improved to
minimise the chances of loss during transport and storage .
(v) The procedure of linking credit with fertilizer supply should be simplified.
(vi) Fertilizer should also be made available in smaller packets of 5 to 10 kg.
(vii) There is need to check adulteration and underweighment of bags. This
can be done by strengthening the quality control organization in addition
to the use of good packing material.
(viii) There is also a need to minimise the number of brand names to avoid
confusion among the farmers specially those who are illiterate or have
poor educational level.
(ix) The ratio of prices of three nutrients (NPK) should be maintained at
levels consistent with the normative use under different cropping
patterns and soil conditions.

i) Marketing of seeds :-
Seed production and its marketing involve a high level of technology
and a high standard of proficiency. The seed business is a business of trust. It
is one of the most difficult areas of management in agricultural development.
The no availability of improved seeds of high quality deprives the farmers of
the advantages of modern technology. With the introduction of the high-
yielding varieties and hybrids in mid-sixties, production and distribution of
improved seeds gained importance in the national programme of agriculture
development. Following steps are involved in the production and marketing of
quality seeds:


The quality seed for ultimate use by the farmers is produced in three
stages viz., breeder seed, foundation seed and certified seed. Breeder seed is
the primary stage of the seed production cycle. 'The production of breeder
seed is organised by the Indian Council of Agricultural Research through the
concerned breeders and scientists attached to its Institutes and State
Agricultural Universities as per the requirements indicated by various states.

The breeder seed is multiplied into the foundation seed by NSC, SFCI
and SSCs. Now the private seed producers have also entered into the
production of foundation seed. While the state's local requirements of
foundation seeds are met by the SSCs, the NSC and SFCI take care of the
requirement of national varieties. The total production of foundation seeds
which was 10915 tonnes in 1980-81 has increased to around 47600 tonnes in
1995-96. )
The foundation seed is supplied to the selected farmers for
multiplication into what is called the certified seed. The farmers who
undertake the work of production of certified seeds have to meet certain
standards like isolation of the yields, the cultivation practices and removal of
plants of undesirable varieties from the plots/The certification agencies keep
close supervision over such plots. The seed is purchased by the agencies,
tested in the laboratories for purity and germination, graded and packed with
certification mark before releasing for sale in the market. The production and
marketing of certified seeds have expanded very fast in the country.


After the purchase of the seeds from registered seed growers, the
seeds are appropriately processed. This is an integral part of improved seed
technology. Seed processing primarily consists of five major steps viz.: (a)
Extraction, (b) Drying, (c) Purification, (d) Treatment, and (e) Packing. Packing
is important for


To retain the confidence of the farmers and provide them protection
against unscrupulous practices, maintenance of quality and its certification is
very important. For this purpose, the Indian Seeds Act was passed in 1966,
which came into force from October 1,1969 in all the states and union
territories of the country. Later, Seed Control Order, 1983 came into existence.
The Indian Seeds Act (1966) aims at regulating the quality of seeds
sold to the farmers. The Act envisages a two-pronged approach namely,
compulsory labelling and voluntary certification. Under compulsory labelling
any one selling seed-of a notified variety should ensure that the seed

conforms to the prescribed limits of germination and purity and its container is
labelled in the prescribed manner. Under voluntary certification, any one
desirous of producing certified'-seeds may apply to a certification agency for
the grant of a certificate to the applicant after satisfying that the seed has
been produced according to the' prescribed norms and that it conforms to the
prescribed standards. The Act stipulates that any person offering to sell seeds
of notified varieties should label them and give information about germination,
purity and moisture percentage all conforming to the minimum standards. Any
discrepancy between the label and the contents is a criminal offence.
The main provisions of the Seeds Act and the Rules thereof are :
(i) Standard of seeds — The Central Seed Committee of the Government of.
India through its sub-commirtees—Central Sub-Committee on Crop
Standards and Notification and Central Sub-Committee on Release of
Varieties—has prescribed the standards for the seeds of notified varieties
so that the uniformity is maintained throughout the country. In addition,
the Central Seed Certification Board also goes into the standards of
certified seeds.
(ii) Certification of seed — This is voluntary in nature and is done by 19 seed
certification agencies set up in various states under the provisions of the
Seeds Act. Certification of seed includes field inspection, proper grading,
representative sampling and careful laboratory testing. The certificate is
affixed securely to each sealed bag or container to show that the seed is
(iii) Seed Testing — Seeds are tested for purity and other qualities in seed
testing laboratories. There are 86 state seed testing laboratories in the
(iv) Enforcement of Seeds Act — Enforcement of the Seeds Act has been
entrusted to the State Governments. The seed inspectors of the
government visit the premises of distribution agencies, check up the
quality and take samples in case of doubt for testing in laboratories.
(v) The Central Seed Committee is the apex body to administer the Act in the
country and to offer the technical advice to the State Governments.

Seed Marketing and Distribution

Seed marketing is more complicated and specialised process as
compared to marketing of other inputs and of agricultural products. Production
of good quality seed is of no value if it does not reach the farmer in time. Seed
is a biological entity. In most cases, seeds are produced far away from the
consumption centres. Further, seed produced in one season is supplied to the
farmers in the following season. Hence, it requires proper storing. Moreover, it
has to be taken for sale to the farmers during the sowing period. Any delay in
the supply by a few days may mean accumulation of unsold seed stocks.
There are chances of loss in the germination percentage if it is to be stored for
another year. As the marketing of seed involves procurement, distribution,
sale promotion and linking credit with sales, effective coordination of all the
related agencies is necessary to achieve the objective of making available
good quality seeds to the farmer in time.
The seed marketing involves taking of bags of certified seeds to the
needy farmers through the network of sales outlets of government, co-
operative societies and private agencies. The sale of certified seeds of
cereals, pulses and oilseeds is handled by the private sector as well as
government and co-operative organisations. The National Seeds Corporation
as also the State Seeds' Corporations have their own sale points for seed
marketing. In some states, Department of Agriculture also sell seeds through
their field staff. The sales of seeds of vegetables, flowers and other crops are
mostly handled by private traders.
The Agro-Industries Corporations of the states encourage private
entrepreneurs to establish agro-service centres in rural areas by providing
them with training and arranging supplies of farm inputs for subsequent sales
to the farmers. Over the years, private trade has come up in the seed
marketing activity in a big way.

Export and Import of Seeds

Though Indian seeds are popular in many countries but domestic
requirements are given priority over demands from foreign countries. Certified
seeds of all cereals have remained on the Restrictive List under the existing
export policy. These seeds cannot be exported without prior permission of the
Ministry of Agriculture. However, in view of great demand for Indian seeds in

other countries and opportunity for earning foreign exchange, the National
Seeds Corporation has been exporting certified seeds to countries like
Bangladesh, Burma, Ethiopia, Nigeria, Vietnam, Maldives, Egypt, Kampuchea
and Denmark. Export of breeder and foundation seeds is generally not
A new policy on seed development introduced from October 1, 1988
aims at securing for the farmers high quality seeds available anywhere in the
world. As; a result, there has been significant increase in the import of high
quality seeds, particularly those of oilseeds, pulses, coarse grains, vegetables
and flowers.

National Seed Project (NSP)

The thrust of National Seed Policy is to develop the infrastructure required for
production and distribution of improved seeds. As such the Government of
India in collaboration with the World Bank launched a National Seed Project in
October, 1976. The main components of the project were :
(i) Development of farms for production of foundation and breeder
(ii) Setting up of seed processing plants for foundation seeds;
(iii) Construction of specialised seed stores;
(iv) Building up of buffer stock of good quality seed;
(v) Strengthening of seed certification agencies and seed testing
(vi) Strengthening of universities, farms for production of breeder
(vii) Establishment of State Seed Corporations; and
(viii) Creation of training facilities for seed technology and marketing.
The NSP was implemented in phases with details as follows :
Phase I (NSP I) — This phase of the NSP was aimed at expanding the
production and supply of high quality seeds and seed processing; capacity in
the States of Andhra Pradesh, Maharashtra, Punjab and Haryana. The period
of this phase was from October, 1976 to| December, 1984.

Phase II (NSP II) — This phase had the same objectives as of phase I and
covered the states of Bihar, Orissa, Karnataka, Rajasthan and Uttar Pradesh.
The period was December, 1976 to December, 1985.
Phase III (NSP III) — The third phase was launched in March 1990. This
phase sought to provide facilities for the growth of private sector seed industry
through adequate institutional financing; to improve the working of national
and state level public sector seed corporations and to ensure timely and
adequate availability of quality seeds at reasonable prices.
Institutions in Supply and Marketing of Seeds
As already indicated earlier, retail outlets for seeds exist in the co-
operative, private as well as the public sector. Notwithstanding the recent
entry of private companies, main institutions engaged in the supply and
marketing of quality seeds in the country, at the national and state levels are
The importance of improved seeds was realised in India long ago. But
systematic efforts for the development of improved seeds began only during
the Second Five Year Plan period. In 1957, the Government of India in
collaboration with the Rockefeller Foundation of the USA, initiated a
coordinated maize improvement programme, which was an important
milestone in the development of an improved seed industry in the country.
Later, the year 1961 was celebrated as the World Seed Year by the Food and
Agriculture Organisation (F. A.O.) of the UNO Coordinated crop improvement
programmes were initiated for wheat, jowar, maize, bajra and rice. The seeds
of hybrid varieties were made available to Indian farmers during the mid-
sixties. At this time, the necessity of an organization at the central level was
realised for the multiplication and development of improved seeds. As a result,
the National Seeds Corporation, a central organization was established in
March, 1963. This is a Government of India undertaking set up under the
administrative control of the Ministry of Agriculture.
The main functions assigned to the corporation are :
(i) To establish a strong seed production industry in the country;
(ii) To produce foundation seeds based on the breeder seeds evolved
at research stations;

(iii) To establish a seed processing plant in the country;
(iv) To impart technical training in seed technology and to arrange for
extension education of the farmers;
(v) To enter into contracts for the distribution and selling of seeds; and
(vi) To undertake, by inspection and other means quality control
measures in all phases of the seed business carried on by or in co-
operation with the state seeds corporations.
The increasing role of National Seeds Corporation in seed production
can be seen in the National Seeds Corporation produces and markets the
certified seeds of wheat, rice, maize, jowar, bajra, jute, fodder crops and
vegetable crops. It has also created facilities for the production, processing
and storage of seeds and for the production of foundation seeds. The
Corporation selects seed certification agencies for the States in
consultation with Central and State Governments under the Indian Seeds
Act, 1966. The National Seeds Corporation has established quality control
and seed testing laboratories at many places. It also exports seeds to
other countries e.g., hybrid maize seed to Sri Lanka and vegetable crop
seeds to Ghana.
The National Seeds Corporation arranges for the sale of seeds through
government agencies as well as through private selected traders with a
view to making improved seeds available to the farmers in time. The
desisting of state Departments of Agriculture from stocking and distribution
of seeds in 1966-67 made it necessary for the NSC to develop an
organised seed marketing system in the country.
The extended marketing activities of the National Seeds Corporation include:
(i) Strengthening of the marketing department at headquarters and
regional offices;
(ii) Introduction of the dealer system;
(iii) Development of the export market in seed;
(iv) Enlarging other ancillary services like processing facilities, storage
and movements; and
(v) Intensive publicity to focus on the benefits of certified seeds.
With the launching of the National Seed Project, the National Seeds
Corporation has assumed the role of a leader to develop the seed industry on

sound lines. Specifically the National Seeds Corporation is contributing
towards the States Seeds Corporation's share capital, coordinates the
certified seed production programme of several States Seeds Corporations,
assesses the demand for seeds, looks after the inter-state marketing of
certified seeds, plans and organizes the production of foundation seeds, plans
the production of breeder seeds in consultation with ICAR, provides market
research and sales promotion efforts, provides training facilities to the staff
participating in the seed industry, maintains a reserve stock of seeds, provides
certification services to those States which do not have independent seeds
certification agencies and produces vegetable seeds for local and export


The SFCI was established in 1969 under the Companies Act, 1956 to set up
and run agricultural farms, primarily for the production of seeds of foodgrains,
fibre crops, oilseeds, plantation crops, fruits and vegetables in various parts of
the country. The Corporation operates large-scale farms in all the States
where State Seeds Corporations have been set up (except Maharashtra). It
participates in each State Seeds Corporation as a share holder grower;
prepares development plans for those of its farms involved in National Seeds
Project regarding production of foundation and certified seeds on behalf of
National Seeds Corporation and State Seeds Corporations and acts as a
consultant for farm development plan of the Agricultural Universities and other
Seeds are produced on 12 central government farms under the control of
SFCI. Some of these are Suratgarh and Jetsar farms in Rajasthan,
Jhasugarha farm in Orissa, Jalandhar farm in Punjab, Hisar farm in Haryana,
Raichur farm in Karnataka, Mizo Hills farm in Assam and Cannanore farm in
Kerala. The total area under the farms of State Farms Corporation of India is
36141 hectares.
State Seeds Corporations have been established in 13 States to widen the
network of production and distribution channels for certified seeds in the
country on the lines of the Tarai Development Corporation. In Rajasthan, the

State Seeds Corporation was established on March 28, 1978. The main
functions of State Seeds Corporation are: (i) production, (ii) processing, (iii)
storage, and (iv) marketing of certified seeds. They are not responsible for the
production of breeder and foundation seeds.

The demand for pumpsets depends on the level of biochemical technology,
the demand pattern for labour and energy, the relative prices of human labour,
fuel and oil vis-a-vis pumping sets, the expansion in canal irrigation and the
exploitation of ground water. Manufacturers have to project the demand and
adjust their production schedule accordingly. By its credit policy, the
government has been encouraging the purchase of pumpsets by farmers. The
market for pumpsets is characterized by monopolistic competition. Different
makes of pumpsets are available; and each manufacturer tries to popularise
his product by price differentiation and sales promotion activities.
The selling price of pumpsets is fixed by the manufacturer. The dealers
or agents have to sell the pumpsets at the fixed prices. The expansion in
aggregate demand and the supply of pumpsets can be judged from the
number of electric or diesel-operated pumpsets installed by the farmers in

Tractors are mainly used to prepare land to receive seeds and to
transport the produce. They are also used as source of power in operating
other machines like irrigation pumps, winnowers, threshers, chaffcutters, the
power sprayers/ dusters. The nature of the demand for tractors originates
from the need to perform the operations of land preparation and transportation
and from the requirement of the services performed by other machines.
Tractors were first introduced in Indian farming in the early twenties. The
manufacture of tractor in India commenced in 1960. Prior to 1960, they were
being imported.
Though the indigenous production of tractors increased to a level of 5714
tractors per year in 1965-66, the supply was not sufficient to meet the
demand. Therefore, imports of tractors continued even after the

commencement of the indigenous production. Up to 1966-67, the country had
to import around two to three thousand tractors each year. During the next five
years, Indian farming underwent a technological revolution in major wheat
growing areas which spurted the demand for tractors. Although the indigenous
production increased to a level of 18100 tractors per year in 1971 -72, yet the
imports had to be increased to a level of 19739 tractors.
Tractors were imported from Czechoslovakia, the U.K., the erstwhile USSR,
West Germany, Rumania, Bulgaria, Yugoslavia and the German Democratic
Republic. The increasing level of imports of tractors which created the
problem of non-availability of spare parts and service facilities, had a
deleterious effect on the growth of the indigenous tractor industry. In February
1973, the Union Government, therefore, decided to ban the import of tractors
altogether, except of those coming under the World Bank assistance scheme.
Since then, the annual production of tractors had been continuously going up
as shown in Table 5.18. In 1990-91, 1,39,826 tractors were manufactured in
the country. The tractor production in the country further increased to 2,30,000
by 1996-97. At present, there are 15 units engaged in the manufacturing of
tractors. These units have a licensed capacity of over two lakh tractors per
The trend in effective demand for tractors in the country can be assessed
through the data on sales of tractors. The sales have increased from 30,229
tractors in 1974-75 to 65,101 in 1980-81,76,886 in 1985-86,1,39,699 in 1990-
91 and 1,91,497 in 1994-95.'
Tractor is a durable resource which provides flow-service in the farm sector.
Therefore, the number of tractors demanded by the farm-community as a
whole during a given year/period, depends inter alia on the inventory or stock
of tractors already available in the farm sector. The estimated stock of tractors
in the country at different points of time, as shown in Table 5.19 has increased
at a rapid rate. In 1996, around 21.83 lakh tractors were being used in the
He Government of India has been regulating the supply and prices of
tractors. 1In order to make available indigenous tractors to farmers at
reasonable prices, the government issued the Tractors (Price Control) Order
in March, 1967. The selling prices of tractors were fixed from time to time on

the basis of the recommendations of the Bureau of Industrial Costs and
Prices. But the fixation of prices became meaningless because of highly
inflationary conditions. The Tractors (Price Control) Order was, therefore,
withdrawn in October 1974 and was replaced by a system of parametric
surveillance. Under this scheme, the government issued guidelines to the
manufactures for fixing of the prices of their tractors. Any price increase by the
manufactures was subject to scrutiny by the government to check whether the
increase fell within the parameters laid down by it. This scheme ensured a
fair return to the manufactures and induced them to go in for the maximum
utilization of capacity. This indirect price control system was withdrawn by the
government in 1976, except in respect of three preferred models—MF 1035
(35hp), TAFE 504 (50 hp) manufactured by i M/s. Tractors and Farm
Equipment Ltd. and Ford-3000 (46 hp) manufactured by M/s. Escorts Tractors
Ltd. The prices of some makes/models of tractors manufactured in India are
given in
The Tractors (Distribution and Sale) Control Order applicable to only a
preferred model prescribed the procedure for registration of orders with
dealers for purchase of new tractors. On the basis of the registered demand
for tractors in different regions, quota were allotted to respective dealers and
farmers had to wait for their turn. The order forbade any individual to buy
more than one tractor during the course of a year and banned its subsequent
sale within two years, except under specified circumstances.
The cost of Indian tractors is high in comparison with that of imported
tractors. The high prices of Indian tractors is partly due to heavy taxation by
the government.
There have been a few important developments in the demand and supply
scene of tractors in India during the nineties. One, the demand for tractors is
increasing at a rapid rate. Though medium term growth in demand is
expected to be 6 to 7 percent per annum, it was 16 percent during 1995-96
and 12 percent during 1996-97. And two, there has been a structural change
in the tractor market in favour of higher ranges. The potential demand of
tractors in India is put at 45 lakhs. The availability of credit plays an important
role in demand for tractors as 90 percent of tractor sales are through credit.

With a view to encouraging the small and medium farmers to own tractors of
low ranges, a scheme "Promotion of Agricultural Mechanization among Small
Farmers" was introduced in 1992-93, under which a subsidy of 30 percent
subject to a maximum of Rs. 30,000 is available to the farmers individually or
their groups for the purchase of tractors up to 30 H.P. This subsidy is also
available to registered cooperative and farming societies. This subsidy of Rs.
30,000 per tractor which was restricted to small and marginal farmers was
extended to all categories of farmers in 1996-97.

f) Marketing of pesticides:-
For regulating the manufacture, import, sale and use of pesticides, the
Insecticides Act, 1968 was operative in the country. Under this act, there is a
provision of registration of pesticides with the Government of India (Ministry of
Agriculture). Every formulation has to be registered after making a formal
application in this regard to the government.
For marketing of pesticides, the manufacturers appoint distributors for each
region. These distributors are mostly located in urban centres and are either
in the co-operative or private sector. They arrange to supply the plant
protection chemicals to farmers through a network of dealers. The number of
dealers varies from chemical to chemical and area to area. These dealers are
either in the private sector, including agro-service centres, or in the co-
operative sector. The lack of technical know-how on the part of the farmers or
dealers and the complementary requirement of such equipment as sprayers
or dusters make the marketing of plant protection chemicals a difficult and
skilled job. Its misuse may endanger human life.
Some of the problems faced by the farmers in procuring plant protection
chemicals are:
(i) The number of pesticides/insecticides depots is inadequate. Each
depot covers 10 to 15 villages. Farmers have to travel long distances
to get their requirements of plant protection chemicals. This increases
the cost of material and results in the wastage of farmer's time. Most of
the time, the demand gets blunted.
(ii) There is a short supply of the pesticides of a particular brand in the
market because of insufficient production.

(iii) Chemicals available from the existing depots are not stocked in
adequate quantities, which results in loss of the crop when there is a
severe attack by insects/pests.
(iv) Farmers are not familiar with the insecticide/pesticide which is required
for a particular insect/pest/disease, and dosage and techniques of its
use. Spraying and dusting machines needed for the use of insecticides
and pesticides are costly and beyond the means of an ordinary farmer.
(v) The cost of plant protection measures is very high because of the high
prices of insecticides and pesticides; and
(vi) There is, moreover, the non-availability of spraying and dusting
equipment on custom service basis.
The following measures are suggested for improving the distribution and
marketing of insecticides/pesticides:
(i) Private entrepreneurs may be encouraged to market insecticides and
pesticides, and they should be given adequate technical and financial
support, so that they may increase the number of distribution outlets in
(ii) Co-operative organizations for the marketing of insecticides/pesticides
should be revitalized. Farmers Societies should be entrusted with the
task of running input depots, including those of pesticides, so that they
may become available in time to the members of these societies.
(iii) At least one sales point in each village and market, including sub-
markets, should be established to ensure easy availability of
insecticides and pesticides.
(iv) At each sales depot, either in the private or co-operative sector,
technical guidance should be provided to the buyers of the chemicals.
Sprayers and dusters should also be provided on custom-hire basis to
the buyer of the plant protection chemical.
(v) The production of plant protection chemicals should be increased
either by granting new licences or by encouraging manufacturers to
utilize the unused capacity of the existing plants.
(vi) More emphasis should be given to biological control and IPM
techniques rather than increasing the use of chemicals.

(vii) The extension education efforts are directed at minimizing the crop
residues in the product.
The prices of pesticides are determined by normal demand and supply forces.
For the pesticides as a group, the nature of market is very close to a situation
of oligopoly or monopolistic competition. Apart from the regulatory measures,
public intervention in the domestic market for. pesticides exists in the form of
explicit subsidies given by the government to certain sections of farmers such
as marginal and small farmers and those belonging to scheduled castes and
scheduled tribes. As these subsidies are given to meet part of the cost of
pesticides in the cultivation of certain crops like oilseeds and pulses, they
result in the increase in the quantity of pesticides demanded. The factors such
as expansion in irrigation facilities and increase in area under high-yielding
varieties shift the demand schedule for pesticides.

g) Live Stock Marketing:-

Livestock is an integral part of agriculture in general and mixed farming
in particular. The animals are kept for draft purpose in arable farming but in
mixed farming draft cattle are kept for the traction work, dairy animals—cows
and buffaloes are kept for milk; small animals like goat or sheep are kept for
milk or for meat purpose. There are animal production farms which do the
breeding of these livestock and they are marketed. Individual farmers do keep
some livestock breed them and sell them to individuals or organizations. The
scientific breeding can produce perfect livestock and rearing them upto the
age of maturity does have a bearing on the market value. Thus, cattle
husbandry plays a very important role.
Draught Animals. These are generally sold after castration and
trained in drafting. Pairing is done keeping in view breed, color, features, size,
weight etc. A month before selling they are allowed complete rest and liberal
feeding. They are fed on Masada composed of ghee, milk, butter milk, sweet
oil, gur, sattoo, turmeric, alium, ginger, black salt and pepper. They are
groomed by giving them hand massage.
Dairy Cows, Milk animals are properly fed before putting them for sale.
They are fed with "calactagogus" like gram, milk, gur, molasses, a few days
before sale so that daily milk yield is improved. Both cow and buffaloes are

washed, cleaned, hoof and horns are painted with oil and the buffalo gets oil
massage to give glossy skin in appearance.
Slaughter Stock. Slaughter animals should look healthy, free from
ailments. But in India generally skinny and good for nothing animals are sold
for slaughter. In abattoirs the veterinary doctors examines the animals and
certifies it fit for slaughter. But presently this practice is rarity.
There are many malpractices in the sale of livestock by which they try to
conceal the minus points from the buyers.
Agencies and Methods of Assembling and Distribution. Both
functions are interlinked.
Breeders. There are two classes: Debaris-Gujrati and Bhardwas.
Professional breeder-with principal occupation is breeding and rearing
of cattle. Cultivators—who keep for primarily agricultural operations but do
breeding as side occupation. These are in majority in this country. The
animals are usually sold in the cattle fair, negotiation is done through brokers.
If no fair or haat cattle are sold by individual contact.
Itinerant Traders. Classified as (i) Nomadic—who buy and sell
animals in the course of their movement from one place to another (ii) Cattle
dealers—who hail from tillages, towns or cities and having made their
purchases in one area sell them in another.
Some of the itinerant act as agents of wholesale merchants and
experts operating in cities and towns and make purchases on their behalf.
Practices of assembling and distributing cattle followed by these two classes
of dealers are almost the same. Itinerant traders play an important role in the
assembling and distribution of cattle all over the country specially where
merchants are wanting and fairs are not held frequently. They mostly
concentrate on draught cattle.
If itinerant traders work as paid agents of wholesale merchants, they
hand over their collections to the latter, but if they conduct the business on
their own account, they may sell animals to wholesellers, butchers and
citizens or take away to other dealers for disposal at cattle fairs or haats.
Wholesale Merchants Very Small in Number. They also export cattle
to foreign countries but it is insignificant as trade. They belong to the
community of butchers, banjaras.

Exporters handle all types and classes of animals according to the
foreign demand. Wholesellers get their supplies from itinerant traders.
Sometimes wholesellers visit villages and buy on their own.
Butchers, Milkmen, and Cart drivers. Butchers get their
requirements from itinerant traders, wholesale merchants, directly through
brokers and a few visit stock raising areas themselves and make their
purchases from haats and fairs. The butchers sometimes get their purchase
of unusable stock from the milkmen and cart drivers.
Market Functionaries. Brokers are the only functionaries and they belong to:
different classes such as:
(i) Cultivators; (ii) Itinerant traders; (iii) Butchers; (iv) Cart drivers.
In big cities the beoparis bring their collection to the stock yard. The price of
the animal is paid to the beoparis after the sale transaction is completed they
are paid either in full cash or instalments. Only brokerage charges are
realized from the beoparis.
The other functionaries are:
Bhangis; bhistis; kahars etc. They clean the premises and supply water
and are paid.
Methods of Business. The unit of sale is: (i) per head; (ii) per pair; (iii)
per group. The most common is per head sale. Per pair is for draught
The market starts wanning up in the after noon and is in full swing till
close of the market.
The sale transaction takes place. (i) The through general inspection
with much carefulness; (ii) Through examination of performances.
The general inspection:
(a) Draught animals and milk animal’s arc examined for—age, breed
good and bad points, health, temperament; and marks which they consider as
good or not good. There is a score card for the scientific judging of the milch
animals and one-third marks are allotted to the udder structure and texture,
(b) Slaughter animals are examined for muscular development, fat and
condition of hide.

Test for Actual Performance. If there is facility for tilling the soil they
are given ploughing test or they are made to trot in pairs or single for cart
In buffalo the actual milking performance is given, the record of
lactation is checked, age and other milk traits.
For the slaughter—its general health, skin thickness, fleshy parts are
Prices are settled after they (brokers or buyers) are fully satisfied for
the attributes as mentioned above.
Prices are determined:
(i) By private treaty; (ii) Negotiation under cover.
Private Treaty. With the existence of broker the buyers and sellers do
not come in contact, all negotiations are done through the brokers. When
buyer makes the transaction they publically announce the price or secret
whisper to sellers.
Negotiation under Cover. This method comprises of touching the
fingers of the brokers by the buyers to keep the secrecy from the other buyers
when there are more than one buyer. The flaw in this is that the unscrupulous
beoparis increase their margin of profit through dishonesty.
Auction. This is generally practiced for slaughter animals but is the
practice for all kinds in Malabar area. The animal is given to the highest bidder
who has earlier examined the animal by himself. This method is for quick
disposal of animals when the number of buyers is large. This is mainly
adopted in towns for slaughter animals. After the settlement advance is paid
out. The sale registration is done by deed writer. In case any dispute arises
the fair controller is refered to or village headman for arbitration.
Sale Centers. (i) Farms; (ii) Open fields; (Hi) Road sides; (iv) Fair
grounds; (v) Private premises; (vi) Village common grounds; (vii) Weekly
These sales centers act as assembling and distributing places.
Types of Sale Centers, (i) Fairs; (ii) Haats; (Hi) Weekly markets;
(iv) Quarterly or monthly markets.
Time for sales is generally when there are religious festivals. During the
post harvest periods.

Periods of Fair. The sale may last from one day to three months like
Dardri ka Mela in Ballia during the beginning of winter. One week duration is
very common. Cattle haats, pivis and panths, shandi or bazaar are weekly or
bi-weekly markets held generally for a day.
Timing is morning or afternoon. Daily markets are found in towns and
cities where the milch or draught catties are sold.

Types and Breeds. Bullocks, buffaloes, cows and young stock.

Ownership and Control. Local bodies—district boards, municipalities;

Private Agencies—panchayats, religious institutions; trusties and individuals—
big land owners; The Government.
Facilities for Cattle. Shady tress gives the shelter from heat or rain. In
daily markets some accommodation is there but inadequate. Drinking water is
provided by the common trough. The fodder supply comes from open stalls at
reasonable rates. Infrastructures generally are poor and inadequate.


Floriculture is the cultivation of flowers and other ornamental plant

materials. Ornamental horticulture apparently covers the complete industry of
flowers and ornamental plants produced.
Flowers have been choice of all cultures and almost every country. In
India flower has a central place in many of the cultural and religious practices,
like marriages, pujas, etc.
Flowers can be grown in all the three types of climates and altitudes as
GOD has made them adaptable to these climates. There are flowers grown in
temperate, subtropical and tropical climates and they have their own
significance and beauty. Different flowers have their own specific climatic
requirements. The following tables give an indication:

Kind of flower Temperature Humidity Day Sunshine
Day Night
Rose 25 16 Not too -------- ----
Chrysanthemums high
For Vegetative 40 15-25 70% 13.5 Full
For Flowers 30 10 70-80% 12.5 Full
Gladiolus 12.22 10 65-75% ------ ------
Jasmine 25-33.5 16-21 55-66% 10-14.2 8 Hrs

Source: Kalavalli, Shashi, Ateeq. LR, jacab, Xavier, “Floriculture Industry in

India,” oxford and IBH co. Pvt. Ltd., New delhi, 1991-p 142.

Classification of Flowers:
(a) Traditional,
(b) Modern.
Major Flower Producing States are: Andhra Pradesh, Karnataka,
Maharashtra, Tamil Nadu, and West Bengal.
(a) Traditional Flowers. These occupy larger percentage of cultivation.
These flowers are: Rose, Marigold, Jasmine, Tuberoses, and
(b) Modern Flowers are produced in. Delhi, Bangalore, Pune/Nasik,
Kashmir, Kalimpong, Chandigarh, Nilgiris hills, Kolkata, Assam, Himachal
These flowers are—Asther, Gerbera, Carnalius, These flowers are
grown in small areas.
Market for Traditional Flowers is: Southern States.
Market for modern flowers is: Metropolis areas and other Cities.
The Marketing of Flowers. The activity in marketing begins with the
harvesting of flowers and ends when it reaches the consumers. Besides,
ornamental utility the other uses are for industrial purposes like edible
products like 'gulkand' and essential oil for perfumery.

Location of industries

Coimbatore—for extraction of essential oils from tube-roses and
In U.P. Aligarh, Ballia, Etah, Ghazipur, Kanauj prepare rose-alta, oil,
and rose water preparation.
In Rajasthan Udaipur, Mathwara, Ajmer—Rose-alta, syrup, water and
Punjab, Amritsar—Gulkand preparation.
Srinagar—Gulkand and Rose-water.

The Marketing Activity

This comprises of:
1. Packaging of flower; 2. Transporting to market; 3. Transforming
flowers into Products; 4. Selling through various channels until it reaches the
ultimate consunicn
Major Flower Markets
1. Peninsular markets. Madras, Coimbatore, Madurai, Bangalore,
Mysore. Dharwad, Hyderabad, Vijayawada, Trivandrum, Cochin, Mumbai and
2. East India market. Kolkata and other regional markets.
3. North India. Lucknow, Kanauj, Delhi, Rajasthan.
Intermediatories in Flower Markets. These are between producers
and consumers. The intermediatories differ between traditional flower
marketing and modern flower marketing. The reasons being:
1. Quantity of modern flower trades is small.
2. Since modern flowers are more valuable and fragile they need extra care
in handling them than the traditional one.
3. There is a good knowledge of marketing of the modern flower growers so
they keep the number of intermediatories less in number.
4. The retailing channels differ between the modern and traditional flower due
to the differences in the segments served in both cases.


Intermediatories. 1. Commission agents 2. Wholesellers 3. Vendors. (In
case the volume of trade is small the wholeseller acts as retailer as well).
In some cases there are pre-harvest contractors. In some cases, the
wholeseller purchase (lowers through commission agents in the nearby
markets. The vendor purchases their flower requirements from commission
agents and wholeseller/retailers.
There is a difference between retailers and vendor as the former puts
up a stall for sale but the vendor goes from house to house to sell.
The complexities of intermediatories role depend upon the size of the
market and whether the market is supplied directly by the producers.

Different Intermediatories and their Role

1. Pre-harvest contractors. They come from nearby markets and act as
wholesellers, commission agents. After harvesting sell flowers to
contractors. They advance money to producers before harvesting and the
balance is paid at a later date. This system minimizes risks, labour
shortage, meets the cash needs but it gives some loss than by selling
2. Commission agents. They sell flowers on behalf of the producers and
avoid risks receiving flowers from producers and selling them in the
market. The producer in this process goes to the market but in case the
market is far off it is sent by transporters. The function of the agent is to
display flowers at the stall. Sale prices are determined by negotiation but
some times commodity is auctioned. The payment is made in cash after
deducting the commission and ancilliary charges to (he producers,
payment is made periodically and its records are maintained. In between
agents and buyers there may be wholesellers, retailers and vendors.
The important service done by the commission agents is the financing of
the producers and the volume of trade indicates the proportionate
financing in advance.
The commission agents and the wholesellers are the main actors in the
movement of flowers between major markets. The shipment depends on
the induced demand from far away markets. The supply of flowers is not
directly from the producers to wholesellers and retailers.

3. Wholesellers. The wholeseller gets his supply either from the producers
or agents and has the ownership of flowers and bears the risk as well. In
smaller markets the agent himself plays the role or wholeseller and
4. Retailers. In small market the wholeseller acts as retailer and the
retailers display ornamental flowers on the stall as in Kolkata.
5. The Vendor. They act as retailers but their modus operundi is. to sell
flowers at the gate of the temple or door to door in the neighborhood.


The mode of marketing differs from season to season. The role and number of
intermediatories are different than in the traditional system. Only in Mumbai
there are commission agent and nowhere else. The wholesellers and retailers
dominate in this trade. The retailers are called "Flowerists" and sell to
consumers. Vendors set "basket
The intermediatories in Modern Flower Marketing:
1. Commission agent. The commission agents get large supplies from
Nasik and sell them to retailers and send the money to producers after
deducting their commission. They exist only in Mumbai.
2. Wholeseller/Retailers. Buy their needs from the city producers either at
the pre-determined price or current market price. The wholeseller directly
supply to the institutions but retailers sell through stalls.
3. Florists. They have the art of sale promotion by preparing attractive
arrangements of flowers and have their stalls in the air-conditioned five
star hotels serving the elites of the town and high income groups. This
has become a very profitable business.
The flowers included are : rose, gladiole, tube-roses, Chrysanthemums,
aster, gerbera, they also buy lillies, sweet william, sweet sultan, blue
daisy, golden red, orchids, larkspur, candy-tips, snapdragon, tetras and
4. Bucket shops. They are popular in metropolis. The flowers are loose
and the method is cheaper but the freshness is lost soon.


Industrialists purchase flower directly from the producers or through the

commission agents. Larger business is in jasmine and on contracted prices.
The gulkand producers buy when demand is low and also flowers of low
quality and hence at lower prices.

Auxillary services in the Marketing of Flowers

1. Transportation of flowers. Transportation comparises of in between the
centre of production and market as well as between markets. The
mode of transports are :-
a) Road – For longer distances it is by trucks, buses, tempos. For
example rose is transhipped from Ajmer, Udaipur, Delhi, Tamil Nadu
b) Rail – It is also for shipment to longer distances.
c) Air transhipment – The high value flowers are sent by air as hasmin,
chrysanthemum, rose.
2. Packaging of Flowers. Proper packaging is important to avoid physical
damage and keeping in condition for shelf life. The packing is generally
done in small bags of fertilizers or bamboo baskets or wooden boxes.


"Efficient organization and management of marketing of milk require

development of suitable systems for procurement, collection, processing
packaging and sale of fluid milk or products".
There are two kinds of marketing:
(a) Wholesale marketing, (b) Retail marketing.
(a) The wholesale markets. Those are privately owned and the milk is
available morning and evening the buyers of which are halwais, cream
manufacturers. These markets are found in Kolkata in places like Bow bazaar,

Sealdah, Citpur also such bazaars are found in Mumbai, Ahmedabad, small
towns in Saurashtra, Bihar, Gujarat and Madhya Pradesh etc.
(b) Retail markets. In Calcutta, Simla, there are stalls which sell milk
and these are located in municipal markets. Raw milk is handled by these
stalls and is subject to municipal health authority’s inspection. Some of these
shops maintain refrigeration facilities to keep the milk cool.
Handling and Treatment of milk. In India the milk is not treated
usually by pasteurization because it is purchased by the consumers within two
hours of milking and the buyers are from within the vicinity. But in foreign
countries milk need to be treated scientifically as this is consumed after three
or four days because it has to travel several miles to reach the consumers.
Thus processing, storage and transportation is done under controlled

Practices Prevalent in India

Milking - Milking is mostly done by hand on the organized dairies hygienic

principles are followed but under the unorganized milk trade the place of
milking is seldom found clean. There are sure chances of contamination of
milk by pathogenic micro-organisms.
Mixing of different types of milk is often done by the milkman who
mixes cows and buffaloes milk and sells to consumers although buffalo’s milk
commands better price over cow milk. Since the quantity produced is small so
mixing is done to get better return.
Supervision and Testing for Quality. The wholesale purchasers
supervise the milk production especially cooperative dairies, Parag Milk
Cooperatives etc. The big dairies which buy milk test it for its fat contents and
the price is fixed on that basis.
Boiling. Milk is boiled to increase its keeping quality.
Pasteurization. In the big dairies milk is pasteurized to increase the keeping
quality by killing the bacteria which are harmful by holding at a certain
Standardization of Milk. Now a day’s milk of different fat contents is
sold which are consumed for different purposes. There is high fat contents

milk. Tonning of milk is done from which excess fat is removed and brought
below 4.6 per cent fat. This milk is used for tea. Standard fat content is 4.6 per
cent for marketing.
Flow chart depicting the typical traditional channels of milk
transportation from producers to consumers:

Neighbour or (cream for traditional -------Consumers (Products)

Producers Dudhla
Processor ------ Wholeseller-------- Retailersa
Separator Destroys or Disposes off Butter Milk.

Middleman Transports by bicycles to cosumers Truck or Rail

--------- Retailers -------- Consumers

Much infrastructure is not needed under traditional system because; (i) little
capital investment per liter, (ii) absence of direct link between producer and

Depiction of Organized Dairies

Producers primany cooperatives Producers Departmental Procurement center

Department Chilling Center
Collector Public sector dairy

Contractor Booth
Union primary cooperative dairy Consumers

Organized dairies collect milk from one the following systems:

(a) Directly from the producers by establishing village procurement centers,
(b) from the producers and middlemen alike by establishing milk collecting
and chilling centers,
(c) from primary cooperative societies. The best method of collection is
through cooperatives by its paid workers.
Chilling Centers. After the procurement of milk question of chilling arises
and now there are collection cum chilling centers. The minimum capacity of

the chilling plant should be 10,000 litres per day for being economical.
Besides, keeping the cost low another consideration should be that the
chilling centers be within the vicinity of the production of milk otherwise it will
be dominated by middlemen and malpractices will be encouraged but with
reliable transport facilities even distantly placed production areas could be
covered. Cost and quality both should be maintained.
Feeder and Balancing plant. There are lean and flush periods in milk
production but the year around demand for milk almost remains constant,
therefore, surplus milk of the flush period should be processed into for being
used as milk products or reconverted into fluid milk to meet the demand. The
feeder function of the plant is confined to the despatch of chilled or
pasteurized milk in bulk to the city distribution system, where as balancing
function of the plant is to balance the year round supply of the required
quantity of milk to the cities and conserve the remaining quantity of milk
procured in the form of milk products. This is the main function of feeder and
balancing plants. In order to achieve this national milk grid should be
established. This will build up "buffer stock" of milk like the milk products
buffer stock like butter cheese etc. This could be in the form of skimmed milk
powder. The skimmed milk powder was imported resulting in use of scarce
foreign exchange so in 1974 the production of skimmed milk powder was
started and there has been creation of buffer stock.
National Milk Grid. The Operation Flood Scheme is building a State milk
grid as a first step covering the metropolitan cities and obtaining milk from the
milk sheds. By having milk grid better will be the modern dairy system able to
serve both producers and consumers on a national basis. This can be very
well done by the Indian Dairy Corporation by organizing the orderly evolution
of the national milk grid.
Milk Processing. 50-60 per cent of the milk produced is processed by
the traditional sectors. Only 40 per cent is being processed into various milk

Whole Milk

Skimmed milk — Whey removed

Whey removed Cream

Butter Butter Chakka
Chhena milk
Ghee Shrikhand
Rasgulla Lassi
Dahi Non-fat paneer
Butter Butter milk Chakka

Ghee Shrikhand
Khoa/Mawa etc.

NB. After Report on National Milk Commission on Agri. Vol. VII p. 142.
Although organized dairies in India has a capacity of 3 million tonnes of fluid
milk annually but only 66 per cent of the capacity is being utilized as feeder
and balancing plant operate at a lower capacity in the lean periods. But
offering higher prices in lean period the producers will supply higher quantity
of milk in the lean period.
Transportation of Milk. Methods used are : 1. Head loads, 2. Shoulder
Slings or Bahangi, 3. Pack animals, 4. Bullock carts, 5. Bicycles, 6. Tongas, 7.
Motor lorries, 8. Railways, 9. Boats. These depend on the distance or the
topographical or geographical conditions in regions.
In foreign countries cans and tanks are used for milk transportation.
Methods of Retailing Milk and Period of Delivery. There are four methods
by which the consumers get their milk supply:
(a) Getting the producers animal milked under his supervision, (b) Milk
delivered at their premises, (c) Purchasing from the 'halvais' or from the milk
booth. (d) Drinking milk at the 'halvais' shop.
Bulk transport of Raw Milk. This depends on the quantity of milk
procured and the distance. Truck loads are preferable being economical in the
long run if tanker is available it is the best. The bigger size tanker used for this

purpose can carry 14,000 litres where as a truck can carry 75 cans of 40 lire
City Milk Supply. There have been different quantities of milk handled
by the dairies but handling small quantities will be costly by plants. Large
cities get milk in bottles of various quantities but arc expensive, therefore,
consumer’s milk marketing systems need reexamination and specially
pasteurization as the consumers boil the milk. There are alternatives available
to bottling such as bulk milk vending, sterilized milk in bottles, aseptic milk in
single service containers, single service pouches etc. Urban dairy plants with
small quantities to be handled are expensive it should not be less than 50,000
litres a day. For the economical marketing of milk the large city milk
processing plants should be linked with feeder/balancing plants and market a
part of the milk in bulk through cans or bulk vending units. The city plants
should also be capable of recombining milk from conserved milk products
during the lean period and should receive only the required quantities of fluid
milk from the feeder/balancing plants during the flush periods.
Methods of Disposing Milk in Retail Sale. Different cities have
different methods having advantages and disadvantages:
(a) Bottling system. As followed in developing countries but this
system has been expensive and chances of deterioration of milk being
exposed several hours between delivery and taking out from cold storages,
also chances of adulteration.
(b) Can milk distribution. From dispensing can into the consumers
vessels if the can is sealed it would eliminate adulteration if it is temper proof
with frequent checking.
(c) Sachet packing. The non-returnable plastic pouch this would
reduce cost. Of course the machine should be fabricated in India.
(d) Aseptic milk packaging. Aseptic paper packaging is becoming
popular because it can be collected in bulk as a grocery item and does not
require pasteurizing or cold storage at home. Milk can be sterilized, packed in
rural dairy plants and transported over long distances to consuming centres.
Packing material and machine are not available in India so it is costly.
(e) Bulk milk vending. Introduced by NDDB. Bulk milk vending is
done with the used of special tokens which the customers can buy in advance

or at the milk vending booth. When tokens are inserted one at a time,
measured quantity of milk is dispensed by the vending machine in consumers
own vessels. The quality is good. Reliable electricity supply is necessary. This
is an economical method. This system is introduced in Delhi and Anand.
(f) Milk powder packets. This is becoming more popular either as a
whole or skimmed milk powder. Packing in polythene bags is more
economical than in tin containers. Milk powder is easy to transport. But in
summer months shelf life of packet is less than tin containers.
Organized dairy is now taking a good stride for rapid and large scale
development. It is the opinion of the National Commission on Agriculture that
the practices adopted by western world in milk processing and dispensing are
not suitable for India. With some modifications some practices in this respect
have been developed in this country and are suitable. In order to judge the
suitability techno-economic aspect of the system be seen. The can delivery is
most suitable and they should be besigned for better performance in serving
the purpose of sanitary milk delivery and this can be done in collaboration with
the NDDB, NDRI, Engineering concerns.
(g) Milk supply to rural areas. In order to attain social justice with
equity the rural areas, which has so far been neglected, be also taken care of
and in this respect the National Commission on Agriculture is of the opinion
that like Kaira District Cooperative Milk Producers. Union which sells milk to
consumers at cost price which is procured from the villages by the society is
practiced. With the increase in per capita income as a result of over all
development the demand for milk in the rural areas will increase and for this
reason efficient marketing system, for meeting their demand, should be
developed for the rural consumers.


Milk and milk products are of perishable nature and without the proper
technological development the prices may be erratic in nature. The rural areas
are the cradle of the milk supply but the consumption takes place in the urban
areas. Except in the case of bulk purchases by the processors or during the

festivals or marriages the unit of sales is per liter kilogram and price of milk is
fixed on per liter kilogram basis. The factors which affect the price of milk are:
(a) The type of milk. Cows, buffaloes, mixed milk (both cow and
buffaloes) and goat milk. Sheep milk is not very common. The buffaloes milk
because of its fat contents which is 7.6. per cent as compared to cows which
is 4.6 per cent fetches better price per unit.
(b) The purpose. Milk in general is consumed in fluid form but it is also
used for preparing milk products like khoa, paneen ghee, curd, malai or rabri.
The sweetmeat makers use milk to produce sweets, like barfi, gulabjamun
etc. The price of fluid milk for direct consumption is higher than what is used
for manufacturing milk products.
(c) The distance between the production and consumption
center. Due to distance time of delivery varies. If there not much competition
the prices will be the same barring the quality of milk but if the supply is
limited them distance will make the difference.
(d) Intensity of demand in relation to supply. In the short run higher
demand will fetch higher price per unit.
(e) If the elasticity of demand in relation to income is high then higher
price will be charged.
Seasonal Variation in Prices. The factor which influence the price
according to seasons are : During the summer months the cost of milk goes
up due to high cost of inputs like fodder, concentrates, labour for higher
frequency of bath given to buffaloes. During summer the number of dry cows
or buffaloes is more in each herd, therefore, the cost per liter goes up. During
the rainy season the roads connecting the town with villages if not unusable
are difficult to negotiate so the supply falls short of demand so prices in far
distance towns go up. The arrival of mansoon if it is late affects the yield of
milk and supply falls short of demand hence raise in price. The outbreak of
cattle diseases affects the production in the area. In case of mansoon failure
the cattle migrate to other regions in search of grazing land.
In the fluid milk trade there is seasonal price fluctuation:
(a) Summer (March-June); (b) Mansoon (July-October); Winter
(November to February). During the three seasons the conditions undergo
marked changes and the milk prices are affected. The summer season is

most unfavourable from several points of view—the yield goes down and the
cost of production goes up. A large number of dry animals have to be
maintained and due to severity of weather the supplies from distance villages
is cut-off. On the other hand mansoon is a very favourable season for the
producers—the calving increases and green fodder and grazing is relatively
abundantly available hence there is a cut on the feeding of concentrates. The
profit is more hence saving allows the loans to be cleared but transport is
difficult and city demand also drops thus the natures abundant blessings are
not fully enjoyed. During the winter season there is a flush period the yield
increases and the demand for fluid milk and milk products go up.
Simultaneously, the cost of production of milk gets higher as more nutritious
feeds and fodders are to be fed to milch animals for keeping the high quality
of milk which is expected at this period of the year by the consumers. Thus,
due to season the price of milk is highest in summer, lowest in monsoon and
moderate in winter. The producer's prices undergo a periodic change and the
supply is met or counter balanced. Either by diluting the milk or high prices but
prices for the regular customers is not changed. Another important feature is
that the retail price of milk does not change but the wholesale prices do
change and the advantage goes to the intermediatory.
Price Variability for Different Kind of Milk. (a) In the case of cow milk
the maximum production is March-April and December-January. The
maximum price is in monsoon and minimum in winter as yield in winter is
maximum, (b) Buffaloes milk—The production is lowest in summer and early
monsoon but highest in late monsoon and winter. The highest price is
obtained in summer and lowest in winter and monsoon. (c) Mixed milk—
Maximum price prevails in summer season because milch animals are at the
tail end at this season.
From the estimation of demand it has been found that the demand
(annual) and milk product was in the range of 33.37 million tonnes (low) and
44.17 million tonnes (high) in 1985 but in 2000 AD it would be 49.36 million
tonnes (low) and high 64.40 million tonnes. The supply of milk in 1984-85 was
41.51 million tonnes which was short of the demand.
The pricing problems are divided into two :

Purchase Prices and Selling Prices. Most marketed milk is the joint
product of mixed farming. Hence, for successful purchase pricing it is
necessary that the purchase price should be such as to attract the inputs
required for production, such as labour, land the former has a low opportunity
cost and the latter has high opportunity cost. The more efficient the supply of
purchased inputs likes concentrates the better is the result. The sufficient
conditions for success include the competitiveness of the purchase price and
of the timing and reliability of payment the more competitive prices can be
reduced, the loss of course is the impact on purchase prices. On the other
hand, the necessary condition for the success of selling prices is more diverse
such as: they must be competitive with others selling prices consistent with
social justice and consumers preferences and the techno-economics of
dairying. (Pricing is done on the basis of fat and solid content of the milk).
Thus, it is clear that both purchased and selling prices of the milk in the
organized dairies have often not reflected the intrinsic values of both milk fat
and solid- not-fat. Both these prices in the organized sector for milk and its
products often not been competitive with those of the traditional sector.
Organization and modernization of dairying only added to the cost of
marketing rather than increasing milk productivity and therefore the
compctitiveness. In order to have efficiency in the marketing of inputs for milk
production the organization of dairying marketing of inputs should be
integrated. A higher price for milk would attract the input in milk production.
The organized dairies give very scant attention to consumer’s preference. The
existing pricing is in favour of buffalo’s milk as reflected in the handling of
cow’s milk to an exient of 10 per cent despite the fuel that 40 per cent of milk
produced is that of cow. This price differential is because of the fat as a basis
of price determination. Determination of a pricing structure for milk in dairy
organization has not only to be based on the demand-supply equilibrium but
also on the compositional quality of milk. While market forces will determine
the base price for milk, milk plants are required to use their own judgment for
the price to be paid to the fanners on the basis of the quality of milk. Some
dairy plants have their own price policy having a kind of relationship to what
the plants get from the sale of their milk and milk products.

The calculation of the cost of production is important in pricing. The
farmers will supply milk in good quantity if the prices paid to them covers the
cost with normal profits. Consistent with the demand-supply situation, the
dairy organization should follow a pricing policy that would ensure the
maintenance of an even supply of milk. A faulty pricing policy can lead to a
combination of the following undesirable effects: (a) encourages adulteration
with water or solid-non-fat with fat from non-milk sources; (b) discourage
production of one kind of milk while encouraging the production of the other
kind; (c) Encourage mixing of cow milk with buffalo milk or vice-versa; (d)
encourage malpractices in payment for milk. In the interest of the organized
dairy sector the pricing has to be such that it becomes instrumental in
increasing milk production by ensuring lucrative returns to the farmer for the
produce they sell.
Different situations in pricing system:
(a) Pricing on only fat content. It involves simple account and
discourages adulteration. The basic disadvantage is that it discourages the
production of cow milk as it is priced on the basis of fat content.
(b) Pricing on species source. The species from which milk is
obtained, cow or buffaloe. Usually a minimum fat standard for different types
of milk is adopted for acceptance or rejection of milk. The milk that meets the
minimum fat standard is usually paid a flat price without regard to the other
compositional quality. It encourages the production of richer quality milk.
(c) Pricing on minimum fat percentage plus a premium on
additional fat Basic fat percentage as standards and the additional fat. This
system encourages buffalo milk and discourages cows.
(d) Pricing on total milk Solid. On the basis of total khoa. The
method discourages high fat production and adulteration is encouraged.
(e) Two axis pricing of milk. This is done by evaluating fat and solid
not fat content as suggested by NDDB.
(i) Pricing of commodities for sale. It should be made in a way that
would enable the industry to pay remunerative prices to the milk producers,
cover the cost of collection, processing and distribution of milk and milk
products, services rendered in connection with channellizing inputs for milk
production and keep a fair margin of profit and yet make the prices of

commodities competitive. In the case of fluid milk marketed by traditional
vendors and private dairies, the same is the picture unless they themselves
are milk producers. In case of government sponsored milk schemes the
consumers price is mostly administered prices that it is kept as low as
possible and often much lower than the prevailing market price. Commercial
consideration of profit or loss can be described as the primary factor for the
success of Kaira District Cooperative Milk Producers Union. This is a sound
policy as it would help in the development of dairying industry. The mailer of
social justice and rendering the assistance 10 weaker section should not be
standing in the way of commercialization of dairy industry. The dual price
policy in the case of milk would justify (he social justice. The availability of milk
to consumers at a reasonable price and the remunerative price to producers
is to keep the marketing cost low this would maintain a competitiveness in the
industry. Management is the proper answer. Pricing is an instrument of supply
and demand management. Milk procurement pricing, can significantly affect
the management of milk supply and dairy plant utilization. A pricing policy
reflecting the value of fat and solid-not-fat content in milk can achieve, among
other things, parity between cow and buffalo milk with a consequent stimulant
to cow milk production.
In order to fix the price of milk and its products a continuous data
collection must be done as an integral functioning of dairy plants. The
committee on pricing of milk setup by the government of India has detailed the
criteria for a rational pricing policy and recommended, inter alia, that a milk
pricing committee should be appointed at: each dairy plant; in each state and
an inter state authority should be setup to coordinate the activities of the dairy
plants that collect milk from more than one State to fix the producers and
consumers prices of milk from time to time. In order to encourage milk
production the Milk Pricing Committee of the State and dairy plants should be
sensitive of the prices of inputs in milk production and benefit the farmer
through competition. The gap between the consumers and producers prices
be kept to a minimum and thus keep a critical watch on the overhead costs of
collection, processing and administration. In order to save the honest milk
producers the strict enforcement of the Act on Food Adulteration Act is done.

As recommended by the Milk Pricing Committee a National Milk Grid is in

Agricultural business needs diversification and horticulture is a major
business for such a diversification and is covered under the big umbrella of
crop sciences. There are several advantages of horticulture as a business
enterprises as it is labour intensive in addition the processing, marketing and
distribution will employ labour. Horticultural products have a high income
elasticity of demand and so has a great potential for export to high income
countries although the trade between developed countries is more. This is
particularly more useful for small farmers. The main advantage is that
horticultural products are more foreign exchange earners. Underdeveloped
countries are more under pressure to expand export and compress imports in
order to meet the acute balance of payment problems. Among developed
countries, horticultural exports are more important than agricultural raw
materials, and sugar.
The Developing countries share of Horticultural and Agricultural Export in
Share 1961-63 1975-77 1983-85
Share of developing countries in world 33.17 32.04 36.68
horticulture exports
share of horticultural in total agricultural 8.94 10.44 13.03
export of developing countries
Share of developing countries in world 41.00 34.20 33.00
agricultural export
Source. Food and Agricultural Organization, UN.
In 1983-85, fruit composed 61 per cent of the horticultural export of the world
and 70 per cent of those of developing countries export is higher than
vegetables in 1975-85 compared to 1965-75. The following table testifies it:
1961-63 1975-77 1983-85
Fruits 38 37 42
Vegetables 24 25 28

The share of the processed products in both total world and developing
country horticultural export increased during the period; by 1983-85, at least
half of total horticultural exports were processed.
It is more difficult to transport fresh vegetables than fresh fruits over long
distances without damage, given present systems for handling, packaging,
and transporting.
There arc four reasons for it:
(a) Value of per ton horticultural export, both fruits and vegetables, were
higher than those of fresh products.
(b) Value of fresh and processed fruits higher than vegetables.
(c) The differences between fresh and processed vegetables were smaller
than those between fresh and processed fruits.
(d) The value of processed products was higher than fresh in both fruits
and vegetables.
The value addition in processes fruits was higher in Under Developed
Countries and Developed Countries. :
Developing countries have comparative advantages in tropical fruits
and would perform well in export. The demand for tropical fruits in developed
countries is on increase because of increase in international travel, emigration
from tropical countries and growing affluence having desire for diversified
Research and development in developing countries is less stressed for
horticultural products than cereals and beverages. The UDC's are
participating in export of horticultural products.

There are difficulties in export of horticultural products from the UDC’s:

(a) Hort products are specific to certain soil and climate.
(b) Hort production requires high level of infrastructures.
(c) Hort products vary widely in taste, colour, quality, and appearance.
It takes time for consumers to get accustomed to new products. The
new entrants in the hort trade have to adjust to qualities to meet sanitary and
health regulations.

(d) Exporters specialize in different market and it-is governed by
transportation costs and hence by geography.
There are some major markets for export: Japan has the highest growth rate
of imports. During 1965-75 period also Western Europe and United Slates arc
good markets for horticultural exports,
There are two types of trade barriers for horticultural exports:
1. Tariff,
2. Non-tariff.
Note. For the characteristics of these two types of barriers see the theory part
of international trade.
TABLE. The Annual Rate of Growth of Horticultural Imports of Principal
Developed Markets
Period United States Western Europe Japan
1965-75 8.38 11.00 18.25
1975-85 15.03 4.82 10.63
Source. Islam, Nurul, "Horticultural Exports of Developing Countries:
Past Performances, Future Prospects, and Polity Issues,"
Research Report 80, International Food Policy Research
Institute, April 1990.
Regional Shares of Developed Country Imports, 1970-72 and 1982-84
Period North America Western Europe Other DC Africa Latin America
1970-72 12.2% 55.1% 7% 6.55% 9.8%
Near East Far East
5.6% 3.8%
1982-84 12.4% 55.1% 4.8% 2.7% 12.5%
4.4% 8.2%
Destination of Exports of Developing Countries, 1970-72 and 1982-84
Period North Western Other DCs Centrally Plan EC Developing
America Europe Country
1970-72 22.5% 46.4% 6.2% 8.9% 16.0%
1982-84 26.5 42.0% 6.7% 4.3% 20.5%
Source. Ibid, pp. 32-33.

Trade barriers against horticultural exports. Horticultural exports of
developing countries arc constrained by tariff and non-tariff barriers in
importing countries but these vary by products, season, and country of origin.
The other factors for the imposition of tariff arc packaging, sugar content and
other ingredients or the stage of processing. Higher tariffs arc imposed during
the seasons when they compete with the domestic products. The non-tariff
barriers include, quotas, voluntary export constraints, variable levies,
minimum price systems, counterveiling taxes and duties, technical
specifications (viz., health restrictions, strict labelling and packaging), and
even bureaucratic delays and uncertainties.
Effects of Trade Liberalization. The liberalization of trade barriers by
developing countries would increase both the quality of world exports and a
rise in world prices. If the supply is infinitely clastic, however, only the quantity
of world export would increase or expand and the prices in the world market
would be unchanged. Following liberalization of trade barriers, consumers and
producers in developed countries would face a decline in domestic prices,
leading to an adjustment in both domestic consumption and production and
therefore a change in net trade. A rise in world prices confronting producers
and exporters in the developing countries will have an opposite effect;
domestic production Would be stimulated and consumption would be
discouraged, leading to rise in exports.
Liberalization of Trade between Developing Countries. Developing
countries account for 17.18 per cent of world imports and they have increased
this share of world trade. They also impose restrictions on horticultural
products. A liberalization Of such restrictions would stimulate imports and
constitute an expansion of world trade, in which exporting developing
countries are expected to share.

Share of Developing Countries in total Import of each Category

Country/Group Tariff rate (%) Share of import from
developing countries
Fresh fruits 147.1 57.3
Processed fruits 73.3 27.3
Fresh vegetables 39.3 41.4

Processed vegetables 48.2 15.6

Source. Ibid, p. 59.

The tariff rates imposed by developing countries were 5-8 times higher
than those of developed countries and tariff rates on procurement products
were higher than those on fresh products. Fruits escalated more than
vegetables but in general the escalation was less in Developing countries
than developed ones.


Horticultural exports of developing countries have experienced dynamic since
the 1960's. The prospect depends on demand from both developed and
developing countries and also on their competitive strength. Horticultural
products have high income elasticity. The demand shall be for tropical fruits.
The demand is segmented into luxury products like the full ripened fruits
transhipped by air and mass market for fruits and vegetables which are
transhipped by ships. There are two segments of tropical fruits—low value
market for fruits and markets for high priced fresh, frozen and processed
fruits. There is also a distinction between the off season and round the year
market in developed countries. There is a bigger scope in neighbouring
countries or regions markets because of the perishability of fruits, similarly in
taste and consumer's preference. There is a good market in developed
countries because of immigrant populations or historical links with tropical
countries. Wherever, there is a low per capita consumption the rise in
consciousness for preference to vegetable proteins over animal proteins will
increase demand for fruits and vegetables.
There are two requirements critical to future growth in exports of
horticultural products from developing countries: firstly, efficient marketing
infrastructures in developing countries, secondly, close links with effective
distribution systems in the importing countries. There are also promotional
activities though time taking and expensive and market intelligence and
knowledge of trade regulations.

The issues for successful, export in horticultural products are :
Production is of course very important but at the same time marketing,
distribution and organization and technologies for export marketing including
provisions for export market intelligence, credits, appropriate shipping and
transportation facilities. There is a comparative advantage in exporting
horticultural products especially in India as horticulture is labour intensive and
land saving productive activity.
Some Policy Issues. Increases in horticultural production and exports
are often the research of a search for agricultural diversification in response to
rising costs of and diminishing returns from production of traditional crops.
There is a stagnancy in • output of traditional crops and also demand has
There is some evidence in both developed and developing countries
that horticultural products are generally labour intensive. The degree of labour
intensity varies among individual fruits and vegetables and from country to
country. In the developed countries attempts are made to use capital intensive
technologies to offset the scarcity and high cost of labour. For example, the
use of mechanical harvesting of vegetables, tomatoes. Fruits arc less
amenable to mechanical harvesting and more suitable for labour-intensive
harvesting method such as picking. Several factors discourage
mechanization: first, it has an adverse effect on quality. Second, mechanical
pickers cannot pick fruits selectively based on maturity. The disadvantages of
high labour cost in developed countries can be offset by the development of
higher yielding varieties through technological researches. Through the
development of an HYV, a more appropriate rotation of land, and better
control of pest and diseases, can thus offset the disadvantages of high labour
Horticultural products usually require more working capital than other
crops because they use more current inputs like fertilizer and pesticides
Furthermore, input costs relative labour costs are much higher for vegetables
than cereals.
Scale Economies in Horticultural Production. In the initial period the
horticultural production was confined to large farms but eventually it spread to
small farms. The foreign owned (the horticultural farms were established by

British settlers in Asia, Keynea etc.) produced and exported. The foreign
owned farms combined production with processing and marketing. Some
exporting firms that resorted to contract farming found it easier to deal with
limited number of large farmers than small ones scattered in larger areas.
In some countries, Senegal, the agro-climatic condition and land tenure
system was suitable for small farms with advantages. In Guatemala, the small
fanners were given financial assistance to open export channels and helped
organize cooperative farms.
Larger farmers have two advantages, first their bargaining position vis-
a-vis exporters is strong, and they can provide large quantities of uniform
hatches of products on a continuous basis. Second, they are able to diversify
their production combining horticultural crops with export crops such as
coffee, non-crop enterprises like cattle breeding as in Kenya.
The evidences show that there is unlikely any economy of scale. There can
be an economy of scale in a few agricultural operations like control of pest
and diseases or use of tractors by a group of small famers. But there is no
economy of scale in marketing, distribution, transportation, and processing of
horticultural products.
Economics of scale arc prevalent in storage and transportation
operations. Marketing costs arc higher for fresh products as they may require
refrigerated facilities in transit, at collecting points in the producing regions,
and at the point of shipment by sea and air. A substantial fixed investment in
such facilities may yield economies of scale. Close coordination of production,
processing and marketing in order to meet the quality requirements of export
market leads to economics of scale; such coordination is more easily
accomplished when large quantities are marketed or processed.
Transportation costs can be reduced by dealing with large shipments and by
spreading overhead costs of labelling, packing, and so forth over a large
quantity. This demands sufficient volume of trade.
Transportation and Export Marketing of Horticultural Products.
The share of transport and marketing costs in total cost or sale price of
horticultural product is high, as can be seen from the costs of exporting
vegetables from Mexico to USA. International transport costs play an
important role in determining the competitiveness of horticultural exports in

the world market. The labour cost advantages of the low income developing
countries can be lost if the share of transport costs in the final sale price of the
products is too high. The higher the unit value of the product, the greater is its
ability to sustain high transport costs because these costs constitute a small
share of a high value product. In several cases, the horticultural products for
export are "demand driven" By Foreign Importers Rather Than "Supply
driven". New crops that arc not consumed or produced at home are
introduced in order to meet export demand.
There is a shift of processing industry from developed to developing
countries, there is increased demand for it in developing countries. In the
choice of processing fresh hort products by importing fruits becomes costly
because of labour cost and transportation costs plus risk of deterioration in
quality. The feasibility of processing in developing countries depend on the
level of intensity of tariff and trade restrictions on processed products in the
importing countries.


The marketing functions can be classified as below.
They are not only performed by middleman, village baniyas,
stockists and bankers but by producers and consumers.
1 Assembling 1 Selling
2 Buying 2 Storage & warehousing
3 Transportation 3 Transportation
4 Storage & Warehousing 4 Standardisation and Grading
5 Standardization & grading 5 Financing
6 Financing 6 Risk bearing
7 Risk bearing 7 Advertising

A) Assembling:-
It is most important of all the marketing functions. It means seeking out
sources of supply, buying, wisely as to quantity, quality and variety and
making commodities available, when and where they are wanted.
The only purpose of concentrating goods at one point is to bring them
together, where they are required either for production or for consumption

purposes. This object is fulfilled through the efforts of businessman,
manufactures of final users.
Assembling has helped to facilitate following:-
i) It has been possible to have economy in handling and Transporation.
ii) It has helped in widening the market.
iii) The goods can be available in bulks.
iv) Availability of sufficient quantity has rendered economic grading and
processing of goods and
v) It helps to get variety of goods in the market.

It is an important function occupying much of the time of both business
concerns and ultimate consumers. It includes determination of needs, finding
out source of supply, negotiating of prices and other terms and conditions and
transfer of title from seller to buyer.

Buying is done for two purposes:

TYPES 1) For consumption and 2) For resale.
Selling in business world means the transfer of ownership of goods or
services to a buyer in exchange of money.
Selling is the personal or impersonal process of assisting or persuading
a prospective consumer to buy a commodity or service.


1) Sale under cover , 2) 3y open auction.
3) By private arrangement 4) by quoting on samples
S) Dara Sales 6) moghum sale.

In this system the buyer or his representative indicated - the price he is ready
to pay by twisting or clasping the fingers of the seller’s agents who is
generally an arhatia of the seller, under cover of cloth.


Under this system arhatia or broker invities bids for the produce of the highest
bidder is sold the produce. It is better than any other system as sale for being
cheated. The systems ensureres fair dealing the parties and secures a
premium for superior quality.
In this case the individual buyers may come at any time convenient to them
and make their individual offer.


Commidities normally covered are cotton, chillies, tobacco etc. The goods
are not heaped up but remains in bags on carts. The arhatias collect sample
from sellers and takes them round to show to buyers. The offers are made on
basis of these saples.

In this system heaps of grains of different qualities are sold at a flat rate
the advantage is that large no. of sales can be affected within a short? Time.

Here the sale is based on verbal under standing between
Buyers and sellers without mentioning the rate as it is understood that the
buyer would pay the prevailing rate.


This method is commonly found in regulated markets. After the produce is
brought to the market for sale each produce is given a lot number. The
packed goods are exhibited for sale in an arranged manner. Each buyer
records price he is prepared to pay against the lot number in the bid slip forms

supplied to them by the market committee. The prices are recorded in the bid
slips which are further deposited in a sealed box kept for the purpose.

Transportation is an important function of marketing as it creates place utility
to a commodity. An improvement in the means of communication and
transport extend the area of the distribution of goods. The efficiency of the
transportation service depends up on
1) Speed and care of goods are moved from one to another place.
2) Conveniences for conveying the product.
3) The degree of care with which goods are handled.
A) Man of porter (Head load):- Fruits, vegetables, fodder etc. in the
big cities are brought by head loads.
B) Pack animals: - Horses, buffaloes elephants are used for
carrying loads.
C) Bullock carts: - This is common means of transport an average
load carried by bullock carts varies from 0.5 to 1.5 tonnes.
D) Motor Truck Transport: - This transport is mostly on tar roads
and sometimes on Kutcha roads also. This transport has
become popular due to its quick delivery from godwons and
1) Quick transport
2) Less packing is required for goods
3) Low cost.
4) Provides wide market
5) Delivery in better condition.

d) Railways :- Indian railways play a significant role in the development of

e) Water transport: - These are three types.
1) River transport, 2) Canal Transport 3) Transport by sea water
transport is cheap as composed to railway transport

f) Air transport: - The airplace as a means of transportation is of great
important for a country of vast distances. It is much helpful in case
emengancy like floods, wars etc. However, it is costly.
Commodity with a view to further subdividing it into several classes. The
quality. The quality may depend upon chemical contents, size, colour,
length of fibre etc.
When standard goods are further divided in to well define classes, they
are known graded. The service of sorting out products into groups of
uniform kind, quality and size is known as grading. Standards are
established on the basis of purity, quality, colour etc. and then grades are
made according to quality, colour, flavour, weight, size etc.

1) Sales are simplified and markets are widened.
2) Better prices are received and it gives incentive to producers to
3) The graded products are easily evaluated and thus, collection of claims
against the claims against the railways and warehouses for losses.
4) Further trading and hedging is possible.
5) Reduces the heterogenous number of variety.
6) Marketing cost is reduced.
7) Consumers can get quality products of their choice.
7) Financing: - The financing function is the advancing of money to carry
on the various aspects of marketing. FInancing may take the easily
recognisable form of advance. It is necessary activity in modern marketing.

Agencies of financing:-
1) Big cultivators
2) Itinerant traders.
3) Money lenders
4) Katcha Adtya
5) Wholesale commission agents

6) Co-operative societies
7) Commercial banks.
8) Risk bearing: - This function is the accepting the possibility of loss
in marketing of a produce.
Most of the risks are classified into a) Physical risk b) Market risk (Price
risk). The physical risks are those which occure from destruction due to
fire, accident, cold heat. Market risks are those which occure because of
the changes in value of a product as it is marketed.
Price risks are more common. Developing knowledge of farmers about
demand and supply. Government actions aimed at stabilization of prices
are some of the other measures in reducing losses arising due to risk.

Strorage & Warehousing:-

It is important mktg. function storage adds time utility to commodity
storage includes all types of storage whether it is a country method or
scientific method. Warehousing on the other hand means scientific facilities
for storage of commodities. Storage is a broader term & warehousing forms a
part of it. Warehousing is a storage done on scientific lines with a commercial
or business motive & run by specialized agencies.
It is an establishment consisting of large number of technical personnel
incharge of goods is safe guarded by laws.
Function of storage

1) Protection of physical character’s of goods.

2) It helps in regular supply of goods to consumers.
3) Preserved maturity of goods.
4) It helps in increasing value of certain goods like rice &

Classification warehouse:-
Warehouses are classified on the basis of
a) Commodity
b) Ownership
a) Classification on the basis of commodity stored :-

i) General Warehouses :-
These are ordinary warehouses used for storage of foodgrains,
fertilizers etc.
ii) Special commodity warehouses :-
They are used for the storage of specific commodities like tobacco,
potato, onion etc.
iii) Refrigerated warehouses :-
These are the warehouses where temp. Is maintained as per the
requirement. Perishable commodities like vegetable, fruis, fish
eggs, meat etc are stored.
b) Classification on the basis of ownership :-
i) Private warehouses:-
These warehouses are owned by individudes or large businessman for
storing their own stock.
ii) Co-operative warehouses :-
They are owned & constructed by co-operative institutions to store
there goods.
iii) Household warehouse :-
These are temporary in nature & found in houses for the storage of
foodgrains eg. Storage bins
iv) Public warehouses :-
Public warehouses are controlled by the government. The public
goods are brought & stored. The warehouses have all facilities such
as scientific storage system, technical experts, precaution against
fire, export facility, advances against stored stock etc.
v) Bonded warehouses :-
These are specially constructed at seaport or an airport & accept
imported goods till the payment of customer by the customer. These
warehouses are controlled by the government.

Advantages of warehouses:-
1) Scientific Storage :-
Agril. Commodities are stored by scientific methods so there are
less chances of damage of agril commodities.

2) Financing :-
Warehouses help in satisfying the financial needs of the persons.
3) Price Stabilization :-
Warehouses play a very important role in the stabilization of prices
by contolling & meeting the supply of goods.
4) Market information :-
Warehouses offer the facility of market information through the

Central warehousing corporation:-

This corporation was established on 2 nd March 1957 & is governed by
central government.

1) To build godowns.
2) To act as an agent of govt. for purchase & sell
3) To run warehouse for storage of agril products.
4) To arrange facilities for transport.
5) To increase the share capital of state warehousing.

State warehousing corporation:-

State warehousing corporation are governed by state govt. The first
state warehouse was established in Bihar in the year 1956.

i) These warehouses issues warehouse receipt
ii) The produce accepted in the warehouse is preserved scientifically.
The warehouse receipt act as a collateral security for obtaining loan.

Agricultural credit

3.1) Credit:-
Credit is that form of confidence reposed in a person which helps him
to obtain from another the temporary use of thing value.
It may be given or obtained on the security of real estates, personal
property or only on a character of a person. Credit is therefore extended
on the belief that the borrower will be wiling & able to repay the loan at
some specified date in the future.

Credit may be either for consumption, for marketing or for production.
Productive credit is that which is used to create some valuable thing. The
productive credit needed by the farmers is to buy seeds, fertilizers, agril
implements, pay taxes, to make permanent changes or improvements on
land such as digging wells, laying pipelines for irrigation etc. consumption
credit is the one which is used for meeting family needs & for social
reasons. The consumptive credit or unproductive credit is required by the
farmers for hospital purpose marriages ceremonies etc.
Reserve bank of India has adopted the following classification of
A) According to length of the loan period:-
i) Short term credit
ii) Medium term credit
iii) Long term credit

B) According to purpose or use:-

i) Non farm business purpose.
ii) Family Expenditure
iii) Other purpose.

C) According to security:-
i) Farm mortgage credit
ii) Chattel & collateral credit
i) Personal credit

D) According to the lender:-

i) Private (Friends, Relatives)
ii) Co-operative
iii) Nationalised Bank
iv) Government
v) Money lenders.
vi) Land Development Bank

A) According to the length of the loan period:-

1) Short Term credit:-
In this case the credit is needed for a period of less than fifteen (15)
months for the purpose of cultivation of crops or for meeting domestic
expenses short period loans are normally repaid after the harvest. The
requirement of credit is for purchase of seeds, manures, fodder, payment
of wages, revenue expenses on irrigation, hire charges of equipments etc.

2) Medium term credit:-

In this case the credit is required for medium period of time varying
between 15 months & 5 years. These loans are larger in amount than
short term loans & can be repaid over longer period of time. The funds are
required for purchase of cattle, for making some improvements on land,
buying agril implements, developing orchards etc.

3) Long term credit:-

In this case credit is required for a longer period of time vary from 5
years to 10 years. The credit is needed for puchase & reclamation of land,
construction of wells, permanent improvement on land, purchase of costly
agril machinery development of irrigation facilities through pipelines etc.

B) According to purchase or use:-
1) Non farm Business purposes:-
In this case the credit is required for non farm purpose. Here the credit
is taken for purchasing of transport vehicles, construction & reparing of old
houses, furniture etc.

ii) Family Expenditure:-

Here short term loans are required for purchase or construction or
addition & repair of building for non farm purposes, purchasing of domestic
utensils, clothing, medical & educational purposes & other family
Here long term loans are taken for purchase, construction & repair of
residential houses & expenditure on marriages etc.

iii) Other Purposes:-

These include purchase of ornaments, shares & debentures of
companies co-operatives, Payment of old loans etc.

C) According to security:-
On the basis of the security offereal africultural credit can be classified
into the following categories:-

i) Farm Mortgage Credit:-

In this case the credit is secured against farm lands is or immovable
property. This is a special type of credit & land taken as a security should
be good in quality & productivity & should be valuable. Such type of
mortgage credit is generally handled by specialized type of credit
institutions like land development banks of India, district co-operative
Banks etc.

ii) Chattel & collateral credit:-

The credit given on the securities of farmer’s livesock, crop or
warehouses receipt is called as chattel, credit & the credit given on the

security of movable properties such as shares, bonds, Govt. securities &
insurance policies.

iii) Personal Credit:-

This type of credit is given on the promissory or personal notes of the
farmers with or without security of a third party. Such type of credit is
based on the security of character of the borrower & takes into account the
honesty & hard working nature of the borrower, his earning capacity & past
records, repaying capacity of the borrower etc.

D) According to the lender or from where they are acquired:-

i) Private (Friends & Relatives)
ii) Co-operative
ii) Nationalised Bank
iv) Government.
v) Money lenders
vi) Land Development Bank.

3.2) Importance of Agril credit

For a long period of time agril in India is facing a problem of low
productivity due to inadequate credit or investment. Low investment is caused
by low farm income which follows in turn due to low resources production
completing the circle. In order to bring about higher productivity & higher
income from agriculture, it is not just sufficient to use more amounts of
traditional inputs. The injection of capital must be used to increase the
intensity with which present land supply is utilized. In order to increase per
acre crop yield & per animal production a tremendous increase in inputs such
as use of fertilizers, pesticides, irrigation, water, feed & concenterates for
animals is necessary for modern use of agril technology with improved seed,
lift irrigation facilities, power threshers, tractors etc. creates a greater demand
for liquid assets such as money. Thus farm finance has now become a part of
present agriculture.
The important source of finance to acquire & use these capital goods is
the profit retained or saved in the business by the individual from operations

of other farm sources farming is very difficult to carried out without anytools,
implements or cash of his own other hesitate to rent to one who has nothing
to exchange except his labour service. It is only possible to utilize labour &
land to its optimum level with capital owned solely by the farmers. Therefore
in the modern way of agriculture & under the situation of scarce owned capital
there is no alternative other than borrowing money. Borrowed capital or credit
thus becomes not only desirable but a necessary function of farm finance.

3.3) Important features of Agril finance or credit:-

i) The need of the farmers for finance is generally constant & not
affected quickly & substantially by changes in agril output.
Agricultural output in a year may be more or less depending upon
the monsoons, weather & other natural conditions but the amount of
finance needed for cultivation purpose will be approximately the
same from one year to another. However a period of time with the
improvement in the agricultural technology the amount of finance
needed will be certainly increased.
ii) In the field of agriculture it is difficult to take probable or expected
iii) The asset with the agriculturists is the land itself. This is considered
as not suitable security for the reason. It is difficult to be converted
into money for repairing money lent by lending agency.
iv) The agriculturist has to carry entire risk of his business by himself
v) The majority of small farmers need finance not only for production
but also for the consumption. The small farmers credit to help him
when there is complete or partial failure of the crop. The farmers
are also traditionally accustomed to spend beyond there limits on
birth & death occasion, marriages & other social & religious
vi) Agriculture requires special & separate treatment in the field of
finance because productions units are small farmers do not have
proper security to pledge & their repairing capacity is very weak.

vii) The basic need is the availability of cheap credit in adequate
quantity and at the right time more credit is require in agriculture
because it takes months too received in agriculture because it takes
months to receive returns after the capital is invested. Supply of
agril produce is seasonal while the demand for credit exists all the
year round which makes financial requirements more essential to
make adjustment of demand & supply & stabilize prices.

These features can also be taken for consideration as the problems

faced in system of credit supply.

3.4) Scope of Agril credit or finance:-

It is the experience that credit from money lenders is easily available as
compared to the institutional credit usually small farmers take credit from the
money lenders who charge exorbitant (high) rate of interest who ultimately
grabs the land mortgaged with them. It is therefore expensive even though
this credit may be easily available. Agricultural finance therefore exhibits
special characteristics & problems. It is therefore necessary that the situation
is properly appreciated prior to formulation of policies either to control the
activities of money lenders or to expand the scope of institutional finance.
In order to improve over the situation the following points can be
considered so the system of agril finance can be on sound footing.
i) Dependence on private credit should be tried to be eliminated &
dependence on the institutional finance should be encouraged. It
should be available to all the farmers & should help raising agril
efficiency & production.
ii) A staff in financing institutions (co-operative banks, R. R.Bs, LDB
etc) should be trained & devoted to run the credit providing system
in order to make the system successful.
iii) Agricultural produce can be taken as security & measure emphasis
need not be on land as a security.
iv) Credit may be for productive purposes (seeds & fertilizers) & be in
kind rather than cash. However necessary arrangement. For
consumptive credit should be made in case of poor & small farmers.

v) Low rate of interest in general agricultural loans, different rate in
case of poor & insisting on regular repayment is also desired.

3.5) Agencies Supplying Agril. Finance or Credit:-

Agencies (sources) supplying agricultural finance can be categoriesed
in to two categories:-
A) Non Institutional sources.
B) Institutional source.

A) Non Institutional Sources or Private Agencies:-

1) Money – Lenders
There are two types of money lenders one of its types is called
as agriculturist money lenders, who combine farming with money lending as
side business. Sometimes village shop keeper also lends money. Second
type of money lenders are those whose only occupation is money lending.
Cultivators depend on money lenders for cash. Due to rise in institutional
credit supply importance for money lenders is declining. However they still
continue to play role in rural credit for reasons as below:-
a) They supply credit for productive, non productive purpose & for
short term & long term requirements very freely.
b) His methods of business are simple & flexible & because of his
local knowledge & experience he can lend against the security of
land as well as promissory notes. However various malpractices are
associated with his business charging exorbitant rate of interest
giving no receipts for repayments or denying repayments or bonds
instead of actual amount borrowed etc. This is because there main
aim is to exploit farmers & grab their land.

2) Traders & commission agents:-

Traders & the commission agents supply funds to the farmers for
productive purposes much before the crop matures. They force the farmers to
sell their produce through them. This is because they are under obligations.
The sale of produce is generally at lower prices & heavy commissions are
charged. The money lent by traders is also at high rates of interest. This

source of finance is more important in case of cash crops such as cotton,
sugarcane, tobacco etc.

3) Relatives:-
The credit from relatives (cash or kind) is to tide over temporary difficulties.
The loan transactions are informal. The interest rates are either very low or no
interest is charged. Such loans are returned immediately after the harvest of
the crop. However this source is uncertain. In the days of increasing needs for
credit in modern agriculture one can not depend on this source to a large

4) Landlords & others:-

Small farmers & tenants depend upon landlord & other to meet their
financial requirement. Almost all defects associated with moneylenders,
traders, commission agents are also observed here. Small farmers are often
likely to be cheated for land & landless labour force to be bonded as slaves.
This source unfortunately is becoming more important one. This is due to
inadequacy of institutional credit.

B) Institutional source of finance:-

Institutional finance refers to the funds made available by the co-
operative societies, commercial banks, RBI etc. It is not exploitative. It is
motive & help farmers to raise productivity & maximize income. The rate of
interest is not high but is relatively low. Rate of interest is different for different
financing institutions.

1) Co-operative credit societies:-

Co-operative finace is the cheapest & best source of rural credit. The
rate of interest is low. This is mainly because of financial assistance received
from the RBI. During 1980 – 81 there were about 95,000 primary agricultural
credit societies (at present they are above 1, 00,000) providing short &
medium term credit of about Rs. 2000 crores. The Government has
understood the importance of co-operatives arrangement for credit needs of

farmers. The credit societies depend upon district central co-operative banks
& the state co-operative banks for the credit.

2) Land Development Banks :- (LDBS)

The objective of such banks is to provide long term credit to the
cultivators. These loans are cheap & repayment period is spread over 15 to
20 years. The loans are given for repayment of old debts, purchase of land
sinking or digging of wells etc. Though these land development banks are
making progress in recent years they have yet to really contribute to the
financial needs of the farmers. There are two types of land development
banks namely primary & central land development banks.

3) Reserve Bank of India:-

It has been assigned special responsibility to help the Indian farmers.
However farmers cannot directly approach and ask for loans. It lends to
farmers through state co-operative banks, DCC banks & primary co-operative
credit societies. The RBI has emerged as the principal agency engaged in the
task of reorganisation of co-operative credit institutions & for provision of
financial accommodation to satisfy their needs.

4) Commercial Banks:-
Commercial banks till their nationalisation were not contributing to
agricultural credits significantly. After nationalization of fourteen commercial
Banks in 1969, they have been playing role in agricultural finance six more
commercial banks were nationalized in 1980. They are extending the financial
support to agriculture both directly & indirectly. Direct finance to the farmers is
given in the form of short & medium terms loans. Indirect finance is by of
providing advances for the distribution of fertilizers other inputs etc. & through
financing primary agriculture credit societies. However commercial banks find
difficulties in lending techniques, scruting of applications recovery etc.
Financing to service units providing services such as warehousing processing
marketing, transporting, repaining of tractors forms a part of the banks credit
for infrastructure development. Bank’s also finance the operations of food

corporation of India, the state Govt. & their agencies for food procurement.
Stocking & distribution of agril inputs is another whose needs are increasingly
met by the commercial banks. They also implement village adoption schemes
under twenty (20) point economiuc programme they had sponsored regional
rural banks to extend credit to small & marginal farmers & rural artisans in
order to save them from the clutches of moneylenders.

5) The Government:-
The Govt. has also been a source of rural finance for short as well as
long periods. Government loans are known as taccavi loans. Such loans are
available at the time of emergency or distress such as famine, flood etc. The
rate of interest is very low & repayment schedule is very convenient.
Installments are paid along with land tax. However there are difficulties &
delays is observed by farmers in receiving these loans.

6) Agricultural Refinance & Development corporation (ARDC):-

The shortage of finance for land development banks for distribution of
sinking of well, improvement in land, mechanisation of farmers is hindered or
stoped the agril. development. Therefore there was a need for institutions
which would give long term loans for financing big agricultural projects
involving long waiting for returns. With this intention Government established
the agricultural refinance co-operation (ARDC) in July 1963. The corporation
was set up with authorized share capital of Rs. 25 crores (later raised to 100

However the start was made with Rs. 10 crore ( Interest free loan of Rs.5
crores was given by Govt. of India & Rs. 5 crores was given by participating
institutions such as RBI, commercial Banks, co-operative Banks, LIC
Investment companies etc.) Recently RBI was asked to give concessional
finance to ARDC. The shares of corporation are guaranteed by the central
govt. The corporation is also authorized to accept deposits for periods
exceeding twelve months & to issue bonds debentures maximum borrowing
power given to the corporation was 20 times it’s paid up capital & the reserve
fund. The corporation also functions which are essentially development &

promotional in nature for which finance is given. It plays an important role in
locating trust projects giving required expertise for formulation, appraisal &
implementation of development projects. Financial assistance is given by the
corporation which covers the fields of animal’s husbandry dairy farming,
poultry farming, planned schemes of minor irrigation, soil conservation,
forestry development, development of horticulture & plantation (coffee, rubber
etc), constructions of godowns etc.
Corporation gives financial assistance in the form of:-
a) Loans & advances by way of refinance to central land development
banks. State co-operative Banks & commercial Banks.
b) With approval of RBI it gives direct loans to other co-operative
c) Subscription to debentures of eligible institutions guaranted by the
state government.

ARDC plays a very important role of refinancing agency in respect of

agricultural credit in India financed by International Development Association
(IDR) & by world Bank. This has made large financial resources available with
ARDC. Refinance facilities are available for both medium term (3 to 5 years) &
long terms (5 to 15 years) loans. The main channels for routing the
corporation’s financial assistance are the LDB’s commercial banks & the state
co-operative Bank’s.
The setting up of ARDC was truly described as landmark in rural
finance. It was the first institution in the country established for specially
assisting agricultural projects involving large investment & long waiting period.

7) Regional Rural Banks (RRBs)

In order to fulfil the objectives of 20 points programme. The first
batch of RRBs was established by the government on 2 nd October, 1975. The
main objective of RBI is to provide credit & other facilities to the small &
marginal farmers, agricultural labours, artisans, small entrepreneur so as to
develop agriculture, trade, commerce industry & other productive activities in
rural areas. Initially five RRB’s were set up on 2/10/75 at moradabad,
Gorakhpur (UP), and Bhiwani in Jaipur in Rajasthan & Malda in west Bengal.

These banks were sponsored by syndicate Bank, SBI, Punjab National Bank,
uco Bank, united Bank of India respectively. Each RRB has an authorized
capital of Rs. 1 crore & paid up capital of Rs. 25 lakhs. The share capital of
RRB is subscribed by the central Govt. (50%) the state Govt. (15%) & the
sponsoring commercial Bank (35%).
They differ from commercial banks in the following respect:-
b) The area of RRB is limited to a specific region comprising
one or more districts of a state.
c) They grant direct loans only to small & marginal farmers,
Rural artisans, agricultural labourers & other weaker
d) The lending rates of RRb’s should not be higher than
prevailing lending rates of co-operative societies in the
particular state. The RBI the sponsoring banks provide many
subsidies & concessions to RRB which helps them to
function effectively.
e) The credit policy including the terms conditions,
requirements of security the terms, conditions, requirements
of security & other legal facilities of RRB is far more liberal.
The RRB’s are locally based rerally oriented &
commercially organized. They are located in backward
areas & generally where co-operatives are not active &
commercial banks are not available.

3.6) Co-operative credit structure of Agril. credit for short term,

medium term & long term:-
Co-operative movement was intitiated in our country in the year 1904
with the establishment of co-operative credit societies. In the
preindependence period the progress of co-operative credit societies was not
satisfactory. In the year 1951-52 co-operatives provided 31% of total rural
credit the progress after independence has been however rapid.

Co-operative structure for short & medium term credit:-
Co-operatives advancing short & medium term loans have a three tier
structure with the primary co-operative societies at village level the central
banks at the middle & the state co-operative banks at the top the nature is
more or less pyramidal.
In case of co-operatives providing long term credit (LDBs) the structure
is two tiers. The central land development banks at the state level from the top
& primary land development banks at the state level from the top & primary
land development banks at the taluka or district level from the bottom.

A) Primary Agricultural Credit Societies:-

It may be started or formed by ten or more persons normally belonging
to a village. The value of each share is generally nominal & liability is
unlimited. Management is done by the body elected by the members them
selves. They obtained their working capital in the form of entrance fee,
deposits from the members & non members, share capital & money in the
reserve fund. These are internal resources. They are however not sufficient.
There fore they to borrow form outside i.e. central banks loans are given to
the members for productive purposes & sometimes for consumption purposes
also. Interest rates charged are low the debts are to be repaid in convenient
installment & punctuality in the payments is stressed is government under
strict supervision & audit by the registrar for co-operative societies. The
primary agril credit societies have covered 97% of the total villages in the
country. Most of the funds of PACS is derived from the central & the state co-
operative Banks. The deposits of the members are very small showing that
the members have not developed a habit of saving. The commercial banks
have started a scheme of financing. Primary Agril. credit societies in the year
1970. The funds of the commercial banks are made available to PACS.

B) Central Co-operative Banks :- (DCB)

The central co-operative Banks are the intermediate link between
primary Agril. credit societies on one had & the state co-operative Banks on
the other. The primary societies borrow from them & are subject to their
supervision. They usually covers the district the central co-operative banks

borrows their funds from the state co-operative banks only primary credit
societies as well as individuals are the members of these Banks. These banks
also transact other banking business such as accepting deposits collecting
bills & cheques. These banks can also open there branches in all the villages
in their respective Districts. These banks are dependent on the state co-
operative banks for must of the funds.

C) State co-operative Banks:-

These are the apex banks in the co-operative structure corganistion) of
the states. They control & finance the central Banks & through them the
primary credit societies. They encourage by way of guidance & finance all
types of co-operative societies (Agril. non Agril. & non credit) These banks are
linked with RBI. The state Govt. & RBI lend funds to these apex banks. The
state co-operative bank obtains its working fund from its own share capital &
reserve deposits from the general public & loans & advances from RBI.

Co-operative Structure for long term credit:-

Land development banks formely also called as land mortgage banks
are been organized for advancing long term credit or loans. Thses banks have
a two tier structure in most of the states with state or central land development
banks at the state level & primary land development banks at the district or
taluka (Block) levels. In a few states like Bihar & up they have a unitary rather
than the federal structure at the state level operating through branches
opened in district or tahsil. The structural pattern of LDBs differs from state
was stared in madras. A central land development Bank was started in
Bombay in 1935.
The main function of LDBs is to grant loans on the security of agril
properties or land. Since they grant loans on long term basis strict rules are
laid down for the security. They generally advance up to 50% of the value of
the security.

LDBs provide credit for a variety of purposes. They are as follows:-
i) Redemption of old debts.
ii) Improvement of land.
iii) Purchase of lands.
iv) Purchase of costly farm equipments.
v) For purpose of minor irrigation, soil conservation land reclamation
Formerly redemption of old debts was the most important purpose
for which farmer approached LDB’s. in recent years farmer borrow
for the purpose of land improvement & purchase of good machinery
over 90% of loans by LDB’s now are for the productive purposes of
which substantial portion is for the minor irrigation.
The LDB’s raise resource mainly by floating debenture in the
market. Such debentures are guaranteed by the state government.
The major investors in these debentures are LIC, SBI, commercial
Banks, RBI, co-operative banks, central & state Govt. Agricultural
refinance development corporation has also provided increasing
financial are also accepted from the public. These funds are then
made available make loans to their members. Land development
banks have contributed to a large extent in agricultural

3.7) Lead Bank Scheme:-

In December 1969 the RBI initiated a lead Bank scheme. It was born
out on the area approach concept of Gadgil committee. Nariman Committee
in the year 1970 recommended providing adequate banking facilities in under
banked areas. Under this scheme a bank is expected not only to provide
banking facilities in districts. Where it has been assigned the role of land bank
but also to help in their all round development. These banks have also
constituted district level consultative committees which help in identifying
bankable schemes for lending to agriculture & other priority sectors.

3.8) Village Adoption & Intensive Centre Schemes:-

This is an important recent scheme through which commercial banks
have extended their farm financing activities. In order to monitor the over all
progress of the lead Bank scheme & to issue policy guidelines for it’s effective
financing a high power committee constituted by RBI had given
recommendations on the basis of which lead banks were asked to formulate
district credit plans & annual action plans. These plans were prepared by the
lead banks in the entire district by the beginning of 1980 & were launched for
the implementation.
Under the village adoption scheme, banks, after completion of detailed
techno economic survey of the villages under the area of operation of their
branches select a village or a cluster of villages & formulate suitable
programmes of financing of bankable proposals & extend credit to all the
viable or potentially viable farmers. This is expected to integrate harmonious
development of the area & avoid duplication of efforts & resources in the
same area by two or more commercial banks. The first bank to adopt this
scheme was State Bank of India. Recently the commercial banks have started
financing to the farmers through primary agricultural credit societies these are
the areas where District central co-operative banks are organisationally or
financially weak. Commercial banks have also set up the Agricultural finance
corporation (AFC) to serve as a promotional agency in the sphere of
Agricultural credit. It sanctions the schemes which are then financed by
members banks the commercial banks also gives priority to certain
agricultural schemes in their credit programme. The most important schemes
among these includes dry farm intensified cropping & milk production, hire
purchase schemes for tractors, diesel engines electric motors, dairy
development, lift irrigation, fertilizer distribution, sinking of wells etc.
Small farmers development agencies are set up to identify the
problems of small but potentially viable farmers in their districts & to ensure
that inputs, services & credit are made available. Commercial banks have set
up farmer’s services societies to provide short, medium & long term finance to
their members & also supply inputs & arrange for the marketing of produce.

3.9) Defects of the co-operative credit societies: -- (Weaknesses)

The co-operative credit societies have important role in the supply of
short term & medium term loans for the development of agriculture. At the
same time various defects have been observed in the management of co-
operative credit societies. They are as follows:-
1) Uneven Development:-
The movement of co-operative credit societies has recorded uneven
development in the country. There is inadequate development of co-operative
movement in the eastern states like Assam, Bihar, Orissa, and West Bengal &

2) Problems of overdues:-
There is a serious problem of overdues in co-operative credit societies
because of lack of will & discipline among the cultivators to repay the loans.

3) Defective Lending Policies:-

Defective lending & recovery policies is one of major drawback of co-
operative credit societies dominant members specially account for increasing
overdues of co-operative societies. There are also some willful defaulters in
the villages. This problem is mostly faced in Bihar state.
4) The major defect that has been observed in co-operative credit
societies is that they suffered from the problems of small area of operation,
small number of members, low level of income of most of the farmers who are
the members of primary co-operative credit societies, due to lack of trained
5) Management:-
There is a lack of efficient & strict management of primary co-operative
credit societies. Due to shortage of funds many primary co-operative credit
societies cannot employ trained staff & therefore management has not been

6) Political Interference:-
Big landlords, social & political leaders in the villages often brings
pressure to give loans to favoured persons having low income & poor
repaying capacity due to which a number of willful, defaulters is increased

powerful members often take the loans from primary co-operative credit
societies at relatively low rate of interest & keep them as fixed deposits in
commercial banles having high rate of interest than the primary co-operative
credit societies for the years together by using the working funds of PCCS.

7) Misuse of loans:-
Most of the loan taken from PCCS for productive purpose is utilized for
consumptive purposes. Eg. Marriages, Birth & Death occasions, education

8) Government policies such as loan melas & subsidies offered by the

Govt. resulted adverse effect on the working of PCCSS.
The same defects or problems are also observed in District control co-
operative Banks & the state co-operative Banks. The political factor plays a
major role in the case of Apex Banks.
All these defects resulted in taking the co-operative credit movement
away from the basic objective of co-operative movement that is economic
progress & prosperity through mutual co-operative.

3.10) Role of Reserve Bank of India in Agril. credit:-

The RBI was established as a share holder Bank on 1 st April 1935. The
RBI was nationalized in 1949 & the shareholders were compensated. The
ownership & control of the Bank was transferred to the Government of India.
The management of RBI is done by the central Board of ten members.
They are as follows.
i) Governor : 01
ii) Deputy Governors appointed by central govt. : 04
iii) Directors appointed by central Govt. who represents the important
elements in the economic life of the country such as agriculture, trade,
industry etc. : 10
iv) Directors nominated by the central Govt. to represent the four local
boards. : 04
v) Government official from the ministry of finance : 01

In addition to the central Board. There are four local boards in Bombay,
Calcutta, Madras & Delhi. Each board has five members nominated by the
Goivt. Of India for term of four years keeping in view the various regional &
economic interests & giving representation to co-operative & indigenes

Functions of RBI:-
The RBI performs two board functions. They are cauled as follows.
A) The central Banking functions.
B) The General Banking functions
A) The central Banking functions:-
i) Issue of notes.
ii) Banker to the Government.
iii) Banker’s Bank & the lender of the last resort.
iv) control of credit
v) Maintenance of exchange rate.
vi) Cleaning houses
vii) Provision of Agricultural credit.
viii) Collection of statistical data & issue of monthly bulletin.
ix) Control over banks.
x) Training through training college to the persons working in different

B) The General Banking functions:-

i) To accept deposits of money.
ii) To buy sell & rediscount bills & promissory notes subject to certain
iii) To buy & sell foreign exchange to the scheduled Banks but in
amount not lesse than Rs. 11 lakh.
iv) To buy & sell foreign & rupee securities subject to certain conditions.
v) To give loans for not more than ninety days to the scheduled Bank &
state co-operative Banks against the security of gold or foreign & rupee
securities or approved bills.

vi) To make ways & means of advances to the central & state Govt. but
repayable with in ninety days.
However RBI is not expected to compete with commercial Banks for
which they are prohibited from paying interest on deposits RBI cannot acquire
immovable property except for its offices.

Reserve Bank of India & the Agril. Finance:-

The backwardness of agriculture in India is partly the result of lack of
finance. The organizations which are mainly concerned with financing of
agriculture are either defective or inadequate to meet the task before them.
Therefore there was needed to take up promotion function by RBI. The
promotional functions would include the provision of adequate finance for
agricultural development. Therefore a separate department of Agricultural
credit (ACD) is found to have been set up since, the establishment of RBI.
The functions of Agricultural credit department (ACD) are as followings:-
i) To maintain an expert staff for the study of various problems of
agricultural credit.
ii) To give advice & guide central & state government & state co-
operative Banks in matters of promoting rural credit.
iii) To finance agricultural operations through the state co-operative
Bank & other agencies of agricultural credit.
RBI took up initiative in all India rural credit survey in the year 1951-
52 to assess the position & suggest measures regarding agricultural
credit survey were published in 1954. The committee suggested to
strengthen co-operative movement as co-operative credit was best
& cheap and also made many important suggested scheme of rural

Supply of Finance:-
The RBI provides financial assistance by way of:-

i) Short term loans to state co-operative Bank for seasonal
agricultural operations & marketing of crops at 3% below the Bank
ii) Medium term loans for specified agricultural purposes at 3% below
the Bank rate.
iii) Long term finance, and
iv) Loans to state Government from the National agricultural credit
(Long term operations fund for participation in the share capital of
co-operative credit institutions at all levels.

1) Short term Finance:-

The RBI gives two types of short term financial assistance to the state
co-operative Banks.
a) Loans & Advances.
b) Discount Facilities.
Both these types of financial facilities are given at the
confessional rate of 3% below the bank rate. The loans are
made against specified securities. Such as Govt. securities of 90
days maturity, promissory notes of state co-operative Banks
served by warehouse receipts or by documents of goods kept as
a security. The bank also rediscounts bills of exchange or
promissory notes maturing with in 15 months & issued for
seasonal agril. Finance & marketing of crops.
2) Medium term Finance:-
The volume of medium term credit provided by RBI has also
increasing steadily. The RBI can lend up to a maximum of Rs 5 crores for
periods not less than 15 months & not exceeding above 5 years. The RBI can
finance a wide range of rural economic activities including production are also
3% below the bank rate under the guarantee of state government.

3) Long term Finance:-

The RBI provides long term finance to the agricultural activities by the
following ways:-
ii) The RBI subscribes to the debentures issued by the central land
development Banks & also advanced long term loans to these
iii) The RBI gives loans to the Agricultural refinance & development
corporation (ADRC) at concessional rates of interest.
iv) The RBI grants loans to the state Government which helps them to
contribute to the share capital of co-operative credit institutions.
The loans to the central land development banks & the state
government are sanctioned normally up to a period of 12 years &
made available through national Agricultural credit fund which was
established by RBI in 1956.
There has been increasing dependence of co-operative credit
institutions on RBI. This is because the elements of agril. credit
through development schemes under the five year plans.

Advisory & Research Functions of RBI:-

RBI has been giving useful advice state co-operative Banks on matters
reacting to rural & agril. finance RBI arranged to conduct. All India rural credit
survey. This is a monumental report. The recommendations on the basis of
these reports have been accepted & implemented by the government RBI has
been taking steps towards strengthening of rural credit structure in the
country. RBI has set up separate department of banking operation
development which helps in the development of co-operative banks of central
& state type i.e. DCCBs & SCBS especially in the under developed states in
the field of co-operative.
RBI has started as system of inspection on a voluntary basis of co-
operative banks especially of those to which RBI lends or proposes to lend to
note the defects.
As the development of co-operative organizations depends to a large
extent on availability of well trained & adequate staff the RBI stated an all
India training college for co-operative person at pune.

With the acceptance of multi agency approach of multi agency
approach to rural credit & need for effective implementation RBI has created a
special cell known as rural planning & credit cell from January 1979. It does
the work relating to RRB’s credit plans at district level & agril. Credit &
intensive sop far handled by Agricultural credit department & department of
banking operations & Development. From July 1982 all this avidities are
transferred to NABARD.

3.11) NABARD: - (National Bank for Agril. & Rural Development)

National Bank for Agricultural & Rural Development was set up in July
1982. It took over all the functions of RBI that were performed in the field of
rural credit. Agricultural Refinance development corporation was set up in
1963 with the objective to meet the long term credit needs of the rural areas
has also been merged with NABARD. The authorized share capital of
NABARD is Rs. 500 crores & paid up capital share is Rs. 100 crores
contributed equally by RBI & Govt. of India.

Management :- ( 15/16)

The management of NABARD is done by board of directors consisting

of following representative
ii) Three directors from the director body of RBI
iii) Three directors from the officials of the central Bank.
iv) Two directors from the officials of state Govt.
v) Three directors representing the co-operative & commercial
banking out of these two will be person with experience in co-
operative banking & one with the expierence in commercial
vi) Two directors who are expert in rural economics, rural development
vii) One managing director & one or more whole time directors.

Functions of NABARD:-
1. It works as an apex body to look after the credit requirement of the
rural sector.
2. It has an authority to supervise the functioning of co-operative
sector through its agricultural credit department.
3. It provides short term credit (up to 15 months) to state co-oprative
Banks for seasonal agricultural operations, marketing of agril
produce, purchase & distribution of fertilizers & working capital
requirements of co-operative sugar factories.
4. It provides medium term credit (15 monhts to 7 years) to state co-
operative Banks & Regional Rural Banks (RRB) for approved
agricultural purposes, purchase of share credit socities &
conversion of short term crop loans into medium term loans in
areas affected by natural calamities.
5. It provides medium & long term credit to state co-operative Banks
Land development Banks (LDB), Regional Rural Banks (RRB) &
commercial Banks for investing in agricultural sector.
6. It provides long term loans to the state government
7. It has been given the responsibility of inspecting central & state co-
operative Banks & Regional Rural Banks (RRB). The inspection of
state Land Development Banks (LDB) & other federation &
cooperatives is under taken on voluntary basis.
8. It maintains a research & development fund to be used to promote
research in agriculture & rural development so that projects &
programmes can be formulated & designed to suit requirements of
different areas.
It needs to be noted that being an apex institution NABARD does not deal
directly with farmers & other rural people. It grants loans through the co-
operative Banks, commercial banks, LDB, RRB etc.

3.12) Co-operative Credit:

The co-operative set-up for the disbursement of credit can be divided
into the short term structure comprising of the PACs, the DCCB’s and the

SCB’s and the long term disbursement comprising of the primary and central
land development banks.

National Fedaration of State Co-operative Banks

State Co-operative Banks (CB)

District Co-operative Bank (351)

Farmers Service Co- Farmers Service Co- Large sized Multi Purpose Co
Operative Societies Operative Societies Operative Societies

Members (84.77 Million

1. Primary Agricultural Credit Soceity:

The primary agricultural credit society is an organization of villages for
manual help and co-operation to next the common economic requirements
and to increase the agricultural production. The main functions of the PAC’s
a. Supply of various agricultural inputs to the farmers like improved
seeds, fertilizers, pesticides, agricultural implements etc.
b. To provide for short term credit for the purchase of farm requirements
and the medium term credit for reclamation of land, sinking of wells etc.
c. To provide household requirements like sugar, kerosene and other
essential items.
d. To attract the deposits of the members and to utilize it effectively.
The credit societies are normally formed on the village community
basis and the main sources of funds are the share capital from the individuals
as well as the State Governments and deposits of the members. Thus, the

PAC’s from the grass roots linkage to the agriculturists for the supply
of credit as well as the other requirements.
2. The District Central Co-operative Society:
The primary agricultural credit societies are federated together at the
district level to form a higher tier of the rural agricultural credit called the
District Central Co-operative Banks. The sources of finance are the share
capital contributed by the member societies and also the share capital
contribution by the Government. The main functions are:
a. To provide the credit requirement to the primary agricultural credit
b. To provide for the working capital assistance to the agro-processing
c. Mobilisation of deposits from the public to undertake the different
developmental activities.

3. The State Co-operative Banks:

The district central co-operative banks are federated to form the state
co-operative banks at the state level. The main functions are:
a. To co-ordinate the various policies.
b. Provision of credit to the district central co-operative banks.
c. To provide for the working capital requirement of the Agro Co-operative
d. Provision of training, supervision and guidance in the area of
agricultural credit.

4. The Federation of State Co-operative Banks:

The function of state co-operative banks was established in 1964 with
its main objective being:
a. Liason with the Government RBI, NABARD and other national
organizations on the policies affecting agricultural credit.
b. Research, publication and consultancy on agricultural credit.
c. Promote and project the interests of member banks in the various
spheres of their activities.

d. Provide a common forum for the member banks to deal with their

Thus the National Federation of Co-operative Banks functions as the

apex institutional linkage to the investment credit for agriculture.

5. The Land Development Banks:

The primary agricultural credit societies providing for the short and
medium term finance could however not meet the requirements of long term
investment finance to resource constrains and as the commercial hands were
also not functioning efficiently, the land development banks were set up to
meet the long term credit requirements of the farmers.

National Co-operative Agricultural and Rural

Development Banks Federation

State Land Development Banks (23)

Regional/Divisional/District Offices (321


Primary Land Develop- Branches of State Land Branches of Primary Land

ment Banks (709) 9) Development Bank (1487) Development (645)
(79)Farmers Service (Farmers Service Co-

Members (13.92 Million

The land development banks in addition to providing the investment

credit to agriculture for land development, irrigation facilities etc. are now
undertaking the financing of allied agricultural activities like the dairy, poultry,

piggery, sheep rearing etc. on a large scale and have also been recognized
for financing under the Integrated Rural Development Programme (IRDP)

The long term credit co-operative structure is not uniform throughout

the country and may be the central land development banks operating as
departments of the state co-operative banks or the central land development
banks functioning through branches as well as primary land developments
land or the central land development banks advancing the loans direct to the

The state land development banks coordinate the long term credit
policies, debentures give credit to PLDB’s supervise and guide the primary
land development banks and liaison with the NAB/ARD, SBI, LIC and other
The district, regional and divisional offices guide the field units for
implementing the loaning policies and the procedures, carrying out the
inspection of the units and verification of the credit utilization and the
coordination with the other developmental agencies.

The primary land development banks provide for the investment credit
to the members.

The National Co-operative and Agriculture Rural Banks Federation

provides the publication, guidance, consultancy on the investment credit,
liaisons with the Government, the Planning Commission, RBI, NABARD,
Commercial Banks, Co-operative, Banks, State Bank of India, LIC, and
others concerned on the matters related to long term credit
3. NABARD is also involved in the healthy functioning and growth of
various organizations dispersing credit like the rehabilitation of PACs
into viable unit’s rehabilitation of weak lands, provision of supper to the
RBIs and commercial banks etc.
4. NABARD monitors and controls the activities of RRBs, SCB’s CCB’s
etc. through regular inspections.

5. NABARD has the training institutions of its own to next the training
needs of the banks involved in leading for agriculture, rural
development etc. Research projects related to credit for agriculture
and rural development etc. Research projects related to credit for
agriculture and rural development are also being undertaken by

Thus the NABARD has been functioning as an apex institution for the
provision of agricultural credit, developing an effective backward linkage to
agricultural enterprises.


4.1) Defn:-
Industries manufacturing inputs for agriculture such as agril
equipments, insecticides pesticides etc or industries engaged in processing of
agricultural output are called as agro based industries.
4.2) Types of Agro – based industries
The agro – based industries may be grouped into following types as
i) Agricultural equipment industries
ii) Fertilizer & pesticides industries
iii) Industries based on cotton.
iv) Industries based on tobacco.
v) Industries based on sugarcane.
vi) Industries based on food crops, fruits, vegetables, animal products

4.3 Importance of Agro based Industries:-

1) Agro: - Industries are helpful in solving the problems of
unemployment. Employment opportunities are made
available through these industries.
2) Development of Agro – industries has assumed a crucial
importance in the economic progress & planning.
Most of the industries are concenterated in Bombay & Poona
city. Now a day there is a lot of scope for expanding the agro
based industries in rural areas.
3) Agro industries increase the productivity of the land by
supplying fertilizers, pesticides, improved agril, implements &
on the other hand agriculture provides raw material to the
agro – based industries
4) Agro based industries meet economic social & cultural

4.4) Scope of Agro-based Industries:-

There is a large scope for the development of agro industries like

agricultural equipment, fertilizers, pesticides which are dependent on the
There is also a great scope for the development of agril processing
industries in our country because of vast area predominantly under agriculture
& in different parts vary in climate, rainfall, fertility & topography of our country
therefore produces
i) different types of crops like rice, millets, wheat, maize, cotton,
sugarcane, tabocco, groundnut, oilseeds etc.
ii) different types of fruits like grapes, banana, mango, oranges,
coconut, papaya, pine apple etc.
iii) different types of vegetables like potato, onion, brinjal, tomato, etc.
iv) different types of animals, poultry, dairy products.

There is appreciable scope for increasing production of these cash crops,

various types of existing, new processing & manufacturing industries based
on agril products & on their by products such as cotton textiles ( spinning &
weaving), cotton seed oil, chemical & surgical cotton, sugar, rayon from
baggase & cattle feed citric acid, synthetic rubber, sugarcane, wax, soap,
manufacture of cigarates & extraction of nicotine, leather, fruit preserving &
canning, manufacturing wine from grapes & cashew fruits etc.
There is also a great scope to develop processing activities like having
of paddy, crushing of groundnut, preservation of vegetables, bottling &
canning of fruits etc.
Agro based industries are very useful for increasing the sphere of
employment & farmers may be encouraged to produce more & get additional


5.1) Meaning :-
Price support policies are introduced to check the rise & fall of prices of
agril produce.

5.2) Implementation of Policies:-

A) Policies for keeping minimum prices levels will include action
such as
1) Surplus purchasing to support prices :-
2) Support price levels can be announced in advance of ploughing. The
purchased surplus can either be sold at subsidized prices to
consumers, exported or placed in buffer stocks
3) Import can be reduced to support domestic product.
4) Reduce prodn costs by way of extension education, development of
new technology & assuring adequate supplies of low cost inputs.
B) Policies for maintaining consumer prices at acceptable level will
include action such as:-
i) Subsidise consumer prices.
ii) Increase import to reduce market price
If the import goods are purchased at a price lower than market
price the profit made on the imports can be used to support
domestic farm prices or subsidise consumer prices.
iii) Sales from buffer stocks.
iv) Govt. should try to reduce production & marketing cost. Reduction
in these costs resources in higher net returns to farmers & thus,
stimulates them to produce more. The increased level of food
grains will lower food grain prices & thus benefit consumer
From these points the policies to support prices in favour of producers
& consumers can be given as below:-
1) Statutory fixation of minimum or maximum prices or both can
be done by the govt. where interest of consumers &

producers is considered. From producers point of view the
maximum price should not be severe & should give rise to
demand for the agril produce maximum & minimum price
fixation presupposes supplementary storage policy. These
prices are announced in advance. Govt. can give guarantee
to buy farm products at a declared price if the prices fall
below minimum price fixed by the Govt. These minimum
prices are support prices.
2) Government can regulate movement of stocks by stopping
exports on imports in to the country or by imposing
restrictions of the movements of produce internally from one
region to other or one state to other state. The operation to
check movement with in a country is called as zoning.
3) Indirect control on prices by releasing stocks in the market &
by purchasing stocks when the prices show a tendency to fall
below the minimum price. This action is called as buffer stock
operation. Here quantity will be purchased at the time of
mass production with an intention to not allow the prices to
fall & as soon as price rises, stocks will be released to
increase supply & check rising prices. This would have
supporting action both for the interest of produces &

Agricultural Extension Services

6.1) Meaning :-
Agril Extension services or agril extension education is an informal
system of extending or imparting practical knowledge related to agril field
which helps in solving the agril problems.
The problem solving practical knowledge is imparted by the teacher or
a group of specialized teachers by discussions, question & answer way, by
holding seminar, by demons tration on a field or by group discussion between
one or a group of students & one or a group of teachers who are expert in
various branches of knowledge concerning agriculture, rural life &
developments in agriculture & allied fields such as veterinary science, animal
husbandary, part plant pathology. .
Fruits of research from development countries in the field of agriculture
reach other countries quickly due to spread of extremely rapid means of
transport & communicating. Sprinkler system of water came to India from
Israel, discovery of Mexican wheat seeds of short variety helped to bring
about Green (Wheat) revolution in Punjab.
Agril Extension services also includes specialized knowledge about
different soils & their suitability for different agril crops, specialized knowledge
about different fertilizers & their different composition & their use for different
crops. The aspect of extending specialized knowledge about various aspects
of agril production to Indian farmers is very important especially because
majority of Indian farmers are illiterate & generally deeply attached to
conventional ways of agricultural production. This task of imparting modern
specialized agricultural knowledge to Indian farmers is a difficult task because
there are more than 5.5 lakh village in the country.
The community development programme was introduced in our country
in the year 1952 in which an administrative system has been built up linking
national & state level research & educational institutions engaged in
conducting research on different aspect of agril sector on one hand & the
farmer working on his farm on the other hand.

The person who works as a link between the farmer & the national &
state level institution is the village level worker or Gram sevak who comes to
know about the new problems regarding new hybrid seeds, unsuitability of the
prescribed composition of chemical fertilizer for soil or any other problems
regarding diseases of the animals, water production, pest control etc. The
village level worker passes on these problems as feed back to National level
& state level research institutions where these problems are studied &
solutions are again passed back through different channels to the village level

6.2) Objective of Agricultural Extn Services:-

1) To keep various specialist connected with different aspects of
agriculture such as veterinary science, Animal husbandary,
Agronomy, plant pathology, Botany, Pest control etc. These
specialists are engaged in conducting research & village
level worker helps in imparting that advanced knowledge to
the farmers by holding seminars, group discussions, field
demonstrations etc.
2) To impart to farmer useful & practical knowledge regarding
agriculture, animal husbandary, home science etc. all with a
view to help farmers to maximize production from land &
3) To impart education to rural women in home science &
4) To promote development of young boys & girls who are
future adults should be willing & research to innovate &
adopt latest technology to solve their day to day problems.
5) Teachers to work with farmers with a view to develop
qualities of leadership, co-operation with others, initiative &
participation with farming community.
6) To co-ordinate research that is going on in several branches
connected with agriculture & different aspects of rural life in
universities, agricultural colleges & agril. department of state

Govt. with a view to make it more & more useful to the

6.3) Agriculture Research Set-up

The existing set up for research comprises of the Indian Council for
Agricultural Research at the apex level and the constituent Agricultural
Universities, Regional Research Stations, Krishi Vigyan Kendras etc. at the
subsequent levels. The main objectives of the ICAR are:
1. To encourage and coordinate education and research in agriculture,
animal husbandry and fisheries and to help in the utilization of the
results of the research.
2. To act as a centre of dimension of research related to agriculture and
animal science.
3. Establishment and maintenance of a research and contact library.
4. To do all that is necessary for the achievement of the above stated
5. To provide advisory services in education research and mining in
agriculture and the related fields of science.

Research activities are being undertaken on various aspects like:

1. Management of the land related to the economics of cultivation,
maintenance of the quality of land s related to both the physical and
biological properties of the soil through the prevention of soil erosion,
land degradation, moisture conservation, appropriate fertilization etc.
2. Crop management involving the improved cultural and agronomic price
like the varietal selections, appropriate cropping patterns, crop
production practices, cultural and intercultural operations etc.
3. Proper water management including the conjunctive use of ground and
surface water percolation ponds, drop and the sprinkler irrigation
systems, diversion ditches, other water conservation techniques in
dryland agriculture etc.
4. Horticultural development including the various management practices
related to penology, olericulture and floriculture like the issue culture
techniques, use of plastic in agriculture etc.

5. Inputs related to animal husbandry, fisheries and poultry management
including production, nutrition, disease management, fodder
management etc.

Research Station and Other Related Organization

National Research Institutes:

1. Indian Agricultural Research Institute, New Delhi.
2. Indian Veterinary Research Institute, Barely, UP.
3. National Dairy Research Institute, Karnal, Haryana.

Crop Science Institutes:

1. Central Rice Research Institute, Cuttack, Orissa.
2. Vivekananda Hill Agricultural Research Laboratory, Almora, U.P.
3. National Grassland and Fodder Research Institute, Jhansi.
4. Jute Agricultural Research Institute, Barrackpur, West Bengal.
5. Central Tohacco Research Institute, Rajahmundri, Andhra Pradesh.
6. Sugarcane Breeding Institute, Coimbatore, Tamil Nadu.
7. Indian Sugarcane Research Institute, Lucknow, U.P.
8. Central Cotton Research Institute, Nagpur, Maharashtra.

Agricultural Universities:
1. Andhra Pradesh Agricultural University, Rajendra Nagar, Hyderabad.
2. Assam Agricultural University, Jorhat, Assam.
23. Rajendra Agricultural University, Pattna, Bihar.
4. Gujarat Agricultural University, Ahmedabad, Gujarat.
5. Haryana Agricultural University, Hissar, Haryana.
6. Himachal Agricultural University, Palampur, Himachal Pradesh.
7. University of Agricultural Sciences, Bangalore, Karnataka.
8. Jawaharlal Nehru Krishi Vishwa Vidyalaya, Jabalpur, M.P.
9. Kerala Agricultural University, Mannuty, Kerala.
10. Kokan Krishi Vidyapeeth, Dapoli, Maharashtra.
11. Mahatma Phule Krishi Vidyapeeth, Rahuri, Maharashtra.
12. Jammu and Kashmir Uniersity of Agricultural Science and Technology.

13. Birsa Agricultural University, Ranchi, Bihar.
14. Narendra Dev University of Agriculture, and Technology, Faizabad, U.P.
15. Bidhan Chand Agricultural University, Michanpur, West Begal.
16. Govind Ballabh Pant University of Agriculture and Technology, Pant
Nagar U.P.
17. Tamil Nadu Agricultural University, Coinbatone, Tamil Nadu.
18. Chandrashekar Azad Agricultural University and Technology Kanpur.
19. Orissa Agricultural University, Technology, Bhuaneshwar, Orissa.
20. Punjab Agricultural University, Ludhiana, Punjab.
21. Sukhadia University, Udaipur, Rajastan.
22. Maratwada Agricultural University, Akola, Maharashtra.
23. Punjabrao Krishi Vidyapeeth, Parbhani, Maharashtra.

Hariticultural Crops Research Institute:

1. Central Potato Research Institute, Shimla, Himachal Pradesh.
2. Central Horticultural Crops Research Institute, Kasargod, Kerala.
3. Central Tkuber Crops Research Institute, Trivendrum, Kerala.
4. Indian Horticultural Research Institute, Bangalore, Karnataka.
5. Central Northern Zone Horticultural Research Institute, Lucknow, U.P.
6. Central Soil and Water Conservation Research and Training Institute,
7. Central Soil Salinity Research Institute, Karual, Haryana.
8. Central Arid Zone Research Institute, Jodhpur, Rajasthan.
9. Central Rained Crops Research Institute, Hyderabad Andhra Pradesh.
10. North Eastern Hills I.C.A.R. Research Institute, Meghalaya.
11. Central Agricultural Research Institute, Port Blair, Andaman.
12. Indian Soil Science Research Institute, Bhopal, Madhya Pradesh.

Veterinary Institute:
1. Central Sheep and Wool Research Institute, Rajasthan.
2. Central Government Research Institute, Farah, U.P.
3. Central Bird Research Institute, Barelly, U.P.
4. Central Buffalo Research Institute, Hissar, Haryana.

5. Central Animal Genetics Institute, Kerala, Haryana.

Agricultural Engineering Institutes:

1. Central Agricultural Engineering Institute, Bhopal, M.P.
2. Indian Lac Research Institute, Ranchi, Bihar.
3. Cotton Technology Research Institute, Matunga, Bombay.
4. Jute Technology Research Laboratory, Calcutta, West Bengal.

Fisheries Institutes:
1. Central Inland Fisheries Research Institute, Barrackpur, West Bengal.
2. Central Marine Fisheries Research Institute, Cochin, Kerala.
3. Central Fisheries Technology Institute, Cochin, Kerala.
4. Central Fisheries Education Institute, Bombay.
5. Central Saline Aquatic Science Institute, Madras.
6. Central Non Saline Aquatic Research Institute, Bhuhaneshwar, Orissa.

Economics and Statistics Institutes:

1. Indian Agricultural Statistics Research Institute, New Delhi.
2. Indian Agricultural Economics Institute, Pusa, New Delhi.

Research Management:
1. National Academy of Agricultural Research Management, Hydeerabad,
Andhra Pradesh.
2. National Bureau of Soil Survey and Land Use Planning, Nagpur,
3. National Bureau of Fish Genetic Resources, Allahabad, U.P.
4. National Bureau of Animal Genetic Resources and Animal Genetics
Institute, Karal, Haryana.

National Research Stations:

1. Nationa Groundnut Research Station, Junagarh, Gujarat.
2. National Mushroom Research Institute, and Training Centre, Solan,
3. Black Soil Research Station, Bikaner, Rajasthan.

4. National Horse Research Station, Hissar, Haryana.
5. National Yak Research Station, Purva, Nagaland.
7. National Insemination Research Station, Purva, Nagaland.

6.4) The Extension Set-up: (The Training and Visit System)

The extension of the valid research being done in the field of
agriculture is disseminated mainly through the training and visit system
comprising of the Village Extension Workers at the grass root level the
Agricultural Extension Officers, the Sub-divisional Extension Officer, the
District Extension Officer, the Zonal Extension Offier and the Director of
Extension as the coordinating agency at the top. The organizational set-up is
as follows:
Depending on the number of farmer families, Village Extension
Workers have been assigned to specific areas. The main responsibility of the
NEW is to visit regularly each of the farmers groups within his area of
jurisdiction and to teach and to convince the farmers to utilize the
recommended practices, monitor the price and availability of the various
inputs and the prevailing market conditions and then to correspond the
farmers response to his superiors or the agricultural extension officers. For
the purpose of dissemination of information the VEW selects certain contact
farmer on the basis of their being progressive and having a large social
Sir to eight Village Extension Workers, are then supervised by an
Agricultural Extension Officer who also provides the technical inputs. The
two main functions of the ABO’s are to review and assist in the organizational
aspects of the VEW’s, to provide technical support to them and to solve the
problems faced by the VEWs in the field.
The Sub-divisional extension officer then supervises about six to eight
Agricultural Extension Officers and is charge of the extension programmes in
the area. The SDEO is assisted in his functioning by a few Subject Matter
Four to Eight SDEO’s are supervised by the District Extension Officer.
At the top is the Zonal Extension Officer who is responsible for the smooth
functioning of all the extension programmes in the different districts that

constitute the Zone. The ZEOs come under the preview of the Director of
Extension at the state level and finally under the Director of Agriculture at the
Administrative level.

6.5) Training of the Extension Workers:

Training to the extension workers include the technical knowledge as
well as training related to how to extend the particular information. Training
may be the pre-service training which is the formal training ex. Two year
training course of the village level workers at the Gram Sevaks Training
Centres or a full fledged college education in agriculture or in the service
training given to the extension officers of the various categories in the new
techniques developed after their employment.

Institutions of Training:
1. National Institute of Community Development, Hyderabad, Andhra
Pradesh. (For the Collectors, Deputy Directors, Joint Directors, and
Deputy Registrars of Co-operatives etc.)
2. Income of Directors at Dehradun. (For the Principals of the Village
Level Worker Training Centres and the Trainers of the Orientation and
the Study Centres.)
3. Orientation and the Study Centres. (They are 11 in number and are
mainly for the Block Development Officers, A gricultural Officers and
the representatives of the Zilla Parishads etc.)
4. Social Education Organisers Training Centres located at Ranchi, Bihar;
Gandhigram, Madurai; Samiala, Baroda; Belurmath, Bengal; Niokheri,
Haryana; Kasturbagram, M.P; Gargoti, Maharashtra; Coimbatore, Tamil
Nadu; Lucknow, U.P. Bhubaneshwar, Orissa.
5. Co-operative Officers Training Centres. (Eight such Centres are
located at Kalyani, Bengal; Himayat Sagar, Hyderabad; Panwadi,
Bhavanagar, Tirupati, Andhra Pradesh, Patiala, Punjab; Faizabad, Uttar
Pradesh; Gopalpur Ganjam ; Kota, Rajasthan.)
6. Health Orientation Training Centres (Najabghar, Delhi; Poonamalli,
Tamil Nadu; Singur, Bengal.)

7. Gram Sevak Training Centres (Andhra Pradesh : 8, Assam : 5, Bihar :
4, Maharashtra : 9, Gujarat : 5, Himachal Pradesh : 1, Jammu and
Kashmir : 1, M/P : 7 T.N. : 7, Karnataka : 5, Orissa : 5, Punjab : 4,
Rajasthan : 5, U.P. : 24 Bengal : 4)
8. Lady Village Level Workers Training Centres (There are 45 such
centres i.e. 3 in the North, 12 in the Central zone, 9 in the West, 9 in
the East and 13 in the South.)

The Research Extension Linkage: (The Lab in Land Programme):

The extension and research activities are closely inter-related as the
extension requires the findings of research to disseminate to the farmers and
it is the feedback of the extension workers regarding the problems faced in
the implementation of new findings and the problems faced by the farmers
requiring immediate attention, which forms the basis of further research.
The monthly working is the main venue of the training of the subject
matter specialists to build up technical skills regularly in the field of
specialization and in effectively meets the actual technical requirements of the
farmers. The researchers and the SMSs discuss and formulate relevant
production recommendations for imparting subsequently to the VEWs and the
AEOs. Monthly workings are normally held at the district levels.
The fortnightly training is the means of continuously upgrading and
updating the professional skills of the VEWs and the AEOs which comprises
of a one day training every fortnight. The VEWs and the AEOs review the
farmers reaction to the new practices, the problems faced in the
implementations and are taught the newer practices for dissemination to the
farmers in the coming weeks. These raining programmes are organized by
the Sub Divisional Extension Officer.
Thus, effective improvements will be possible in the agricultural set up,
unless there is a close co-ordination between research and extension. The
Lab to Land Programme thus mainly comprised if the effective, dissemination
of the various laboratory research to the farmers fields and their effective
implementation with a continuous feedback to the laboratories or to the
research centres where useful research can be further undertakes. This may

be an improvement in the existing technology or a new problem identified by
the farmers. The main objectives are:

1. The transfer of new technologies directly by the scientists to the

2. Development of a strong feed back mechanism to enable the research
stations to identify the problems and needs of the farmers and to
identify the constrains in the adoption of a particular technology.
3. Improvement in the standard of living of farmers aimed at increasing
the productivity of firms, diversification of agricultural enterprises for
additional income, concentration on the economies of farming etc.
4. Involvement of the farmers, themselves in the research activities and
the introduction of simple and low cost technologies throughout the
5. Still development of the farmers, women and youth to better facilitate
the adoption of newer technologies through the organization of various
training programmes.

6.6) Training Programmes For Farmers:

1. Training in the Village:

Youth are trained in small clubs in the village itself on the adoption of
improved practices of cultivation, leadership qualities, project
formulation etc.

2. District Level Training:

Demonstration-cum-training camps, short duration training courses,
discussion groups etc. are conducted at the district level for young and
introduce farmers as well as the farmer’s families including the women
and youth.

3. Voluntary Organisations:
Short duration training courses and seminars are taken up by the
national level voluntary organizations which are also being provided

with financial assistance by the Directorate of Extension to enable them
to undertake programmer related to agricultural production through
their state and district level branches.

4. International Farm Youth Exchange Programmes:

The Directorate of Extension has been working in collaboration with
international organizations where in farming youth from the
participating nations visit each others countries and in the process can
learn about the new technologies prevalent elsewhere and the
suitability for implementation at home.

5. Exchange of Farmers within the Country:

Evaluation and monitoring of the various extension programmes results
in the provision of a feedback of the relevant important information to the
agencies concerned about the impact of a particular programme in order to
attain higher standards of excellence through continuous improvements each
time. Monitoring may be in relation to the goal, content or the system.

6.7) Agro-Industries Management and Agricultural Extension:

For the effective management of any enterprise the determining factor
proves to be the knowledge and the access to current development in the
area. As seen above, there already exists a very effective system for the
dissertation of the research findings to the grass root level farmers
through the intricate government network or prising of the zonal extension
officers, district extension officers, sub-divisional extension officers and most
important of all the village level workers who are the grass root level
functionaries. What is essential for any individual or organization involved in
Agri-business is to form an effective contact mechanism with the functionaries
in the extension link to have immediate access to all the revolutionary
changes in technology taking place in the field of agriculture related to
mechanization, pest control, disease management, water management,
managerial techniques etc.

In addition to the tapping of the downward linkages, care should be
taken to give a useful feedback to the research institutions regarding the
various problems in the implementation of a particular technology. Any
difficulties in the production such as the occurrence of some unidentifiable
diseases etc. should also be communicated back to the laboratories so that
effective, useful and need based research can be undertaken.

The managers involved in the agribusiness can also participate in the

various training programmes being conducted by the Directorate of extension
through the voluntary organizations, exchange scienes etc. for an up
gradation of the skills required to implement advanced or the appropriate


Agriculture Marketing:
Agricultural marketing which forms the mainstay of the forward linkage
to agriculture comprises of several activities like grading, standardization,
quality control, storage, warehousing and processing besides the distribution
channels comprising of the wholesalers and retailers who are involved in the
handling, selling and purchase of the produce. The different approaches to
the marketing that have been adopted are the financial approach which can
be divided into:
Exchange Functions : Buying and Selling
Physical Functions : Transportation, Storage and Warehousing
Facilitative Functions : Classification and grading financing,
market Information and risk bearing.
The institutional approach comprises of the nature and the character of
various middlemen and the related agencies and also the organization and
the arrangement of the marketing machinery.
The third is the commodity approach as the problem of marketing
varies from commodity to commodity on account of the seasonally,
production, financer, storage, handling, size of unit and the number and types
of middlemen engaged for the various commodities.

Agricultural Markets:
The agricultural markets can be broadly divided into the wholesale
markets, retail markets and the terminal markets. The primary wholesale
markets are owned by the market committees, local bodies or the private
individuals and are periodically field wherein every shopkeeper has to pay a
rent for the space occupies. In the secondary wholesale markets, the bulk of
the arrivals are from other markets. Here the transactions are mainly between
the wholesalers and the retailers and are situated at the district or the taluka
headquarters. The retail markets are owned by the retailers subject to
municipal control and are scattered all over the town or city. The terminal
markets are where the produce is finally disposed of directly to the consumers
or processors or assembled for export and possesses sufficient warehousing
and storage facilities covering a wide area extending over a state or two.

Institutional Linkages:
Agricultural marketing requires a large number of institutional linkages
on account of several special characteristics of agricultural produce, like the
bulky nature in terms of value as compared to manufactured goods,
specialized storage and transport facilities on account of the perish ability of
the produce and also the fact that the agricultural commodities are subjected
to one or more forms of processing, thus justifying the need for a large
number of forward institutional linkage to marketing.

Institutional Linkages to Grading:

As the agricultural commodities depend on several factors like the
climatic conditions, still factors, cultivation techniques, management factors
etc. grading which is the process of dividing the same kind of goods into
uniform groups according to certain standards of size, shape, texture, degree
of cleanliness, activity, chemical content, length of fibre or a combination of
several such characteristics and based on certain standards, becomes
extremely important so that the prices are fixed according to the quality of the

The Government of India enacted the Agricultural Produce. Grading
and Marketing act 1937and defines standards of quality, fixing the grade
designation marks to scheduled agricultural produce, the grading being under
AGMARK, authorizing the Agricultural Marketing Officer to the Government of
India, to grant the certificates to the individuals or corporate bodies, who
grade out mark the agricultural commodities on the basis of the standards laid
down by the Act. The specifications are arrived at alter discussion with the
producers themselves, merchants, exporters, etc. and also on the analysis of
the sample in order to ensure that the specifications are acceptable to both
the producers and the buyers alike under the prevailing market conditions.
These specifications are subject to periodic revisions based on the nature of
production and consumer demands. A network of AGMARK laboratories have
been set up all over the nation to facilitate the testing and the grading of
several agricultural commodities.

Grading may be compulsory for export or voluntary for internal

consumption. In case of the compulsory grading for export, there exists the
inspectorate for each exportable commodity having their officers carrying out
the regular checks alter which the grade designation levels and seals are
fixed internal grading is aimed at ensuring purity and quality products to the
consumers and remunerative prices to the consumers and also facilitating the
marketing practices at various stages. The export of agricultural produce is
facilitated though the compulsory grading through ensuring of the quality
produce in the importers, thus creating an enhanced demand.

Institutional Linkages to Quality Control:

Several institutions like the Export Inspection Council of India, the
Indian Standards Institution, the Indian Statistical Institute, the National
Productivity Council, the Indian Society for Quality Control and the Indian
Institute of Foreign Trade are functioning to ensure the generation of
awareness and the maintenance of quality. Several legislative measures are
also prevalent. The Prevention of Food Adulteration Act, 1954 aims at the
protection of the public from poisonous and harmful food and the prevention
of the sale of sub-standard foods. The Food Produces Control Order, 1953

ensures that all manufactured products confirm to the minimum standards in
relation to the quality, packing, marking, labeling and for the maintenance of
proper hygienic and sanitary conditions in the manufacturing premises.
Analysis is done at the Central Food Technological Research Institutes on the
basis of the samples sent in by the inspecting officers, thus ensuring that the
basic quality standards are adhered to. The Meat Food Produces Order 1973
ensures quality through a mandatory provision for every person involved in
the business of manufacturing or packaging of meat products to obtain a
licence from the Agricultural Marketing Officer, thus maintaining the required
quality. The Vegetable Oil Products Control Order, 1947 wests powers in the
Controller to monitor the manufacture, and distribution of any variety of
vegetable oil. The Packaged Commodities Order, 1957 embodies a measure
of self discipline on all the concerned levels of trade and industry from the
manufacturer to the retailer ensuring that the consumers pay a fair price for
the produce. The Export Act, 1973 requires that quality control and pre-
shipment inspection is necessary for practically all agricultural commodities
meant for export. The Government, through its various mechanisms is thus
providing a viable forward linkage towards quality control.

Institutional Linkages to Standardization:

Standardisation is the setting up of basic limits or grades in the form of
specifications to which the manufactured goods must confirm and the classes
into which the products of Agriculture may be sorted. The Indian Standards
Institutions promotes standardization and quality control through preparation
of standards relating to the products, commodities, materials and process and
the promotion of their adoption, coordination of the efforts of produces and
users for the improvement of materials, products, appliances, processes and
methods, thus achieving variety reduction which brings about the economics
in production. Standards have been laid down for a variety of commodities
like food grains, fruits and vegetables, spices, oil seeds, essential oils, fibres,
animal products, irrigation facilities and agricultural inputs etc.

Institutional Linkages to Storage:
Agricultural produce being seasonal and perishable necessitates
average by means of which commodities are prevented from deterioration and
surplus supplies are carried over for future consumption in periods of scarcity.
Foodgrains may be stored for an expected increase in price or for payments
in kind to labour etc. Storage of fruits, vegetable, fish, dairy products etc.
become necessary to provide for their continuous consumption.
The principal government agencies storing food grains in their own
buffer stocks are the Food Corporation of Indian and the Civil Supplies
Department of the State Governments. The FCI is responsible for foodgrain
imports, buffer stocks, price supports, inter-zonal movement, price distribution
and some processing. The foodgrains are stored in their own godowns or in
rented space provided by the Central Warehousing Corporations or the State
Warehousing Corporations. Warehouses may be special commodity
warehouses like those for cotton, grain etc., or refrigerated warehouses for
perishables like fruits, vegetables, dairy etc.

The warehousing activity is therefore undertakes by the Central

Warehousing Corporation which confines its activities to terminal markets,
marketing centres, of all Indian importance and specialized storage like cold
storage etc., the State Corporation functioning at the marketing centres of
regional and the state importance and finally the co-operative societies below
the sub-divisional level. The NCDC provides active financial support for the
setting up of storage and warehousing facilities at various levels. The Cold
Storage order, 1964 aims at ensuring the proper refrigeration conditions and
technical guidance for scientific
Preparation. In addition to the financing of cold storages, various incentives
are also being provided like concession in excise duty, subsidy in backward
areas, etc.

The Central Warehousing Corporation is entrusted with the task of

providing godowns and warehouses in suitable places in India, running
warehouses for storage of agricultural produce, seeds, fertilizers, implements
etc. offered by individuals, co-operative societies and other institutions, acting

as the agents of NCDC or the Government for the purposes of purchase, sale,
storage and the distribution of agricultural produce, implements, seeds,
fertilizers etc., arranging for facilities for the transport of agricultural produce to
and from warehouses and subscribing to the shares of the State Warehousing

The State Warehousing Corporation are entrusted with the acquisition

and building of godowns in the state, run licensed warehouses, manage
regulated markets at centres to which the Corporation’s activities have been
extended to do distribution work as an agent of the Central and State
Government or the Central Warehousing Corporation and to subscribed to the
share capital of co-operative societies concerned with the storage or
warehousing as their primary function.

Institutional Linkage Towards Pricing:

Several factors like the climatic conditions, seasonal production,
variations in the area under cultivation affecting the supply, policies of import
and export, large number of intermediaries, underdeveloped systems of
storage and marketing etc. lead to wide variations in the agricultural prices
which affects the farmer adversely as the cost structure is relatively rigid and
the turnover in agriculture is comparatively low.

In order to bring about some sort of stabilization in the

agricultural prices, the Agricultural Price Commission has been announcing
the minimum support prices, procurement prices and issue prices for a
number of agricultural commodities. The minimum support, prices, are
announced in advance to the sowing season in facilitate second planting
decisions wherein the Government purchases at fixed prices so that even in
cases of adverse conditions with a full in prices, the farmer is not affected.

The government maintains a control on the prices by the procurement

of food grains, import of food grains, creation of buffer stocks and increasing
the domestic production of food grains. The government procures the food
grains through monopoly procurement or through imposition of levy or

purchase from the open market. The procured grains are then solid at lower
prices through the Public Distribution System or the Fair Price Shops. When
production is not sufficient, the Government imports the food grains from
abroad to prevent the prices from spiraling upwards. Buffers are maintained
by storing the food grains in the years of high production for consumption in
the years of lower production. Government also tries to increase the
economics of domestic production through the introduction of high yielding
varieties, provision of irrigation facilities, various input subsidies etc.

Institutional Linkage Through Regulated Markets:

The objective of exercised some level of control over the various

malpractices prevalent in the agricultural markets like excessive market
charges, short weights, unauthorized deduction and allowances made by the
commission agents, adulteration of produce and the absence of any
machinery to settle the disputes between sellers and the buyers led to the
establishment of regulated markets in India. The Government action pertains
to the formulation of a set of rules and regulations necessary to be followed by
all the market functionaries as also the evolution of an institutional structure
vested with the authority to see that the market functionaries obey the
directives. A market regulated through governmental intervention strives to
create mutual trust and confidence between the traders and cultivators,
establish for trade policies and assure them just and reasonable returns. A
regulated market therefore private’s facilities for trading on an equitable basis,
facilitates the settlement of disputes arising from the trading activities and also
provides ancillary facilities like godowns, communication, transport etc. A
market is therefore said to be regulated when the government establishes a
market under some enactment and frames the rules and regulations to
conduct the business thereon.

The regulated markets were initiated by the passing of the Berar

Cotton and Grain Markets Law, 1957 whose salient features were:

1. All existing markets came under its purview.
2. The resident authority could declare any additional markets or bazzers
for the sale of agricultural produce.
3. A committee was to be constituted for enforcing the law.
4. The Committee was authorized to delegates its duties to a sub-
committee or joint committee.
5. Trade allowances were abolished.
6. Unauthorized markets were banned within the miles of the notified
7. Market functionaries were required to take out licences.
8. The resident authority was empowered to made rules for some specific
9. Penalties for the breach of certain provisions of the law were laid down.

The Bombay Cotton Market Act, 1927 provided for:

1. The establishment of markets for ginned and unginned cotton.
2. The notification of a cotton market by the local government either after
consulting the local authorities as they deemed necessary or upon the
representation made by the district local board.
3. Constitution of a market committee as a body corporate for managing
every market to be established with a majority of the cotton grower’s
representatives on it.
4. The obligatory appointment of a disputes sub-committee.
5. The ban on any trade allowances not recognized under the rules or the
bye-laws framed under the act.
6. The levy of market fees.
7. Exercise of administrative control on the committees.

The Royal Commission on Agriculture, 1928 made the following


1. Regulated markets should be established in all the provinces of India in

order to facilitate the marketing of all types of agricultural product.

2 Products other than cotton should be brought under the purview of
regulated markets.
3. Establishment of the marketing committees should be under a single all
prevailing provincial legislation.
4. Municipalities and market boards should be kept out of the
management of these markets.
5. The markets controlled by the local boards should automatically cease
to function after these regulated markets come into existence.
6. The initial expenditure on land and building incurred on starting such
markets should be net from a loan out of provincial revenues.
7. Half the members of the marketing committees should be from among
cultivation and may also include an officer of the Agricultural
8. The market committee should see that is members are well informed
about the market conditions daily.
9. Provision should be made for a machinery settle disputes in the form of
panchayats or the board of arbitration.
10 Action should be taken to prevent the brokers in regulated markets
from acting adverse to the interests of both the buyers as well as the

Institutional Linkage for Export Promotion:

The exports of agricultural commodities has been of vital importance to
the nation on account of various reasons like overcoming the adverse balance
of payment situation, to meet the imports of industrial and capital goods and
critical raw material, to meet the shortages of food grains and petrol and
petroleum products and mainly to create new markets for the serious
agricultural produce. The organizational set-up by the government to promote
exports consists of:

World Trade Organisation (WTO)

7.1) Introduction
Parallel to the post war reconstruction of the
It was the signing of the international payments system, two
GATT in 1947 that set up the Important developments have affected the
framework for the
liberalization of international level and structure of international trade.
trade. This was a crucial step These include the tariff reduction reduction
forward in ensuring that a
larger free trade system negotiated through the GATT and the
would exist in the post war movement towards West European
economic integration.
It was the signing of the GATT in 1947 that set up the frame work for
the liberalization of international trade. This was a critical step forward
in ensuring that a larger free trade system would exist in the post war
The international tariff negotiations under GATT involved to large and
redious bargaining process. A number of international conferences under the
aegis of GATT were held, such as the Kennedy Round, the Tokyo Round and
the Urugnay round.
The aim of these Rounds was to reduce tariff and non-tariff barriers in
international trade worldwide. Subsequently, the world trade organization
(WTO) based in Geneva, came into existence in January 1995.

World Trade Organisation

The WTO is the third economic pillar of world wide dimension along
with the World Bank and the IMF and thus
The WTO is the third
economic pillar of world wide enjoys equal status with them. The WTO
dimension along with the
has potential membership larger than the
World Bank and the IMF and
thus enjoys equal states with 128 members signed unto GATT. Unlike
GATT, Unlike GATT which was essentially a
provisional organization for over 40 years,

the WTO is a permanent institution and has
an annual budget of first US $ 80 million.
Rate of World Trade-Organisation
One of the main roles of WTO is to
administer the new procedures for setting
disputes between members. Thus strict
The arrival of WTO does deadlines are set for each stage of the
not mean that the GATT
process and no single member can block
disappears. However the
members of WTO can alone the decisions of the new dispute settlement
take part in the new trade
board. The arrival of WTO does not mean
liberalization measures or
the dispute settlement that the GATT disappears. However, the
mechanisms while the
members of WTO can alone take part in the
others remain more
members of GATT. new trade liberalization measures or the
dispute settlement mechanisms, while the
others remain more members of GATT.
7.2) Scope of World Trade Organisation
Like GATT, the WTO agreement will regulate the commodities trade in
addition it will deal with services across national borders, for example,
insurance and tourism. The new WTO conditions protect intellectual property
rights like patterns, copyrights and brands.
Agriculture and textiles are completely covered by the WTO agreement
Rules on state subsidies have been made stricter to cut down on such
The highest WTO body is a ministerial conference which will meet at
least once in two years. The new trade body, WTO, however has strong
differences over the environment and workers rights. WTO has to tackle
problems like naming a new Director General.
Chapter 8 – INTERNATIONAL ECONOMIC CO-operation ------------------
7.3) GATT & WTO
 GATT is an international body which no longer exists.
 GATT incorporates certain general agreements which have been
accepted by WTO

 GATT coveted only trade in goods, whereas WTO includes not only
trade in goods but also trade in services, trade-related investments
measures, intellectual property rights and dispute settlement.
 GATT has been an adhoc and temporary body (from 1948 – 1994)
whereas WTO has been a permanent body from the time of its
 GATT had contracting parties whereas WTO constitutes the member
 GATT was not backed by the legal system whereas; the WTO
agreements are backed by the parliament of WTO member nations.
 WTO has wider scope than GATT, since it includes trade policy review
mechanism, as well as dispute settlement mechanism.
 The working pattern of GATT was linked with its quotas, whereas WTO
is more democratic in the sense it follow nations one more policy.


The General Agreement in Trade in
Services (GATS) has been one of the major
GATS covers also services achievements of the Uruguay Round of the
sector including financial
services and is based on two negotiation and is now an integral part of
elements. WTO’S legal framework, GATS covers also
 First is the set of
rules and disciplines which services sector including financial services
apply to all WTO members and is based on two elements.
 Second is the  First, is the set of rules and
‘Schedule of specific disciplines which apply to all the
commitments’. These
schedules are similar to the WTO members, and
tariff schedule, which govern  Second, is the ‘Schedule of specific
market access commitment of
each WTO member with commitments’? These schedules are
similar to the tariff schedule, which
govern market access commitments
of each WTO member with respect
to merchandise goods.

Structures of WTO
The structure of WTO consists of the highest authority – Ministerial
Conferences and the second in line, the General Council.
 The Ministerial Conferences consists of the representatives of the
WTO members. This body meets at least every two years. Its scope
covers taking decisions on matters related to multi-lateral trade
 The General Council reports to the Ministerial Conferences. The
routine work falls on this body. It consists of
(a) The Trade Policy Review body, which conducts regular reviews of trade
policies of each WTO member. It brings about increase in
transparency in trade practices.
(b) The Dispute Settlement Body oversees the dispute settlement
procedure. The dispute settlement procedure. The dispute settlement covers
all the aspects of dispute negotiations as explained in the WTO agreement.

7.4) WTO and Developing Nations

Since most of the countries in the WTO are either in the process of
transition to market oriented economies or
Since most of the countries developing economics such economies play
in the WTO are either in the
process of transaction to an important role in the WTO.
market oriented economics WTO pays a lot of attention to the specific
or developing economies
such economies play an problems of developing nations. A number of
important role in the WTO training courses are introduced for such
member nations.
The international trade centre has been established in 1964 so as to promote
the exports of developing nations. The centre provides information and help
to developing nations regarding various issues of exports.

Farm Management
8.1) Meaning:-
Although the farm is an economic and social institution developed over
many centuries, the scientific management of farm as a business is relatively
new. Because of the recent origin, the term farm management conveys
different meanings to different people. Some take it to be another name of
production economics or agricultural economics, while others consider farm
management as nothing more than the farmer’s art of carrying out the daily
routine. The daily work of supervision of farm labour and carrying out the
directives of seniors by the public or private employed farm manager is
generally referred to as Farm Management.
Like any other economic problem, farm management is a rational
resource allocation proposition, more particularly from the point of view of an
individual farmer. On one hand, a farmer has a certain set of farm resources
such as land labour, farm buildings, working capital, farm equipment etc. that
are relatively scarce. On the other side, the same farmer has a set of goals or
objectives to achieve, may be maximum family satisfaction through increasing
net farm income. In between these two poles is the farmer himself with
specific degree of ability and awareness. This gap is bridged by the mental
exercise and concentration of desire and will power of the farmer to use his
scarce resources in a way that desired objectives are achieved. This
necessitates taking a series of rational decisions in respect of farm resources
having alternate uses and opportunities.

8.2) Definitions:
1) Farm Management is that branch of agricultural economics which deals
with the business principles and practices of farming with an object of
obtaining the maximum possible return from the farm as a unit under a
sound farming programme.
2) Farm Management is a branch of agricultural economics which deals
with wealth earning and wealth spending activities of a farmer in relation
to the organization and operation of the individual farm unit including

some or all the functions of marketing for securing the maximum
possible net income consistent with the maintenance of soil fertility.
3) Heady and Janssen: “Farm Management” as the subdivision of
economics which considers the allocation of limited resources within the
individual farm is a science of choice & decision making and there is a
field requiring studied judgment.
Research, Teaching and Extension together thus, seek to improve the
ability of the farmers and introduce desirable changes in the utilization of
scarce resources at the farm with a view to increase income and improve
standard of living of the farmers.

With the technological development farming is changing from the more
concept of subsistence to commercial and business oriented. Farmer
endeavors to produce maximum surpluses to be sold in the market to buy
some nonfarm products for further satisfaction of life thus, making agricultural,
and production market oriented. In order to make use of new technological
improvements, it required farm organization adjustments and decision making
ability. Continuous adjustments in resource use become very essential to
take advantage of changing technology and farm management science has to
play a pivoted role in bringing about these adjustments smoothly & efficiently.
Even in the developing countries like India, new high yielding varieties are
being introduced and therefore, farmers can think of producing some
quantities for their family consumption from a lesser area and the released are
can be used for producing for the market. There is also a scope for bringing
about structural changes and also in operational aspect of the farm business.
One has to decide which method is more economical on a particular farm
situation depending upon availability of labour, capital and other resources.
Here farm management has a role.
Development of industry in a country enhances the scope of the
application of the subject of farm management. Progressive industry puts
forward many alternatives in relation to type and use of fertilizers, insecticides,
implements, machinery etc. This requires managerial skill to suitably adopt

these new inputs and make other farm adjustments in order to rationalize the
resource use under new set of alternatives.
Farmers learn more quickly, if they are convinced on cost returns
analysis of each suggested management action. Economic analysis makes
the farmers learn more of alternative courses of action. The scientific
management process acts as a useful education – tool through gathering
more information on new alternatives and testing each recommendation on
economic standards.


The economic principles as applied to farm management are used in
making choices and decisions on matters relating to all aspects of farming
such as – crop production, livestock raising, capital needs and its utilization,
human and bullock labour utilization and farm practice and so on. These
principles guide the farmer in obtaining possible returns from the farm as a
These principles serve as a guideline for collecting and using requisite
information for rational decision-making. They also provide a set of tools for
the preparation of farm hundreds and production programmes. The farm
problems can be solved by the help of these principles within short period and
with less energy. These principles also enhance form entrepreneurs sense of
judgment, a prerequisite for meeting demands of a business.

The following are the important basic principles generally used in farm
1. Principles of variables proportions or laws of returns.
a) Diminishing returns
b) Constant returns
c) Increasing returns
2. Principles of substitution between inputs (Least cost combination)
3. Principles of comparative advantage and absolute advantage.
4. Principles of equimarginal returns.
5. Principles of opportunity cost.

6. Principles of enterprise combination.
7. Cost principles.

(1) Law of Diminishing Returns:-

It is a physical law of fundamental importance in agriculture. It is an
important guiding factor, in farming to decide the level to which the farmer can
push his out return per acre, per cow or per buffalo to secure maximum
possible profit.
In agricultural production, it is experienced that the level of production
in initial stages goes on increasing with increase in quantity of variable
resources applied to a fixed resource, then it remains somewhat constant for
sometimes and than it declines.

Marshall defines the law of diminishing returns as follows:

“An increase in the capital and labour applied to the cultivation of land
causes in general a less than proportionate increase in the amount of produce
raised, unless it happens to coincide with an improvement in the art of
The following are three conditions which may delay the operation of the
law in agriculture.

1. Improvement in technology
2. Improvement in managerial ability
3. Residual effect of previous doses.
This law can also be stated, as if successive units of one input is added
to a given quantity of another input a point is eventually reached, where the
addition to the product per addition input will decline or “if increasing amounts
of one input is added to a production process, while all other inputs are held
constant, the amount of output added per unit of variable input will eventually
start declining.
It states that, if the quantity of one factor is increased with quantities of
other factors held constant, the marginal increment to the total product may
increase or remain constant at first, but will eventually decrease after a certain
point. It can be said that the added quantity of variable resources applied to

affixed acre of land or given heads of livestock adds less and less to the yield
or output. Under this situation of declining production, the farmer has to think
for the level of production to which he should push up the yield per acre or per
acre or per animal. For determining appropriate level of production he must
study the input-output relationship.
This principle should be therefore, helpful in making decision such as –

1) The level to which yield/ha. Milk/Cow etc. should be pushed to secure

maximum profit.
2) The size of the farm one should operate with given resources of
capital, labour and management.
3) The amount of fertilizer, labour or type of machinery one should one.
EXAMPLE: Marginal cost and Marginal Returns Analysis of Paddy Yield
Response to
Application of Fertilizers.
Sr. Fertilizer Yield Total Marginal Marginal Marginal Total Profit
No. Unit/Acre of cost cost Product Returns Returns Rs.
N. (50 Paddy @ Rs (Rs.) Qtls. (Rs.) @ Rs.
Rs/can) (Qtls) 30/- (M.C. (M.P.) (M.R.) 50 Qtl.
(T.P.) unit (T.R.)
1 0 2 0 0 0 0 100 100
2 1 6 30 30 4 200 300 270
3 2 9 60 30 3 150 150 390
4 3 10.5 90 30 1.5 75 `5`25 435
*5 4 11.5 120 30 1.0 50 575 455
6 5 12.0 150 30 0.5 25 600 450
7 6 11.5 180 30 -0.5 -25 575 395
8 7 10.5 210 30 -1.0 -50 525 315

* Level of profit maximization.

From the above table, it is seen that the total product is increasing with
increasing rate up to second level of N application. Then from the third level
to the sixth level of N with the addition of successive levels of imports, the
total production is increasing at decreasing rate. Then from seventh level, the
total production is decreasing.

From the above situation, we can say that the law of diminishing
returns is operating to the production of paddy because each successive unit
of N has added less and less to the total product. In agriculture, it is always
desirable to produce maximum yield per acre or per animal from this point of
view, it be said that the farmer should push up the level of production of paddy
up to sixth level, because at this level by applying 5 units of N, the maximum
output of 12.0 qtls/acre has been obtained.
The farm or farm manager should not think only for maximum output /
more or per animal, but he should also think for maximum profit / acre or per
animal. Thus, he has to consider the cost of input factor and prices of output.
By comparing marginal or added cost and marginal returns, one should stop
applying additional doses of fertilizers, where the fertilizer cost is equal to the
additional returns.
As shown in the table, the optimum level of fertilizer to be used in this
case is 4 units. Beyond this level the marginal returns is less than the
marginal cost. If we calculate total profit at each unit of fertilizer as given in
last column, we observe that the net returns / profit per acre are the highest
(Rs. 455) at 4 units of fertilizer use.
Meaning of Different Terms:
1) Total Product (TP):- The amount of product which results from different
quantities of variable inputs is called the total product.
2) Average Product (AP):- The term AP refers to the average productivity of
a resources. It is ratio of total product (TP) to the quantity of inputs used
to producing that amount of product.
AP = Y; Where, Y = Product & X = Input
3) Marginal Product (MP):- The term MP refers to the quantity when
additional (Marginal) unit of factor – input adds to the total product. The
MP at any level of the variable input can be approximated by the addition
to total output by the addition to total input.
MP = ∆ Y
8.4) Relationship between Total, Average and Marginal Products
A) Total Product and Marginal Product:-

1. Since, the marginal product (MP) is a measure of rate of change.
a) When TP is increasing, the MP will be positive.
b) When the TP remains constant, the MP will be zero.
c) If the TP decreasing, the MP will be negative.
2. So long as MP moves upward or increases the TP increased at
increasing rate.
3. When the MP remains constant, the TP increases at constant rate.
4. When the MP starts declining or slope downward, the TP will be
increasing at decreasing rate.
5. At the point the MP becomes Zero or MP curve crosses X-axis, the TP
will be at maximum.
B) Marginal product and Average Product:-
1. When the MP keeps increasing or is moving upward right from the
beginning, the AP curve also keeps moving upward. So long as MP
curve remains above the MP curve, the MP curve keeps increasing.
2. As soon as the MP curve goes below the AP curve, the AP curve starts
3. If AP does not change with additional inputs used, the amount of
product added by marginal or additional units of input of equal to AP
i.e. AP = MP
4. When AP = MP, at this point, MP will be at the maximum.
The relationship between AP and MP can be summarized as:-
1. When MP > AP AP is increasing
2. When MP < AP AP is decreasing
3. When MP = AP, Ap is at a maximum
Elasticity of Production: - The elasticity of production refers to the
percentage change in output in response to the percentage change in input.
It can be denoted by the symbol Ep and can be computed as:
Ep = ∆ Y / ∆ X OR ∆Y x X OR ∆Y x X
Y X Y ∆X ∆X Y

= MP

The principle of diminishing returns is very useful in taking decisions of
most profitable levels of inputs under conditions, where available resources
are in unlimited in quantities. In such a situation, where resources are in
ample quantities, the problem of selecting the most profitable level of resource
use can easily be determined by finding out the point at which the added
return is equal to the added most. But most of the farmers have limited
resources. In such a limited resource situation, the farmer must plan and use
the available resources in such a way that each and every unit of limited land,
labour and capital will produce the maximum returns. The economic principle
which helps the farmer under such circumstances is the principle of equi-
marginal returns.
This principle says that returns from a limited resources will be
maximized, if each unit of limited resource is used, where it will add the
maximum to return. In other words, it can be said that the farmer must use
each acre of land, each day of labour, and rupee of the capital in those
enterprises, where they add maximum to the net returns. In other words, this
principles state that resources should be used, where they bring not the
greatest average returns, but the greatest marginal returns.
Example: Suppose a farmer has Rs. 5,000. He can grow Groundnut, Jowar
or Paddy. His problem will be what amount of capital he should invest on
each enterprises to get highest profit.
Marginal Returns to Capital on Three Crop Enterprises.
Amount of Capital Groundnut Marginal Returns (Rs.)
Used Rs. Jowar
1000 1300 1400 1500
2000 1300 1200 1250
3000 1200 1100 1100
4000 1200 900 1000
5000 1100 800 900
Total Returns from Rs. 6100 5400 5750

Net Profit Average 1100 400 750
Returns Per rupees 1.22 1.08 1.15

Average returns will be highest, if the whole amount is spent on Groundnut

with gross returns of Rs. 6,100/- and profits Rs. 1100/-. The marginal returns
will however, guide while spending this amount as under:-
Amount Crop Enterprises Added Returns
First Rs. 1000/- Paddy 1500
Second Rs.1000/- Jowar 1400
Third Rs. 1000/- Groundnut 1300
Fourth Rs. 1000/- Groundnut 1300
Fifth Rs. 1000/- Paddy 1250
Total Returns from Rs. 5000/- 6750/-
Net Profit 6750/-

So this principle states that the resource should be used not where,
they bring the highest average returns, but where they yield the highest
marginal returns. The best combination of enterprises is attained not when,
we select profitable crop, but when we spent capital of Rs. 5,000/- as Rs.
2,000/- on Groundnut, Rs. 2000/- on Paddy and Rs. 1,000/- on Jowar, he will
get maximum returns of Rs. 6,750/-
Most of the farmers have limited capital and hence, his each unit of
capital should being maximum possible returns. The principle of eqimarginal
returns guides the farmer to plan a budget for crop system and to fit his crop
system with livestock programme. The adoption of specialized and diversified
farming depends to a certain extent on the principle of equimarginal returns.

B) Law of Substitution or Least Cost Combination

Farmers are using many different recorded both to crops and livestock
Recent advances made in the field of physics and biology. Science have
further added the list of alternatives, when two competing resources for
practices can be used to produce a given output, farmer has to decide,
whether to use one resource for the other or combination fo the two e.g. A

farmer may farm the problems of deciding whether to grow local variety or
high yield variety of crop, whether to produces seedbells by desi-plough
or by improved plough,, whether to apply chemical fertilizer or F.Y.M. whether
to follow hand weeding or chemical medicides etc, to produce a given output
of a crop. In such cases the farmer is 2interested in selecting the least cost
resource or practice of least cost combination of resources of practices.
The law which helps in making choice from a number of alternatives is
known as the law of substitution. This law can be defined as “If the quantity of
output is constant, it is economist to substitute one factor of production for the
another factor of production, if the cost of first is less than the cost of second”.
This law helps the farmer in minimizing the cost of performing a particular job
of producing a given output.
While minimizing the cost, the farmer may face two situations:
1) Two major resources or practices which substitute for each other
without changing of output level.

Constant rate of Substitution:-

Table: Selection Lowest cost resource or practice.

Sr.No. Particulars Yield level / acre Cost Rs.

1 Bullock power threshing 10.00 50.00
2 Mechanical Power 10.00 45.00

From the above table, it is seen that the mechanical power threshing, is
costing Rs. 5/- less than the bullock power threshing. Therefore, farmer
should substitute mechanical power threshing for bullock power threshing.
2. Many possible combinations of two resources or
Practices which substitute at diminishing rate.
When large number of combinations of two resources or practices is
possible, the farmer should select the combination which will cost least.
EXAMPLE: - Decreasing the least cost combination of Bereseem and

Sr. Feed required Added Replaced Marginal Price
No. producing 1800 litres of Qty. of Qty. of rate of Ratio
milk / 100 days. Berseem concentrate substitute
Berseem (Kg)
Concentrate (Kg)
X1 X2 X1 X2 X2/ 1X1 PX1
1 2 3 4 5 6 7
1 7500 800 - - - -
2 7700 850 200 50 0.25 5/50 0.10
3 7920 800 220 50 022
4 8170 750 250 50 0.20
5 8160 700 290 50 0.17
6 8800 650 340 50 0.147
7 9200 600 400 50 0.125
8 9670 550 470 50 0.106
9 10220 500 550 50 0.09
10 10860 45`0 640 50 0.073
11 11600 400 740 50 0.067

The principle or least cost states that “If two factors or resources are
considered for a given output, the least cost combination will be such, where
their price ratio is inversely equal to their marginal rate of substitution.
To find out the least cost combination of berseem and concentrates it is
necessary to complete four steps.
1. Calculate the added quantities of berseen and replaced quantities of
concentrates and consider the two successive levels of each.
2. Compute the marginal rate of substitution (M.R.S.) by dividing the
number of units of replaced resources by the number of units of added
resources` by the following formula.
M.R.S. of X1, & X2 = No. of units of replaced resources
No. of units of added resources
= ∆ X2
∆ X1

In other words, we can say that the marginal rate of substitution for
concentrate is the no. of Kg. of concentrated replaced by 1 Kg of berseem.
3. Compute the price ratio as follows
P.R. =Cost/Unit of added resource = PX1
Cost/Unit of replaced resource PX1

In our example calculate the price ratio by taking price of berseem @

Rs. 5/- quintal and price of concentrates @ Rs. 50/- Qtl. Hence, the price
ratio will be:-
P.R. =Cost/Unit of added resource = PX1 5
Cost/Unit of replaced resource PX2 50-0

4. For determining the least cost combination, field out the point where
marginal substitution ratio and price ratio are equal. At the point the
combination is least cost combination.
∆ X2 ∆ X1
∆ X1 ∆ X2
∆ X1 - PX1 = ∆ X2 - ∆ X2
In our example the MR.S. at the combination equals to price ratio.
MRS. = Price ratio i.e. 0.106 = 0.10
Therefore 8th combination will be the least cost combination among all
the combinations. Hence, this combination i.e. feeding of 9670 Kgs. berseem
and 550 Kgs. Of concentrates / to obtain 1800 liters of milk be recommended
to the farmer.
Principles of Comparative Advantage:-
The Principle relates to the extension and application of factors
determining specialized and diversified types of farming. The physical and
economical conditions influencing production value from country to country,
region to region, farm to farm and even within a farm from field to field.
The principle of comparative advantage directs that the farm should
select those drops and livestock enterprises in the production of which
available resource have the greatest relating and not absolute advantage.
There are two types of advantages growing crops.
1) Absolute advantage
2) Comparative or relative advantage

C) Absolute Advantage:-
This type of advantage refers to the advantage due to particular crop grown in
two or more ratios.
Crop Amount Region A Region B
Wheat Sugarcane Wheat Sugarcane
Total Income Rs. 800 7,500 600 3,900
Total Expenses 500 1,250 100 1,300
Rs. 300 1,250 200 2,600
Net Returns Rs. 60 200 1.50 3000
Return / Rupee 160 % 200 % 150 % 300 %
Returns %

From the above table, it is seen that Region ‘A’ has an absolute
advantage in growing wheat, because net income/ha. From wheat in region ‘A’
is greater than in region ‘B’ Region ‘B’ has an absolute advantage in
Sugarcane, because the net income from sugarcane in region ‘B’ is more than
that in region ‘A’.

D) Comparative / Relative Advantage:-

This refers to the relative advantage of growing different crops in a
region ‘C’.

Crop Amount Bajra Groundnut Cotton

Total Income Rs. 150 500 900
Total Expenses 150 150 250
Rs. 200 150 650
Net Returns Rs. 2.34 3.33 3.60
Return / Rupee 234 % 333 % 360 %
Returns %

From the above figures, it can be said that the farmer of region ‘O’ can
make profit by growing any of three crops. But for making the greatest profit,
he will have o allot the largest possible average under cotton alone us it has
given the maximum relative advantage.

If the cultivator wants to get the greatest profit he should produce those
crops in which their relative advantage is greatest after taking into account the
net income / acre. Cultivator should choose the crop or crops that will
contribute most to the net income of the farm as a unit. The specialized or
diversified farming depends largely on the principle of comparative advantage.
The to the operation of this law specification of fruit and vegetable
farming near the cities and sugarcane farming around the sugar factories take


The farm resources are always limited and there are more than one
alternative to use these resources. When resources are used in one product,
some alternative is always foregone. The opportunity cost is the value of the
next best alternative foregone. The value of one enterprise sacrificed is the
cost of producing another enterprise. In other word, opportunity cost means
the value of the product that was not produced, because resources were used
for a different products.
The opportunity cost principle thus, refers to advantages which might
have been obtained from any factor, if it has not been used in producing that
commodity, but would have been used for other next best purpose.
Example : If a cultivator has Rs. 800/- for investment in the farm business, he
will make a choice from various alternative uses to which this many could be
put. He might have following alternatives.
1. Purchase of buffalo giving not returns Rs. 80/- i.e. 10% returns on the
funds invested.
2. Purchases of a water lift on 5 acres farm net returns Rs. 100/- (12.5%
returns on investment).
3. Invest on a bullock cart for transporting his produce to the market,
thereby increasing share in the consumer’s rupee net return of Rs. 60/-
(7.5% returns)
The farmer gets the highest returns of Rs. 100/- from use in water lift
as compared to Rs. 80/- on purchase of buffalo & Rs. 60/- from investment on

the cart. Opportunity cost of choosing one alternative is to surrender the best
returns from next best alternative foregone.


A farm of manager is obtain is often confronted with the problem as to
what enterprise to select and the level or which each enterprise should be
taken up. How far he can go or should go in combining should be taken up.
How far he can go or should go in combining one enterprise with another
enterprise or replacing one enterprise with another, depends partly on the
inter relationships, between different enterprises and the prices of products
and inputs.
Types of Product Relationships:-
The enterprises can have any one or combination of the following
relationships. :-
1. Independent Enterprise.
2. Competitive Enterprises.
3. Supplementary Enterprises.
4. Complementary Enterprises.
5. Joint Enterprises.
a) Independent Enterprises:-
Independent enterprises are those which have no direct bearing on
each other, an increase in the level of one neither helps nor binders the level
of other. In such cases each product should be treated separately. E.g.
Production of wheat and maize independently.

b) Joint Enterprises:-
Joint produces are those which are produced together e.g. cotton and
cotton seed, wheat etc. The quantity of one product produced decides the
quantity of the other product. In case of joints products there is no accounts
decision to take with respect to the combination on of products and the two
products can be treated as one.
c) Competitive Enterprises:-

Competitive enterprises are those which compete for use of the
farmer’s limited resources. Use of resource to produce more of one
necessitates a sacrifice in the quantity of other product.
When enterprises are competitive, three things determine the exact
combination of the product which would be most profitable:-
1. The rate at which one enterprise substitutes for the other.
2. Prices of the products and
3. The cost of producing the product.

The rate at which one product substitute for another is known as the
marginal rate of substitution. Two products can
1. Constant rates of substitution.
2. Decreasing rates of substitution.
3. Increasing rates of substitution.
e.g. paddy-Jowar, Paddy-Groundnut.
d) Supplementary Enterprise:
Two products are said to be supplementary, what an increase in the
level of one does not adversely affect the production of the other but adds to
the total income of the farm i.e. enterprises which do not compete with each
other but adds to the total income. For example, on many small farms small
dairy enterprise or a poultry enterprise may be supplementary to the main
crop enterprise because they utilize surplus family labour and shelter
available perhaps even some feeds which would otherwise go to waste.
When products are supplementary both the products should be produced up
to the and of the supplementary stage. Some time enterprises supplementary
for one resources but competitive for another. In other cases the relationship
should be treated as one of competitive even though they are supplementary
to one another in respect of other resources e.g. mixed crops.
a) Complementary Enterprises:-
Complementary enterprises are those which add to the product of such
other e.g. Berseem and maize crops. Two products are complementary when
the transfer of a variable input from the production of the one product to the
production of the other results in an increase in the production of both

products. When crops are complementary enterprises, the use of resources
for the two crops results in the increased production of both the crops.
Two enterprises do not remain complementary over all possible
combinations. They become competitive at some stages. When both
complementary and competitive relationships occur, the complementary
relationship concurs first and then is followed by competitive relationship.
The type of farming means a group of farms which are similar in kinds
and production of crops and livestock that are produced and the methods and
practices followed in production in similar ways.
An area in which many farms have a general similarity in products sold
and methods followed is called type of farming.
The determination of type of farming area is based upon the concept of
comparative advantages that maximizes the net earnings of the farmers. It
includes specialized, diversified, mixed, dry farming and ranching.
1. SPECIALISED FARMING: - An specialized farm is one on which 5 or
more receipts are derived from one sources
According to the above definition, a farm on which 50 % or more of the
receipts are from the sugarcane would be classified as sugarcane farm, and
the one yielding 50 % or more of its income from vegetables would be called a
vegetable farm.
It India, we find evidence of regional specialization of crops as below:

Sr.No. Name of Crop Regions of specialization

1 Wheat Punjab, U.P., M.P. and Eastern Rajasthan
2 Paddy Assam, West Bengal, Bihar & Eastern U.P.
3 Sugarcane U.P., Bihar, Punjab, Tamil Nadu, M. H
4 Cotton Punjab, MP, Maharashtra, Karnataka, Gujarat

Advances of Specialized Farming:-

1. Better Use of Land: It is more profitable to grow a crop on a land best
suited to it e.g. Jute cultivation on Swampy land in West Bengal.

2. Better Marketing: Specialization allows better assembling, grading,
processing, storing, transporting, and financing of the produce.
3. Better Management: The fewer enterprises on the farm are liable to
be less neglected and sources of wastage can easily be detected.
4. Costly And Efficient Machinery Can Be Kept: A whet harvester
thresher can be maintained in a highly specialized wheat farm.
5. Efficiency And Skills Are Increased: Specialization allows a man to
be more efficient and expert at doing a few things.

Disadvantages of Specialized Farming:-

1. There is greater risk – Failure of crops and market together may ruins
the farmer.
2. Productive resources – land, labour and capital are not fully utilized.
3. Fertility of soil can not be properly maintained for lack of suitable
4. By products of the farm cannot be fully utilized for lack of sufficient
livestock on the farm.
5. Farm returns in cash are not generally received more than once a year.
6. General knowledge of farm enterprises becomes limited.


A farm on which no single product or source of income equals much as
50% of the total receipt is called as diversified or general farm. On such a
farm, the farmer depends on several source of income.
According to an English proverb, a good farmer is one, who diversifies
– one who does not put all his eggs in one basket. One who rotates his

Advantages Of Diversified Farming:-

1. Better use of land, labour and capital: - Better use of land through
adoption of crop rotations, steady employment of farm and family labour
and more profitable use of equipment are obtained diversified farming.
2. Business risk is reduced due to a crop failure or unfavorable market

3. Regular and quicker returns are obtained from various enterprises.

Disadvantages of diversified farming:-

1. Marketing is insufficient, unless the producers arrange for sale of their
produce on co-operative basis.
2. Because of varied jobs in diversified farming a farmer can effectively
supervise only limited number of workers.
3. Better quicker in of the farm is not possible because it is economical to
have expensive implements and machinery for each enterprise.
4. There are changes, when some of the leaks in farm business remain
undetected due to diversity of operations.

Mixed farming is a type of farming under which cop production is
combined livestock raising. The livestock enterprise is complementary to crop
production programme, so as to provide a balanced and productivity system
of farming. In mixed faming at least 10% of its gross income must be
contributed by the livestock activities the upper limit being 45% Under Indian
conditions the scope of mixed farming to combination of crops and their
complementary livestock enterprises of mixed farming would certainly include
`a vast majority of our farms, establishing a complementary relationship
between crop and livestock enterprises. However, the combination of
supplementary enterprises like ship, goats, fishery and poultry is classified
under diversified farming.

Sr.No. Enterprise Contribution to the Type of farming

Gross Income of the
1. Cows, buffaloes only 10 % to 49% Mixed farming
2. Cows, buffaloes, 10% to 49% Diversified farming
poultry sheep, Goats

Advantages of Mixed Farming:
1. Which cattle provide draught animals for crop production and rural
2. Mixed farming helps the maintenance of soil fertility.
3. It tends to give a balanced labour load throughout the your for the
farmer and his family.
4. It permits proper use of the farm by products.
5. It provides greater changes for intensive cultivation.
6. It offers highest returns on farm business.
RANCHING: - A ranch differs from other type of crop and livestock farming in
that the livestock grace the natural vegetation. Ranch land is not utilized by
tilling the raising crops. The ranchers have no land of their own and make
use of the public grazing land. A ranch occupies most of the time of one or
more operators.
Ranching is followed in Australia, America, Tibet and certain parts of
Farmers in dry land precious tracts, which receive 20 th or less of annual
rainfall, struggle for livelihood. The major farm management problem in
those tracts, where crops are entirely dependent upon rainfall, is the
conservation of soil moisture.
Dry farming involves the adoption of the following practices:-
1. Timely preparation of the land to a condition in which, it is best able to
receive and conserve the available moisture.
2. Timely and proper interculturing during growth period of the crop.
3. Improving the water holding capacity of the soil by the profitable
application of organic manures.
4. Use of such implements as are capable or rapidly breaking of the
surface of the soil immediately after harvest as the optimum condition
of the field for tillage operation is of a very short duration.
5. Bonding of fields – sloppy places should be bunded into small level
6. Use of small seed rate per hectare.
7. Mixed cropping.

The term “System of Farming” is generally referred to the method of
agriculture and the type of ownership to land as under:
1. Co-operative Farming
2. Collecting Farming
3. Capitalistic Farming
4. State Farming
5. Peasant Farming
The object of any good system of farming must be to maximize the
yield with minimum of expenditure. This requires the best utilization of
resources and the use of latest technique of cultivation. The problem of
increasing agril. Production is of utmost importance for a country like India,
where land is scarce even concentrated in few hands, yields are low but rents
are high farmers are poor but farms are expensive, Co-operative farming
offers the opportunity for removing the existing drawbacks and derive the
maximum benefit from the limited resources of cultivation.
Co-operative Farming :
The farming in which land is jointly cultivated. In other word application
of the principles of co-operation in the cultivation land is called co-operative
The co-operative farming society is a voluntary organization based on
ideas of self help and mutual aid. The members pool their labour and
resources. It is an extension of the concept of joint family system to

Need for Co-operative Farming :

1. To increase agril. Production in general and food production particular
and to make the country self-sufficient.
2. To enable a farmer to get a fair price for their produce.
3. It will enable a considerable increase in the marketable surplus and
thus help capital formation in the individual sector.

4. Owing to the low yield per acre, small and scattered holdings & inability
of farmers to adopt mechanized farming, co-operative farming would
seen to be the only happy means for increasing production.
5. Efficient and economic management.
6. It would enable introduction of higher techniques in Agril. Facilities land
improvements and progressive agril. In planned manner.
7. Savings made under this could be used to introduce better farming
techniques, long term improvements and effective planning.
7. The objectives of the liquidation of landlords zamindars and the
consequent emergence of a large no. of peasant proprietors can be
achieved by way of co-operative farming.
Types of Co-operative Farming :-
1. Joint farming societies.
2. Collective farming societies.
3. Co-operative better farming societies
4. Co-operative Tenant farming societies
1. Co-operative Joint farming society :-
Land is pooled and cultivated jointly and the produce is raised
collectively and also disposed collectively. Each member gets wages for his
daily labour irrespective of the nature. In this type of farming, the individual
ownership of land is retained even though land is jointly cultivated. A member
is to receive a return for ownership of land pooled by him according to its
fertility, location and production capacity. A part of the net profit is utilized for
the payment of bonus to member and a substantial portion of it is paid on the
basis of work done by them.
2. Co-operative Collective Farming Society :-
Land is pooled and cultivated jointly and the produce is raised
collectively and distributed among the workers in proportion to labour and
other resources contributed by them. Each member receive wages for the
work done by him. Net profits are divided in collective farming society has all
features of a joint cooperative farming society except that in the former the
lands belongs to the society is freehold leasehold, while in latter the land is
hold by the members as owner or tenants.
3. Co-operative Tenant Farming Soceity :-

Under this, the society holds land in freehold or leasehold the entire
land is divided into smaller plots and each is leased a tenant cultivator, who is
a member. Each member cultivate the given to him and is entitled to get the
produce of his land but has to pay a stipulated rent to the society. The society
undertake supply of credit, seeds, manures, implements etc. It is open to
members whether or not to avail of these facilities. After meeting all expenses
and providing for resources the profits of the society are usually distributed
among the members in proportion to the paid by them.
4. Co-operative Better Farming Society :-
Such societies are organized with a view to introduce improved method
of agriculture. In this farm the agril. Land is not pooled, but each member
owns his land and cultivates it independently. He agrees to follow a plan of
cultivation laid down by the society. It acts like ”service co-operatives” (and
provide for credit, marketing, land development, irrigation, joint harvesting
and different resources to the members.


Sr.N Type of Co-operation Type of ownership Type of

o Farming Operationship
1 Co-operative better farming Individual Individual
2 Co-operative joint farming --- do – Collective
3 Co-operative tenant farming Collective Individual
4 Co-operative collective -- do -- Collective

In collective farming, the members of collective surrender the land,
livestock and dead stock to the society. The collectives cannot refuse to admit
other members of required qualification. The member week together under a
management committee elected by themselves.

The committee directs farm management in matter of allocation of
words, distribution of income and marketing surpluses and puts all members
into labour to see that the work it done efficiently. The payment of workers is
to term of ‘work day units’- & standard quota for each kind of farm operation is
fired in relation to one working day and the amount of work done by oath
farmer in a day calculated accordingly, both in respect of quality and quantity.
The unskilled worker has to put in more hours than the skilled one to fill his
quota of work day. This system of farming is arising in Russia and China.


The capitalistic farming is based on capitalistic methods of farming
where landlordism exists as in America or England. In India, this type of
farming can be seen in sugarcane areas, where factory owners have their
own farms, e.g. the Walchand Nagar farm. In such farm, improved methods
of agriculture are followed and the application of capital input is high, because
the landlords happen to be a capitalist to provide necessary fixed and working
The workers on these farms can get better wages, better housing
facilities and other social services, but they are reduced to the status of
industrial workers and subject to capitalistic exploitation..
Under the system of state farming, the farms are managed to
Government officials. The agricultural workers are paid wages on weekly or
monthly basis. Various state Govts. In India have measures for improving the
condition of farm labour in matter of leave, pay and other social amenities.
In peasant farming, farmers follow agricultural practices in their own
way and are managers and organizers of their farm business. Living and
working are closely related. The farm steel is the centre of both home and
agricultural business. The entire family of the peasant has a part in making
decisions and executing the farming programme. The wife and children are
actively associated with some of the phase of the farm business, particularly
with the care of the livestock and looking after the kitchens, garden and the
poultry. The peasant effectively increases the family labour force during the

busy seasons of sowing and harvesting for a short time by working longer
hours and by working faster.


The term ‘Cost’ generally refers to the outlay of funds for productive
purposes. In other words, cost refers to the expenses incurred on productive
services and physical productivities are guided by the cost of various input
Cost analysis is an important total to describe the relationship of costs
to income. Commonly there are two types of costs used in farming viz. Fixed
costs and variable costs. However, marginal or added cost is also an
important tool to guide the farmer to decide how far can be push the
production and how much of various resources he can use.
The total sums of farms fixed and variable costs in the production of a
particular commodity is called as total cost. There are other costs which have
been derived from these main groups.

1. Fixed Costs :-
These costs are related to fixed resources and are overhead costs.
They remain constant irrespective of the yields obtained much or less. These
are the same at all levels of production. Rent interest or fixed capital,
depreciation of building, taxes and wages of the permanent laborers
constitute fixed costs. Family labour cost is also treated cost. Fixed costs
here little relation to making decision on the level of production of farming

2. Variable Costs :-
These costs are related to the variable resources and changes with the
output. The variable costs are nil, if there is production on the farm. They
change with the quantity of production. In the beginning, as the production
increases variable costs rise quite rapidly but with further rise in production,

variable costs do not increase proportionately with the production due to
economic brought about by mass production. Later on as diminishing return
set in variable costs start rising more rapidly then the production.
If farming is to be carried, the variable cost must be less than selling
price, e.g. current supplies such as seeds, fertilizers, food, irrigation,
insecticides, hired labour charges interest on working capital.

3. Total Costs :-
The fixed and variable costs make total cost of production such unit of
crop or livestock product. The total cost stands even when production is zero.
They increase on like variable costs and determine whether farming would be
profitable. But once the total costs are covered, the farmer remains indifferent
to the average cost of per unit cost of production.
Total Profit = Gross Inocme – Total Cost (Fixed – Variable)

4). Average Total Cost :

It refers to the average of all costs fixed plus variable units of output. It
is the resultant of total cost divided by output. In the beginning the average
costs are very high because high fixed costs are distributed on a few units of
production. As more units are produced, the fixed costs are spread over on
many units, there is not much effect of the fired costs on the average costs.
Variable costs assure importance as average cost begin to rise.
Average total cost = Fixed Cost – Variable Cost
Total output

5) Average Fixed Cost :-

Average fixed cost is a fixed cost per unit of output. The total fixed cost
is the same of all the levels of production. The average fixed cost falls
continuously at a decreasing rate as core output is produced. It is because
the first cost is divided by increasingly large number as output increases. It
can expressed as
AFC = IPO where
AFC = Average fixed cost
TFC = Total fixed cost

Y = Output

6) Average Variable Cost :-

The average variable cost (AVC) refers to total variable cost per unit of
output. The AVC has an inverse relationship with average product (AP).
When AP increases AVC decreases, when AP decreases, AVC increases.
Further more, when AP is at maximum the ATC must be at its minimum. The
ATC is expressed as :-
When VC = P X 1, X 1
WhereATC = Average variable cost
VC = Variable Cost
Y = Output
X1 = Input factor
PX 1 = Price of 1 unit of X 1

7) Marginal Cost :-
Marginal cost (XC) is the change to cost associated with an increase of
one unit of output. The marginal cost has also certain relationship with
Marginal product (MP) just as the average variable cost (ATC) has with the
average product (MP). There is an increase relationship between Marginal
product (MP) and Marginal Cost (MC), that is when MP is increasing, MC is
decreasing what MP is decreasing MC is increasing and when MP is at
maximum MC is at lowest point. Marginal cost is calculate as

MC = Cost

As marginal costs are related to the cost of producing additional units

of output, they are affected only by the variable cost. Fixed cost, as a rule, do
not influence the marginal cost because they neither increase nor decrease
with the additional production. Marginal costs are very important in
determining as to how far production should be pushed and how much of the
various resources should be used. A farmer should add to the production as
long as added return is greater or at least equal to the added cost.

Cost Concepts and Items of Cost :-
Cost is the value of the factors of production used in producing and
distributing goods and services. The cost of a factor unit equals the maximum
amount which the factor could earn in alternative employment. Concept
means idea underlying or general motion.
The cost of production of a crop is considered at those different levels
via. Cost, Cost – B & Cost C. The concept of five costs such as Cost-A. Cost
A1, Cost A2, B and Cost C is followed by the Directorate of Economics and
Statistics, Government of India in their cost studies. These cost concepts are
generally followed in the studies of cost of production of crops.
The input items included under each category of cost are given below:-
1) Cost A : Actual paid-out costs for owner / cultivation, inclusive of both
cash and kind expenditure, which include following cost-items.
1) Hired human labour : a) Male b) Female
2) Total bullock labour a) owned b) Hired
3) Seeds
4) Manures
5) Fertilizers
6) Insecticides and pesticides
7) Irrigation charges
8) Land revenue, cesses and other taxes
9) Depreciation on capital assets
10) Transport and Marketing
11) Interest on working capital
2) Cost A : (For the tenants cultivators). The rent paid by tenant to the
landlord is another item of actual cost. Cost on account of all the
above cost items exclusive of land revenue and other taxes, but
inclusive of this rent is referred to as Cost A 1 to distinguish it from the
corresponding cost to an owner cultivator. So Cost A 1 = Cost on
account of all the above items of cost except land revenue and other
taxes + rent paid by tenant.

3) Cost A2 : It is defined as the sum of Cost & (or cost A 1 ) and the
imputed value of the holdings own labour. Cost A 1 = Cost X + imputed
value of the family human labour.
4) Cost B : If the amount invested in purchase of land would have been
put in some other long-term enterprise or in a bank, it would have
yielded some returns or interest. But due to the investment of the
amount in purchase of land, the farmer has to part with the returns or
interest that he would have otherwise gained. And as much, this loss is
considered as Cost. It is balled rental value of land. Similarly, the
hypothetical interests that the capital invested in farm business would
have earned, if invested alternatively is also considered as cost.
Rental value of land and interest on fixed capital represent
costs which are added to Cost A (or Cost A1 ) to give cost B.
Cost B = Cost A + Imputed rental value of owned land
+ Imputed interest on owned fixed capital
5) Cost C : It is the total cost of production, which includes all cost items,
actual as well as imputed. The value of building’s own labour is to be
imputed and added to Cost B to workout Cost C.
Cost C : Cost B + imputed value of family human labour.
Cost of Cultivation and Cost of Production :
The term “Cost of Cultivation” and “Cost of Production” are used as
synonyms for the purpose of cost study. However, a nice distinction can be
made between the two, restricting the content of the cost of cultivation include
factor costs up to the stage of gathering the harvest and that cost of
production to include factor costs up to the stage of marketing the produce.

Per Unit Cost of Production :

Cost of production is to be worked out as cost per unit of area and
production i.e. per hectare and per quintal/tones.

a) Per hectare cost of production

= Total cost

Area under the crop in ha.

b) Per quintal // tone Cost of Production

= Total cost – Value of by-produce

Quantity of main produce in quintals/tones

Measures of Farm Income :

The profits at different cost levels provide different measures of returns
to the cultivator. These are discussed below :
1) Profit at Cost A :
It is also known as farm business income. It provide on estimate of
returns to the farmer for this labour investment and profit.
Farm business income = Gross returns – Cost A (or Cost A1 for tenant
2) Profit at Cost A2
It is also called farm investment income. It provides an estimate of
returns to the farmer for his investment and profit.
Farm Investment Income = Gross returns - Cost A2
3) Profit at Cost B :
It is also termed as family labour income. It provides an estimate of
returns to the farmer for his labour and profit.
Family labour income = Gross returns - Cost B
4) Profit at Cost C :
It is also known s net income. It provides an estimate of returns to the
farmer purely of profits.

Net Income = Gross returns – Cost C

Gross returns or gross income is the total of the value of both the main
and by-products.
Farm business income, family labour income, farm investment and net
income are the measures of farm income.

8.9) Farm Efficiency Measures, Physical Efficiency Measures and
Financial Efficiency Measures, Definitions And Their Importance.

In successful farming one has to use the resources efficiency. The

farm efficiency Measures are helpful in judging the efficiency of various
factors. These efficiency Measures can be categories as physical and
financial Measures.
The efficiency measures are as under :-

1) Land use efficiency : The land use efficiency is judged by appolying

the following criteria.
A) Yield per hectare : The production efficiency of the farm as whole
should be expressed in terms of yield per hectare.
B) Crop yield index : It is a measures of comparison of the yield of all
crops on a given farm with the average yields of those crops in the locality.
The relationship is expressed in percent.
C) Intensity of crouping : The intensity of cropping refers to number of
crops grown on a farm during the year with a l and as a fixed resource.
It is calculated as :
Cross cropped area
------------------------ X 100
Sown area

2) Labour Efficiency :-
Labour efficiency can be best judged by working out the average and
Marginal Productivity of labour put in man hours. An average productivity of
labour is the output per unit of labour input and is expressed as the ratio
between output and input required to produce that output.
Labour efficiency can be judged by :
a) Return per labour day
b) Outturn per worker
c) Crop average per man equivalent.
d) Productive man work units per man equivalent.

Capital Efficiency
An analysis of income statement and balance sheet provides the
needed information on the performance of the business.

A) Capital turn over ratio

= Gross revenue 42000
-------------------- = --------------- = 0.35
Capital 1,20,000

For each rupee of capital employed in the business a gross income of

Rs. 0.35 was realized.
B) Gross ratio :
= Total expenses
Gross income

C) Operating ratio :

= Total Operating expenses

Gross income

D) Rate of return on capital

Net Income

These efficiency measures are helpful in judging the efficiency of

various inputs utilized in farming business. The study is helpful in running the
farms efficiently and profitably.



Farm management is a process of decision making by a farmer in
running his business. These decisions are of two types, which can be
described as planning and “operational” decisions. The planning decision are
concerned with the overall organization of the farm business. They are long
term decision. Though, they need to be modified from time to time, with
changing situations, they are normal not subject to sudden alternation.
The major decisions taken, while operating the day to day activities of
the farm with an objective of obtaining more profits, are the operational
decisions. They are not long-term decisions and they can be taken easily.
Both the types of decision are very necessary for utilizing the available
resources efficiently and obtaining maximum returns.
Farm planning is a process which helps the farmers to choose,
organize and carryout the different from enterprises for obtaining maximum
income and other satisfaction.
Farm planning is a process of making decisions regarding the
organization and operation of a farm business, so that it results in a
continuous maximization of not returns of a farm business.
The main purpose of farm planning is to help the farmer for increasing
his level of production and income by adopting scientific methods of farming.
Farm planning helps the farmer to do the following things in an
organized, systematic and affective way :-
1. It helps him to look at his situations and post experiences as a basis to
decide which of the improved ideas and methods fit to this situations.
2. It helps his to take decisions in relation to the crops to be grown, the
area to be bought under or the number of livestock to be raised and
how they are to be grown or raised.
3. It helps him to identify the credit needs both short and long term and its
4. It helps him to identify clearly the various services and supplies, needs
for improved plan.

5. If gives him idea about the yield that can reasonable expected from
each enterprise.
6. It gives him the clear idea about the returns that may be obtained from
each enterprise and from business as a whole.

Farm Budgeting :-
Farm budgeting is a method of anlaysing plans for the use of
agriculture resources at the command of the decision maker. A farm plan is a
programme of the total farm activity of farmer drawn up well in advance.
Advantage of farm budgeting :
1. It evaluates the old plan and guides the farmer to adopt a new farm
2. Leakage and wastage in farm business are made to known to the
3. It gives a comparative study of receipts, expenses and net earnings on
different farms in the locality.
4. It facilities most efficient and economical use of resources.
5. It serves as a valuable basis for improvements to the farm
management practices.
Types of farm budgeting :
There are two types of farm budgeting (a) Partial budgeting enterprise
(b) Complete budgeting.
(a) Partial Budgeting : It refers to estimating the outcome or returns for a
part of the business i.e. one or few activities. Partial budgets are
commonly used to estimate the effects of outcomes of reasonable
adjustments in the farm business before such adjustments are actually
made. Partial budgeting analysis is simple, quick and easy. It provides
a method for deciding, how far yields should be increased.
b) Total or Complete Budgeting : It refers to making out a plan for the
farm as a whole or for all decision on one enterprise. In case
budgeting analysis involves complete reorganization of the farm
business, it is called complete budgeting. Complete budgeting
considers all the crops, livestock, producing method and estimated
costs and returns for the farm as a whole.

Full budgeting takes an entire view of the farm as a whole and
resources and enterprises are considered, simultaneously. It requires
more time and efforts and more basic data in accurate for


The system of book keeping means the procedure of recording

transactions for the year in the books of accounts.
There are two systems of Book-keeping of Accountancy.
1) Double Entry
2) Single Entry
1) Double Entry System : It is a method of recording each transaction in
the books of accounts in its two fold aspects two entries or made for
each transaction in the same set of books. One being a debit entry
and the other a credit entry.
Business Transaction : It means transaction or dealing in money goods with
persons, wherein some benefit is given as well as taken. In other words, any
event which involves the transfer of money or money’s worth from one person
to another or every… change for whether in goods or depts. Is a business
transaction. These transactions are cross-dealings involving simultaneously
the receiving of a benefit by some one and the giving of a benefit some one
else for an equal amount. These usually consist of
(a) Paying and receiving of on money (b) buying and selling of money,
services ltd. In such instances business has been transacted between two
parties. But there are certain evens or financial changes involving either
increase or decrease in value where no such business is transacted and even
they are record in the books of the business e.g. 1. The birth of calf, lambs
litter of pigs represents in increase in the value of livestock.
2. The death of a cow or sheep represents decrease in the value
livestock. 3. Machinery, implements, livestock and buildings decrease in value
due to their use during the year. These are all recorded in the books of
business of the end of the year.

The term entry means the act of writing a transaction in books of
accounts. To make a debit entry means to write on the left side while to make
a credit entry means to write on the right side or credit side.
Theory of Double Entry System :-
a) Two fold aspect of a transaction – Every business transaction
necessarily involves two parties or two sides – one for the giving of a benefit
and the other for the receiving of that benefit. Even transaction must,
therefore, be recorded in its two fold aspects. i.e. one for the giving of a
benefit and then again for the receiving of that benefit in order to make a
complete record. This gives rise to the term “Double Entry Book Keeping”.
b) Debit and Credit : The opposite effects of receiving and giving of
benefits are represented by the two sides of 2a ledger Account, the left hand
side being called Debit (Debtor) and the right hand side called credit
(Creditor), respectively. Thus, receipt of a benefit is entered on the Debit side
of the receiving account and the giving of a benefit on the credit side of the
giving account. In short, the term debit refers to either receipts or income and
means receiving account which is debited with the amount of transaction.
The term credit refers to either payments or losses (Expenses) and means the
giving account which is credited with the value given.
Principles of Double System
a) A transaction is entered in two accounts, on the debit side in the one
which receives a benefit and on the credit side, in the other which gives
the benefit.
b) The receiving (debit) and giving (credit) are between accounts in the
same set of books.
c) The amount of the debit entry is equal to the amount of the
corresponding credit entry.
The single entry system ignores the double effect of transactions. This name
is given to a system where only the personal Accounts of debtors and creditors are
kept and impersonal accounts are ignored altogether. In fact, there is no particular
system which can be terned single entry. Any method of accounting which falls short
of Double entry, whether it be a combination of no entry single entry and double
entry, may be called as the Single Entry System.

No Double Entry System Single Entry System
1 The double entry system is absolutely Single entry system is faulty,
perfect in its arrangement & incomplete and unscientific.
mathematically accurate in its results.
2 Under D.E.S. record of both personal Under S.E.S. record of
and impersonal accounts is kept. impersonal A/c is ignored
altogether only record of
3 It furnishes ways and means for personal A/c. is kept.
checking the arithmetical accuracy The S.E.S. is imperfect and its
and this can be tested by preparing results unreliable and its
4 trial balance. accuracy cannot be tested by
It prevents mistakes, provides means of Trial Balance.
safeguards against frauds and It can not be possible in this
facilities their detection & offers easy system.
5 and ready reference to details
However, D.E.S. cannot be proved
useful for small holders in India. It is
useful only in big firm. Ago service
Centre and other business.


It is always said that Indian cultivator is a good producer, but a bad
businessman. He knows how to produce but he is not maintaining any
records of his farm. In modern India, agriculture is no longer carried as a
Means of subsistence, but as a business. Farm business involves use of
land, labour and equipments for producing farm commodities, either for sale
or for use of the farmer’s household. It is necessary to record all the
transactions in deciding his future plans.
Advantages of Maintaining The Records :
1. The farmer can avoid mistakes, misunderstandings and losses which
will occur, if he will only depend on his memory.

2. He will get the details of receipts and expenditure, the quantity of seed
fed to the livestock, the effect of prices on the farm produce etc.
3. He will assess the results of his year’s farming and to know the nature
and extent of the profit he has to make and the losses he has
4. Cultivator will know the actual financial position of the business at the
end of the year i.e. assets possessed, liabilities incurred & the net
worth of his business.
5. He can compare his financial position with that of the neighbouring and
competing farms with that of his own in previous years.
6. He will have a better insight into the working of the business.
7. Cultivator will acquire business habits which will help him in taking
advantage of any rise or fall in the disposal of his products.
8. The account books can be produced in support of any legal claims i.e.
the increase of decrease of land rent, income-tax, litigations etc.
9. The date on cost of production will be helpful for the purpose of
obtaining loans.
There Are Two Types of Farm Records :
1) Physical farm records
2) Financial farm records
I) Physical Farm Records :
Physical farm records are related to the physical aspects of the
operation of farm business. They do not indicate financial position or the
outcome of the farm business but simply record the physical efficiency or
performance of the farm. Physical farm records normally include the following
1) Farm Map, soil map and contour map
2) Charts on physical efficiency
3) Land utilization record
4) Crop production and disposal record
5) Livestock production and disposal record
6) Labour records, daily work diary
7) Machinery use records
8) Feed records

9) Stock / Store register
10) Poultry records
II) Financial Records :-
These records are mainly related to the financial aspects of the
operation of farm business. These records are as under :
1) Farm inventory
2) Farm cash accounts
3) Classified farm cash accounts & annual farm business analysis
4) Supplementary financial records
i) Capital assets register
ii) Cash sale register
iii) Credit sale / purchase register
iv) Wage register
v) Funds borrowed, repayment register
vi) Farm expenses
vii) Non farm income record
Farm Inventory : An inventory is a list of assets and liabilities, which are
claims or debts against the business. It will, therefore, include item by item all
the property or assets (things) owned or possessed for the field operations for
growing crops and all other cultivation accounts receivable as well as all
liabilities or obligations (debts) owed such as accounts payable with their
valuation on that date.
Purpose :
1. A complete farm inventory taken at the beginning of each season, will
give a list of all the assets with their values – it shows what amount of
capital goes back into the business. The farm inventory is a necessary
stp in complete farm accounting.
2. It reveals the changes in net worth through comparison of a farm
inventories taken at the beginning of the year with another assembled
at the end of the year. The inventory provide a basis for computing
growth in net worth.

3. It enables to work out the measures of income.
4. It enables to determine the depreciation costs.
5. It helps to work out the value of last years takeover of stock and this
year’s left over.
6. Basis of income statement – net firm income cannot be calculated
without inventories.
Time For Taking Farm Inventory : Usually at this time of the year, the crop
season is finished and work for the next season on hand are ordinarily low at
this time, which makes the inventory jobs of physical measurements of these
items and estimates of value relatively easy.
Process of taking farm inventory :
1. Physical counting &
2. Valuation of physical assets
The physical counting is necessary to verify numbers, weights, and
measurements. Losses, wastages or shrinkages are always occurring and
can cause considerable error, if the inventory is not made carefully.
Next the farmer should place value on each item using an appropriate
valuation method. Valuation of farm assets presents a most perplexing
problem, because an error in the valuation of an inventory may result
Methods of Valuation :
1. Valuation of cost minus depreciation.
2. Valuation at cost or market price which ever is lower.
3. Valuation at net selling price
4. Valuation by Replacement cost minus depreciation
5. Valuation by income capitalization method

1. Valuation at cost minus depreciation :

With cost as the basis of valuation, the inventories show the total of
sum actually put into the business and amount depreciated over time.
This method is commonly used for such working assets such as
machinery and breeding livestock. This method assumes that the
purchase price was an appreciation of the value of the assets and its
value in subsequent years can be determined by substracting a

depreciation allowance from cost. This method cannot be, however,
applied to things produced on the farms.

2. Valuation at cost or market price :-

In this method, valuation is estimated at the cost or the market price
whichever is lower. This method is commonly used for valuing
purchased farm supplies. No proper profits accrue and losses due to
falling prices are absorbed immediately.

3. Valuation at net selling price :-

This means the price which could probably be obtained for the asset, if
marketed, less the cost of marketing. This confirms most closely to
the present worth. This method represents the market price, provides
a reasonably accurate measure of the current value of the asset.

4. Valuation by replacement cost minus depreciation :-

This method is due to value to the assets at what, it would cost to
reproduce them at present prices and under present method of
production. This method is best suited for long lived assets such as
buildings, particularly, where wide changes in the price level occur.
This method will guard against undervaluation, but may not ensure
against over valuation.

5. Valuation by income capitalization method :

This method is appropriate for the farm assets, whose contribution to
the income of the farm business can be measured and which have a
long life. The capitalization formula V +R Can be used for this purpose.
Where ‘V’ is the value in rupees, ‘R’ refers to the income infinite
number of year in future. In practice neither the annual income nor the
interest rate in future is known with accuracy.
Methods for calculating depreciation :-
1) Straight line method : This method is commonly used.
2) Diminishing Balance Method : A fixed percentage is charged on the
diminished balance.

3) Sum of the years Digit method
4) Revaluation Method
5) Depreciation of livestock


Meaning : It is well known that the products are the results of the use of
resources or services of resources. Production is a process of transformation
of certain resources or inputs like land, labour, seeds, fertilizer etc. in to
products like wheat, paddy, jowar, milk etc. Output and its level of a particular
commodity thus depends upon the qualities of inputs used for its production &
relation therefore, exists between input and output. This relation between
inputs and outputs can be characterized as a
Production Function : Production function is, therefore, a technical and
mathematical relationship describing the manner and extent to which a
particular product depends upon the quantities of input(s) or service(s) of
inputs used. In the production function, output is dependent upon or
determined by or related to or is the function of inputs or the use of
Production function is if two types : i) Continuous function and ii)
discontinuous or discrete function. Continuous Function can be explained by
response of yield to fertilizer or seeds, where the doses can be split into small
units. Fertilizer can be applied to a hectare of a land in quantities ranging
from a fraction of kilograms. Discontinuous or discrete function is obtained for
input factors or word units which are used or done in whole number such as
one ploughing. One can only from one point to another.
Stigler has defined production function as the relationship between
inputs of production services per unit of time and output of production per unit
of time.
Transformation or production period :
Time required for a resource to be completely transformed into a
product is referred to as transformation period, production period varies with

nature of resource. Production may be carried on with resources which are
completely transformed in a single year. But in case of long lived resources
like building and machinery they can be used over number of years.

Short and long run production function :

Production function which relates to factors and products , where some
resources are fixed (regardless of the number of fixed resources and the level
at which each is held fixed) can be termed as short run production function.

Long run production function :

Those input-output relations which permit variation in the input of all the
factors (none is fixed) can be termed as long-run-production functions.

Types of Forms of Production function (Mathematical Relationship)

The input output relationship or production function be expressed in a
tabular form or with the help of a diagram (geometric form) on in a
mathematical expressions. The various mathematical forms (types) of
production function are as below :

i) Linear production function Y = a+b X

ii) Quadrate production function y = a+b+x-Cx2
iii) Square root production function y = a+b √ x+c X
iv) Cobb-Douglas production function y=a X b 1 or
log Y = log n + b log X

Where Y = output, X = input, a = constant or the efficiency parameter

and b, b 1 c are parameters. In case of cob Douglas production function b is
the elasticity of production.
Slope of the Curve (Function)
It is defined as change in Y (vertical) distance of a curve divided by
change in X (horizontal i.e ∆ Y

The types of input-output relationship in the production of a commodity,
where one input is varied and the quantities of all others are fixed. The nature
of the relationship can be either of the one or a combination of following types.
i) Constant marginal returns function
ii) Increasing marginal returns function
iii) Decreasing marginal returns function

Total Product : (TP)

A given level of total product is always associated with a particular level
of input use with a given production function. It is the output received at given
all leel or input or input used. It is generally denoted by y.
Average Product (AP)
It is the ratio of the total product (TP) to the quantity of input used in
producing that amount of product. It is the total output divided by the total
input used or output per unit of input used.
AP = y where Y = output and X = Input
Marginal Product (MP)
Marginal product is given by addition to total output divided by addition
to total input. It is the additional product received per unit of additional input
used. It is the rate of change in total product at a given point as the quantity
of input changes.
It is denoted by the quation MP = ∆ Y

Relationships such as increasing returns, constant returns &

decreasing returns in case of total output production have been seen above.
Now two important physical returns or productivity relationships such as
Average and Marginal product and how total average and marginal products
are related to each other.

(a) TP and MP : Mp is the measure of rate of change.

i) TP and MP : MP is the measure of rate of charge.
ii) When TP attains maximum, MP will be more.
iii) When TP decreases, MP is negative.

iv) When MP increases TP increases at increasing rate.
v) When MP is greater than Zero and remains constant, TP
increases at constant rate.
vi) When MP increases, but is positive TP-increases at a
decreasing rate.
i) MP and AP : When MP is increasing and is above AP, AP also
increases. It means that as long as AP is increasing MP must be
greater than MP.
ii) What AP is decreasing, MP is always less than AP.
iii) When AP does not change with additional inputs used, the amount of
product added by marginal input is equal to Average Product.
i.e. MP = AP
iv) When AP is equal to MP, AP will be maximum
Thus, when MP > AP, AP is increasing
AP > MP, AP is decreasing
MP = AP = AP is maximum
Elasticity of Production
It refers to the percentage change in output in response to percentage
change in input.
It is denoted by a symbol
EP = ∆Y ∆Y
----- ------
Y ∆X
--------------- X -------------- = MP
∆x y AP
x x

i) EP in the first stage of production is greater than

ii) When MP curve intersects AP curve, MP=AP, AP is maximum and EP =
iii) In the second stage of production EP is greater than zero and less than
1 i.e. EP is between zero and one.
iv) At the point, when TP attains maximum MP is zero then EP = Zero
v) In the third stage of production, when TP declines, MP is negative, then
EP is negative or less than zero.

Factor – Factor Relationship
The relationship between a single input and ouput (other inputs
considered fixed) was a simple case of a production function analysis. In
actual practice number of inputs are used to produce a commodity. The
farmers are faced with a problem of deciding about the use of more than one
resource or choose best combination of resources or to substitute one
resource for another to find out a combination giving a least cost combination
to produce a given quantity of an output. For simplicity a possibility of
substituting one factor (x 1) for another factor (x 1) when product level (y)
remains constant. The aim of analysis of factor relationship is two fold. I)
Minimization of cost at a given level of output.
ii) Getting an optimum level of output with the help of fixed amounts factors by
taking their alternative combinations. Conceptually this factor relationship
does not differ from one with variable input. Each combination oft two inputs
produces a unique amount of output.

Chapter - 09


1. Agri Business Management - Smita Diwase

2. Agri Business Management - Dr. S. W. Bhave

3. Agri Business Management - Dr. S. S. Desai

4. Agri Business Management - A. C. Broadway

Arif A. Broadway

5. Agricultural Marketing in India - S. S. Acharya

N. L. Agarwal

Chapter – 10

1. Define Agri. Business state it’s scope & importance.

2. Discuss in details the role of Agriculture in Indian Economy.

3. Enlist the various problems & it’s solutions of Agriculture sector in


4. Explain the term ‘ Public Agencies’ in Agril. marketing & discuss in

details various public Agencies in Agril. marketing.

5. As a marketing manager of Agro. based Industry prepare a

marketing plan for marketing of jam, Pickles, Tomato Sauce.

6. Discuss in detail the marketing plan for marketing of fertilizers,

seeds, pesticides & tractors.

7. Define Agricultural credit state it’s scope & importance in

Agricultural sector

8. Discuss in details various agencies engaged in supplying finance to

Agricultural sector in India.

9. Explain in details the role of RBI in Agril. Credit.

10. Define Agricultural extension. State it’s objective & set up in our


11. Explain in detail the role of WTO & it’s impact on Agriculture sector

in India.

12. Define farm management & explain in details basic Economic

principles of farm management.

13. Define farming explain in details different types of farming.


I. Functionaries in Agril. Marketing

II. Classification of Agril. Markets

III. Defects in Agril. Marketing

IV. Co-operative Agril. Marketing


VI. Co-operative Credit

VII. Agro based industries

VIII. Price support policies

IX. Forward Institutional linkages to Agriculture.


XI. Relation between total, Average & marginal Products.

XII. Cost concepts cost A, B & C

XIII. Farm planning.

XIV. Farm Budgeting .

XV. Farm Records.

XVI. Farm Inventory.