Efficient and competitive markets

contribute to rural growth and poverty

reduction
Diversify income and employment opportunities—
trading, value-addition, exports
Raise farmer income potential
Enhance food security-- reduce food cost and
supply uncertainties
Improve diets of consumers—greater variety of
food items, fresh and processed
! "# # $
%
Policy Reforms: increased market deregulation
Lifting of movement and storage controls, repeal of Cold Storage
Act, removal of ag commodities from SSI, ban on futures
contracts and export cess, amendment of Milk and Milk Products
Order, Food Safety and Standards Act, model APMC Act
Reduced Taxation
State adoption of VAT, reduction/removal of CET on processed
agric products
Increased private investments, facilitated by:
Investment incentives: investment grants schemes
Increased public investments in rural infrastructure
State adoption of model APMC Act/waiver
of some restrictions
 &# '
(
Critical market infrastructure and services gaps
increase marketing costs
e.g. market facilities/services, road connectivity, market
information, grades and standards, food safety & SPS capacity
Multiplicity of government agencies and programs
how to build greater synergies, focus on public goods
Unfinished policy reform agenda
state adoption of model APMC Act, Warehousing Bill, SSI
reservation
 % )
%
100
TN
Wholesale Markets, %

80
OR
60
MH
40
UP
20

0
s ed o ps ard le s) ks
) ge ge se rea
o y c c a ra u a
nc
l
d sh kt eh
i
(Tru Drai
n
S to eho ing
e r e n m ll v g d a r ry
a e di (a kin ol W D
t are c ov
ro a n g ar C
arke t has cca a rki P
M ke p u P
r d /
Ma ave
P
Source: World Bank agricultural marketing survey 2005.
 C
os Percent of Enterprises
C
os Percent of Traders
+
A t
A to
ff
c c of
cc es f in
es in
s a s a

0
10
20
30
40
50
nc t o nc
to

0
10
20
30
40
50

i R fi n in g
fi n n g oa
an an
d

45
ci ci
45

ng co
E ng
le nd
ct R
(

i ti

39
R ri
A
44

oa on
o a ci ty
d
cc d s
es bl
bl o

33
s
,
39

C oc
to E ck
or k s
ru sh le c

33
pt
C
38

o p tr i
ri io
U n / s c i ty
nf m e to
/ ra

30
ai
38

E
r p th e C ge
co r a ft or
n Ac ct r

28
ic E C upt
32

p o ce es co U r im io
l i c ss
y/ t n nf e n
/T

28
un o la p o ai
h
31

ce n d lic r p e
rt y r a c ft
Te ai un t
le nt 27 M
30

co y ce i ce
m Ta ac rt s
m xa ro ai
26
27

u n ti in nt
M ic on Te s y
ac at ta
ro io le bi
25
24

Tr in ns co l it
ad st m Ta y
e ab m x
i
24

re Li un a t
24

g u l ity ce ic ion
R la ns at
oa ti o W io
24

Li d
22

ns or e & ns
*$

ce co ke
ns nd pe
es rs rm
22

W i ti
o k
21

La
or & b o i ll s i ts
pe n
ke
rm r /e
20

rs Tr re du
18

La ki i ts ad g u c.
ll s
bo
r /e e la
re t i
20

re du
17

gu c gu on
s
la la
ti o ti o
19
17

ns ns
17
15
 % -#

1. Informal barriers appear to exist to trader

entry
Physical limitation—full capacity reached
Market registration requirements
e.g. Maharashtra/Tamil Nadu requires references
from about 5 current traders in market
2. Blurring division of functions:
commission agents and traders
 . /
% 0
Maharashtra Uttar Pradesh Orissa Tamil Nadu
Wholesale market Grain F&V Grain F&V Grain F&V Grain F&V
Farmers Requesting, %
Closer market 17 19 27 35 60 55 70 70
Reduced fees 41 41 50 47 13 13 13 15
Improved transportation 20 48 49 16 48 47 46 30
Improved facilities 64 66 32 36 8 7 27 27
Cold storage 17 15 20 17 64 61 7 7
More honest traders 37 35 58 55 11 13 27 25
Less theft 11 10 37 31 0 0 3 5
Be allowed to sell /sell more often 9 10 10 23 3 8 6 19
1 / -
$
Growth of supermarkets/food processing
with more coordinated supply chains
Will small farmers be excluded?
Meeting volume requirements
Lack of technical know-how to meet stringent
quality standards
Limited bargaining power--negotiating contracts
SPS Challenges in Exports
Tightening international public and private
SPS standards
Export rejections/temporary bans/price discounts
Food safety concerns: Pesticide residues (F&V, spices); illegal
colorants (spices), salmonella (fish products); antibiotic residues
(eggs)
Improper labeling, damage to packaging

Crisis management vs pro-active strategy

High cost of compliance
Grapes to EU: Public and private costs estimated at $1.9 milion/year
(about 11% of FOB values), grape exports 2004/05 = 0.5% of ag exports
+ 2 + % # 3
Filling market infrastructure/service gaps
With state adoption of APMC Act—potential for market
development and management (including through PPPs)
Collective Action and Self-regulation
Awareness building and advocacy (e.g. Avian flu, AMPC rules
international trade diplomacy)
Adopt codes of practice (e.g. trading practices, food safety)
Partnering with farmers to supermarkets/modern supply
chains (e.g. India, Kenya, Thailand, China)
Facilitate organization of producer groups
Establish collection centers
Training of farmers on good agricultural practices, grades and
standards, food safety, contract farming responsibilities
Facilitating farmer access to inputs, credit, crop insurance
2 + % #
#+#( 3
Collective action and self-regulation
Awareness raising and capacity building among
members, advocacy in trade diplomacy
Development and adoption of industry codes of
practice
Investing in “Good” Management Practices
Implement GAP, GHP, GMP, HACCP
Gain formal certification
Provide training, advisory and conformity
assessment services through supply chain
+
!
Continuing deregulation of marketing
Warehousing Bill, trade controls, SSI reservation, tax
reform
Rationalize the roles and activities of large
number of government agencies involved in
agricultural marketing development
May need formal mechanism for
coordination/rationalize functions
Monitoring and evaluation of programs.
+ !
Review and rationalize public expenditures:
Rationalize large number of private sector
investment grant schemes
Consolidate schemes
Over medium term, targeting of support and formulate
“sunset” provisions
Increase focus on financing public goods and
services
e.g. markets, rural roads, electricity, market information
and extension, food safety
SPS issues: Awareness/capacity building, risk assessment
and management, international trade diplomacy
+ #
Adoption of model APMC Act
Ensure APMC rules are not barriers to entry
Formulating a state agricultural marketing
development strategy
Assessment of progress made and foster coordination
among agencies
Set priorities for market infrastructure investments: build
synergies with private sector initiatives
E.g. village vs wholesale vs terminal markets vs other mechanisms (agri-
marts, food parks, AEZ, etc), taking account of private marketing initiatives
Explore PPPs
Complementary investments: agric extension, road connectivity, electricity (
links to MoA extension, PMGSY, Bharat Nirman)
+ #
Institutional reforms
Shift in role of Mandi Board to regulator and facilitator (vs operator) to
remove conflict of interest
Subcontracting of market management to private sector, privatization
in longer term
Improve financial management (e.g. mandatory audit of accounts)
and invest revenues on market improvement
Linking farmers to the market
Support of market oriented extension for new commodities,
grades and standards, food safety and SPS standards
Improving farmers bargaining power
Fostering formal and informal associations
Strengthening access to market information/market intelligence (PPPs)
Awareness building on contract farming/negotiations
(
Improved market efficiency and
competitiveness critical to promoting
rural growth and to reducing poverty in
rural areas

Making this a reality requires

commitment of the government and
private sector