National Conference on Emerging Platforms for Agriculture Marketing
September 20-21, 2007, New Delhi

Speech of Shri Sharad Pawar, Union Minister of Agriculture & Consumer Affairs, Food and Public Distribution

Shri Habil Khorakiwala, President of FICCI, Shri P.M. Sinha, Chairman of FICCI's Agriculture and Rural Development Committee, Shri P.H. Ravi Kumar, MD and CEO of NCDEX, Dr. Amit Mitra, Secretary General of FICCI, distinguished Experts and Resource Persons, Representatives of State Governments, other Delegates at the Conference and Friends

I am delighted to be here with you this morning. I congratulate FICCI for taking this very significant and timely initiative by bringing together leading minds from all over the country to discuss and debate an important subject like agricultural marketing, an issue that is vital for the future of agriculture in our country. Agricultural marketing is the key to a better living for farmers, as India is one of the largest producers of several agri-commodities. Yet, the Indian farmer, very often, is unable to go beyond the subsistence level, as he is not able to effectively market his produce.

In the last couple of years, the Ministry of Agriculture has initiated several policies and programmes to increase crop production in the country, improve farm income and achieve targeted growth of 4% in the agriculture sector. Steps have been taken to increase public sector investment in agriculture and also to improve institutional credit flow to this sector which has almost increased by 62% over the last two years. The launch of the National Horticulture Mission, Micro-Irrigation Scheme and the National Bamboo Mission are some of the highly significant programmes launched during the recent past to encourage crop diversification and stimulate growth in hitherto untapped areas of agriculture.

The Government of India has recently launched two major Schemes, viz. the National Food Security Mission for Rice, Wheat and Pulses and additional Central assistance to the States through the National Agriculture Development Programme. It is also planned to cover all the remaining districts of the country also under the ATMA Programme to revamp our agriculture extension system and to ensure that technology adoption and improvement in productivity takes place all over.

Based on the Draft National Policy recommended by the National Commission on Farmers headed by Dr. M.S. Swaminathan, the Central Government has formulated the first ever National Policy for Farmers 2007. The new Policy aims at achieving several important goals including the improvement of economic viability of farming by substantially improving the net income of farmers. It aims to provide appropriate price policy and trade policy mechanisms to enhance farmers' income. It further aims to introduce measures which can help to attract and retain youth in farming and processing of farm products for higher value addition by making it both intellectually stimulating and economically rewarding.

These initiatives are definitely going to help farmers in increasing productivity and agricultural production alongwith diversification to high value crops. We have already seen a significant growth in sugarcane, cotton and foodgrains production over the last two years. The production in horticulture sector is expected to be doubled by the end of the XI Plan period. This growth in agricultural production would definitely throw up new challenges of finding suitable market for the surplus. As it is, our farmers get only a minor share of the final price paid by the consumers due to a long value chain. We need to shorten these long value chains and encourage their vertical integration and consolidation for ensuring a remunerative price to our farmers.

Unfortunately, the infrastructural facilities in our regulated markets has remained very inadequate and even the availability of these markets is quite limited in several States. Farmers have to travel long distances to avail the market facilities which increases transaction costs. Therefore, most of the farmers remain confined to selling their produce in rural primary markets or through the commission agents at throw away prices. Over time, regulated markets have acquired the status of restrictive and monopolistic markets. They provide no help in direct and free marketing, organized retailing, and smooth raw material supplies to agro-processing, competitive trading, information exchange and adoption of innovative marketing systems and technologies.

Today, more than anything else, the Agriculture sector needs well functioning markets to drive growth, employment and economic prosperity in rural areas of the country. In order to provide dynamism and efficiency into the marketing system, large investments are required for the development of post harvest and cold chain infrastructure nearer to the farmers' field. A major portion of this investment is expected from the private sector, for which an appropriate regulatory and policy environment is necessary. Alongside, enabling policies need to be put in place to encourage procurement of agricultural commodities directly from farmers' field and to establish effective linkage between the farm production and retail chain & food processing industries.

While providing a Model Agricultural Marketing Law for guidance to the States in 2003, the Central Government had requested the State Governments to suitably amend their respective Agricultural Produce Marketing Committee (APMC) Acts for deregulation of marketing system in the country. This is mainly to promote investment in marketing infrastructure, motivate corporate sector to undertake direct marketing and to facilitate a national integrated market. By now, 18 States & UTs have amended their APMC Acts and Bihar has repealed the Act. Seven other States & UTs do not have any APMC Act. We expect that the remaining States would complete these amendments by March, 2008. A set of Draft Model APMC Rules prepared by the Ministry have also been circulated to the States and other stakeholders for their comments. A final draft is likely to be made available to them very soon so as to facilitate implementation of reforms.

Agricultural marketing, specially that of the perishables, is a key driver for achieving higher growth in agriculture. Market-driven production is the order of the day and an efficient and seamless supply chain management has become a necessity for us. To fulfill these objectives in potential areas, Government of India has recently initiated the process of setting up terminal markets under a Central Sector Scheme. The hub-and spoke model of Modern Terminal Market including electronic auctioning system and state-of-the-art infrastructure facilities coupled with operational efficiency through synergy between the best of the private and public sector practices in planned to be implemented through the State Government. The establishment of Modern Terminal Market complexes would ensure both backward and forward linkages.

The availability of prompt and reliable market information about what is happening in the market for different commodities can considerably improve the decision making capability of the farmers and strengthen their bargaining power. In this regard, newly proposed Electronic Sport Markets could provide a viable alternative to the existing practice of the mandi system.

New marketing links between agri-businesses, large retailers and farmers are required to be developed urgently. Contract farming is a major initiative in this area that is fast changing the face of traditional agriculture. Pricing arrangements through contract farming can significantly reduce the risk and uncertainty of market place and at the same time it can empower farmers with technology and provide them better market access. Emergence of organized retailing in recent years has led to demand for quality produce and thereby private investment in supply chain infrastructure is getting a boost. Modern food retailing will lower marketing costs and lead to lower prices for consumers and higher realization for farmers. We need to be sensitive in this regard and we have to address concerns being expressed about the impact of contract farming and organized retail chains for rural India and the small farmers.

Today, we need to closely look at alternative models for marketing which can assist farmers in better price discovery. We also need to analyze as to the marketing infrastructure development programmes are performing and how this development can be catalyzed in public-private partnership mode. Efforts are required to be made to further strengthen infrastructure for warehousing, grading and packaging. There is a great deal of urgency for expediting various regulatory changes, introduction of options and exotic products like weather derivatives and indices and implementation of Negotiable Warehouse Receipt System. Strengthening of our domestic marketing system should be in such a way that it must help us in responding to the challenges and opportunities that the global markets offer in the liberalized trade regime.

Friends, I believe that this National Conference has been organized at a very opportune time, as the transition is fast taking place in the country in this sector and a debate is already on relating to the impact of various changes taking place. Clarity of thoughts and a clear strategy has to emerge from such deliberations to make everyone aware about the strengths and weaknesses of various emerging marketing systems and a clear roadmap is needed to be drawn up. The structure of this Conference promises a lot of valuable outcomes in this context and I shall be eagerly looking forward to the proceedings of the same.

I wish all success to this National Conference on Emerging Platforms for Agriculture Marketing.

Thank you.