Choice determinants and comparative evaluation of agri-output marketing channels – A farmers’ perspective

Abstract

Agricultural marketing, regulated by the state APMC Acts of 1960s for over four decades, was found wanting in expanding services, securing better returns to farmers, and ensuring low prices of farm commodities to consumers. Reforms were introduced in the sector to encourage competition to APMCs, reduce intermediaries in supply chains, spur development of marketing infrastructure and raise efficiency. These objectives were envisaged to be achieved largely through measures such as creation of marketplace alternatives to APMCs, contract farming, e-trading of agricultural produce, state-wide single licensing and single point levy of tax. In this exploratory study, we focus on the impact of reform measures in terms of creation of alternative marketplace choices, and effect on transaction costs and market efficiency due to e-trading initiatives. Previous studies in agricultural marketing explored different issues ranging from policy to market participant relations. Quite often, different dimensions of a marketing system can overlap and have mutually influential effects. Hence we adopted a systems perspective to examine components of marketing system to draw insights from a farmers’ perspective. This research was carried out in Karnataka, one of the foremost states to have amended its APMC Act to facilitate various reform measures, including e-trading, which was implemented through the Unified Market Platform initiative. First, we verified if farmers had more choices of marketplaces besides the APMC. Factors determining farmers’ choice of marketplace were identified. Next, we compared transaction costs and farmer-trader relations in a regular APMC with those in an electronically linked APMC (e-APMC). Finally, we tried to gauge farmers’ expectations of elements of marketplace designs. Relevant econometric and statistical analytical methods were used for each of the research questions. Although we did not find marketplaces such as private market yards or direct marketing initiatives in the surveyed areas, two marketplaces emerged as dominant options – APMC and farm gate. Choice of marketplace was largely determined by perishability of produce and services offered by buyers. We did not find any significant reduction in transaction costs, improvement in efficiency, or greater price-net-of-transaction-costs in the e-APMC compared to regular APMC. There were also no major changes in farmer-trader relations that were attributable to the electronic intervention. Exploratory factor analysis indicated a complex interplay of social and commercial variables that defined farmer-trader relations. Marketplace design preference indicated an inclination for warehousing and assaying infrastructure, besides willingness to pay for such facilities. However, these findings, particularly on marketing channel alternatives to APMCs and e-trading, are indicative and not conclusive due to the fact that various processes and related to e-trading are still unfolding and the system is not yet stabilized. Synthesizing our findings with the extant knowledge on e-markets, we foresee the potential of e-markets to change the face of Indian farming community, and hence recommend enhancing awareness about reform measures, and providing visible benefit to farmers, such as better infrastructure, for ensuring success of electronic trading platform.