Fruit and Vegetable Marketing and its Efficiency in India: A Study of Wholesale Markets in the Ahmedabad Area

Abstract

There has been concern in the recent years regarding the efficiency of marketing of fruits and vegetables in India. It is believed that poor efficiency in the marketing channels and poor marketing infrastructure is leading not only to high and fluctuating consumer prices, but also to only a small proportion of the consumer rupee reaching the farmers. The paper examines regulated wholesale markets for fruits and vegetables in the Ahmedabad city area, a large city of 4.5 million in western India. The markets were established to facilitate and improve the marketing efficiency. The paper studies their infrastructure, operation and status, and the value chain - from farmer to wholesaler to retailer to consumer. A variety of facilities and services are provided at the three regulated wholesale markets studied. The ratings by farmers, commission agents and retailers indicates that location is the most important, followed by go-down facility, yard maintenance, weighing, price display, and banking facilities. Analysis of the data on the system of sale followed indicates that use of open auction as a system of market transaction is very limited and most of the exchanges take place through secret bidding or simple transactions. Significant marketing efficiency losses may be taking place due to this. Analysis of marketing costs indicates that on an average they hover around 8 per cent of the consumer price for vegetables and around 11 to 15 per cent for fruits. Among different cost components, transport cost and commission are the most important. Analysis of prices at different levels indicates that overall the average share of the farmers in the consumer price is only around 48 per cent for vegetables and 37 per cent for fruits. A study of the profit margin after accounting for explicit marketing costs shows that the margin is frequently as high as 80 to 90 percent as a percentage of the farmer-consumer price difference. This may indicate significant imperfections and poor marketing efficiency. The study indicates that the regulated wholesale markets can help in improving the efficiency by measures such as increasing the direct contact with the farmers, increasing the number of buyers and sellers in the market, promoting the use of open auction at the market, and improving/ adding facilities and services such as go-down, cold storage, weighing, and transparency and access to internal and external market information.