Our first task was to identify a couple of emerging channels, i.e., channels that deviated in some innovative way from the regular channels that have existed commonly in agricultural marketing. This was easier said than done, as it was soon realized. Firstly, defining the boundaries of a traditional channel was itself a challenge for the coordinator when the investigating Centres reported on the range of actual chains that already operated in the different states. Secondly, it was more difficult to locate an emerging channel even by any specific definition. It is not surprising that the task has been far more difficult in cases where the State government has vacillated with reforms and especially where the APMC Act has not been amended.
Definitional aspects
The definition of what constituted the traditional channel and what made up the emerging channel could only be made in context of the situations prevailing in the states. Nevertheless, broad demarcations needed to be made to distinguish between the channels in the nation wide study.
52
The AERC Assam (Kakaty et. al., 2011) has defined the traditional channel as ‘one where a large number of intermediaries are involved and the share to the producer is comparatively low. As a result the supply chain in the traditional marketing system becomes long and completely dominated by traders who operate at high margins without much value addition’. Even under this umbrella definition, the channel can take varied forms with differing channel lengths. Emerging channels i.e., channels that differ from the traditional ones are even less uniform and present even more varied models.
More importantly, continual evolution of new marketing models to suit the indigenous conditions comes in the way of making sharp boundaries of definition. Acceptance of
‘non standard’ business practices and ‘organizational variety’ (Williamson, 1985) would be the more relevant spirit behind the definition of an emerging channel.
We have specified certain queries to be made when identifying emerging channels. Do they come with shortened chains than the traditional ones operating most commonly in the area? Do they necessarily involve private corporate entities such as large marketing companies? Do marketing services begin at the field level, relieving farmers of marketing cost? Are the prices decided by prior contracts or by open bargaining?
Assessing chains by these parameters is also not by any mean simple. Shortening the channel would reduce the number of middlemen and eliminate them in the extreme case (direct farmer-consumer marketing) but at the cost of efficiency gains (see Chapter 2, section 2.2) that comes from specialization and skill. Replacing innumerable traders with a single large and specialized marketing firm need not diminish farmers’ marketing cost and can depress producer prices on account of unequal bargaining power. Prices decided mutually in advance may deviate substantially from what could be potentially realizable by spot negotiation. Contracts for price determination are not entirely novel and pre-harvest contracts with traders are a common practice for horticultural products in India.
53
Unavoidably, the definitions had to be made broader. Admittedly, there is room for questioning whether all channels studied as ‘emerging’ are indeed emerging in terms of idea or history. Indeed the channels under study are far from homogeneous with varying structures and lengths and they do not necessarily bypass all the traditional intermediaries. However, these channels are not only shorter in length than the traditional ones that operate bringing the producer and the consumer one step closer, but sometimes they also create space for more resourceful and organized players to enter the channels. In all cases studied in this report the first and most important link in the chain, namely either the commission agent or the pre-harvest contractor is bypassed.
In each case, a sample of farmers selling in a traditional channel, familiar, long standing and usual in the same region is also selected as a control to facilitate assessment of the emerging channel against a contrasting case. Thus, the two channels differ in their history of existence and the lengths of the channels. The views and opinions of farmers and other agents like the traders, market committee members, buying companies in the channels and the customers in the consuming centres are also sought.
Reforms in agricultural marketing are yet nascent. Our decision about the regions to be sampled in states was constrained by the actual presence of the alternate routes of marketing that can be designated as emerging channels. In most cases, new channels if any are scarce, have just begun to evolve and are hard to locate, leaving little freedom for pre-selecting the regions. Admittedly, the presence of emerging channels dictated the choice of the region.
The regions selected for the presence of the new channels thus varied widely not only in character of the channels studied but with respect to socio-economic environments.
This makes comparison among different cases difficult. On the positive side, due to these limitations, the whole project ends up providing an entire landscape of how
54
different market channels with varying attributes emerge and function in different conditions prevailing in these regions. What appears as a fertile ground for one market channel may not be compatible for another.
Non-cereal food items like fruits, vegetables and non-traditional edible oils are popular choices of private enterprise driven marketing channels. These items are increasingly accommodated in the plates of the growing urban middle class milieu and are becoming common in the shelves of plush supermarkets. Many of these crops are gaining significance for their health benefits as learned from on going and recent research on nutrition. Cultivating such crops for the emerging market is viewed as the most potent way towards generating higher incomes for farmers in India. The emerging channels are also considered especially suitable for promoting crops that are known to be perishable.
Modern technology for increasing the durability and shelf-life of such products is crucial for their commercial success. For this reason this study has confined the choice of crops to those emerging in significance in India with particular preference for horticultural crops namely fruits and vegetables.