co-operative mktg soc and reguilated markets

8/22/2019 Co-Operative MKTG Soc and Reguilated Markets

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Charanya AroraB.B.A. Semester V For educational purposes only

Marketing Institutions and

Government Intervention

Unit 6: Marketing Agencies, Co-Operative Marketing agencies, Buying

and Selling activity


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Agricultural Marketing Institutions

In addition to individuals, corporate, co-operatives andgovernment institutions are operating in the field of agriculturalmarketing State Trading Corporation (STC) The Food Corporation of India The National Agricultural Co-operative Marketing Federation

(NAFED) Cotton Corporation of India (CCI) Jute Corporation of India (JCI) National Dairy Development Board (NDDB) National Oil seeds and Vegetable Oils Development (NOVOD)

Board Tobacco Board Agriculture Processed food Products Export Development Agency The Directorate of Marketing and Inspection, Govt. of India, State

level Agricultural Marketing Departments and AgriculturalMarketing Board.

State and Low level co-operative marketing societies, fair priceshops, Consumers Co-operative stores, milk union etc


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Regulated Market

Regulated markets are those in which business is done inaccordance with the rules and regulations framed by thestatutory market organization, which represents differentsections involved in markets

The marketing costs in such markets are standardized and

practices are regulated It is not compulsory for the farmer to sell his produce in the

regulated market yard

Instead voluntary action on the part of the farmers to takeadvantage of such a market is assumed

It acts as an alternative marketing system

The basic philosophy of the establishment of regulatedmarket is elimination of malpractices in the system andassignment of dominating power to farmers or theirrepresentatives in the functioning of markets.


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Objectives of Regulated Markets

To prevent the exploitation of farmers byovercoming the handicaps in the marketing oftheir products

To make the marketing systems most effective

and efficient so that farmers may get betterprices for :their products and goods are madeavailable to consumers at reasonable prices

To provide incentive prices to farmers for a betterproduction programme both in quantitative andqualitative terms

To promote orderly marketing of agriculturalproduce by improving the infrastructure facilities


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Features of a Regulated Market

Methods of Sale: Either open auction or by the closed tendermethod is followed

Weighing of Produce: It is done by licensed weigh-man withstandard weights and platform scale

Grading of Produce: The produce is sold only after grading, butonly 13 percent of regulated markets have grading facilities

Market News Service: Arrangements are made for proper andcorrect dissemination of market prices through various mediasuch as loud speakers and notice boards

Market Charges: The buyers of agricultural produce pay themarket charges

Payment of the Value without deduction: The buyers should makeprompt payments for the produce

Licensing of Market Functionaries Supervision: The officials of the market committee supervise the

day-to-day functioning of regulated markets i.e.. the Secretary,auction clerks and other staff. The administrative decisions aretaken by the nominated/ elected market committee


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Features of a Regulated Market

The market committee consists of representatives of allsections: farmers, traders, co-operative marketingsocieties, co-operative or commercial banks, autonomousbodies (Panchayat Samithi and Municipal Board of the area)and government officials

The number of farmer members is more than that of otherinterest groups

The sources of funds to market committee for meetingadministrative expenditure, to create additional facilities inthe market area are market fee, license fee/renewal feeand subsidy from the government

Disputes arising between producer- seller and traders byreason of the quality of the produce: a sub- committee ofthe market committee solves this. Avoids legalcomplications and unnecessary expenditure


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State Agricultural Marketing Boards

They were established to supervise and provide guidance tomarket committees

Main Functions

To carry out the training of officers and staff, create

facilities for grading and standardization, constructmarket road and approach roads to the markets,construct market yard and sub- yard, establish andmaintain the Board office and others as specified

To tender advice to the government on the functioning

of market committee and on improvement in agriculturalmarketing as and when referred to, and

To frame byelaws, help in the functioning of marketcommittees and supervise their operations


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Council of State Agricultural MarketingBoards (COSAMB)

The COSAMB, an apex body of the StateMarketing Boards was established in February1988

The need for such a body was felt to co-ordinatethe activities of State Marketing Boards,especially those connected with creditmobilization, central assistance for marketdevelopment and some common problems


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Co-Operative Markets

The efforts of the government to improve the marketingsystem of agricultural commodities have been only partiallysuccessful

The progress of regulated markets is not uniform in allareas

So the establishment of co-operative marketing societies isanother step taken to overcome the problems arising out ofthe present system of marketing agricultural produce

A cooperative sales association is a voluntary businessorganization established by its member patrons to market

farm products collectively for their direct benefit It is governed by democratic principles, and savings are

apportioned among members on the basis of theirpatronage


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Functions of Co-Operative MarketingSocieties

To market the produce of the members of the society at fair prices To safeguard the members from excessive marketing costs and

malpractices To make credit facilities available to the members against the security of

the produce brought for sale To make arrangements for the scientific storage of the member's produce To provide the facilities of grading and market information which may help

them to get a good price for their produce To introduce the system of pooling so as to acquire a better bargaining

power than the individual members having a small quantity of produce formarketing purposes

To arrange for the export of the produce of the members so that they mayget better returns

To act as an agent of the government for the procurement of food grains

and for the implementation of the price support policies To make arrangement for the transport of the produce of the members

from the villages to the market on collective basis and bring out areduction in the cost of transportation. .

To arrange for the supply of inputs required by the farmers such asimproved seeds, fertilizers, insecticides and pesticides


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Types of Cooperative MarketingSocieties

On the basis of the commodities dealtcooperative marketing societies may be groupedas

i) Single commodity marketing societies e.g. Sugar

cane Cooperative Marketing Society, CottonCooperative Marketing Society, Milk CooperativeMarketing Society

ii) Multi -commodity cooperative marketing societies

iii) Multi-purpose, Multi- commodity cooperativemarketing societies


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Structure of Cooperative MarketingSocieties

Two Tier Structure

State Level Marketing Federation

Three Tier Structure

State Level Marketing Federation

Primary co-operative marketing

Societies (TalukLevel)

District Marketing Societies

Primary co-operative marketing

Societies (TalukLevel)


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Membership in Cooperative MarketingSocieties

There are two types of members in co-operativemarketing societies

Ordinary Members: Individual Farmers, Co-operative farming societies and service societies of

the area may become the ordinary members of theco-operative marketing society. They have theright to participate in deliberations of the societyshare in profits and participate in decision-makingprocess

Nominated members: Traders with whom thesociety establishes business dealings are enrolledas nominated members, Nominated members donot have the right to participate in decision-makingand share in profits


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Sources of Finance

Share Capital : Farmer members and state governmentsubscribe to the share capital of the marketing societies.

Loans: The societies can avail loans from the Central andState cooperative banks and Commercial banks by pledgingand hypothecation and also by advancing credit to theextent of 50 percent of owned capital

Subsidy: Societies get subsidy from the government forpurchase of grading machines and transport vehicles tomeet their initial heavy expenditure. They also get asubsidy for a part of the cost of the managerial staff for aperiod of 3 years to make them viable


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The produce marketed through these societies account for8 to 10 percent of the marketed surplus

The progress of marketing societies varied from state tostate and within each state from commodity to commodity

Foodgrain, cotton, sugar cane, oil seeds, fruits, vegetablesand plantation crops were important commodities marketedin these societies

Maharashtra, U.P, Gujarat, Punjab, Karnataka, Tamil Naduand Haryana together account for more than 80 percent of

the total agricultural produce marketed throughcooperatives in the country

Over 70,000 retail outlets of these societies deal inagricultural inputs


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Reasons for Slow Progress of Co-operative Marketing Societies

Farmers do not make use of cooperative societies since they aresituated at distant taluklevels, fanners need cash after harvest tomeet personal obligations and also they are indebted to localmoneylenders

In some cases rivalries among fanner members result inindecision, which retards the progress of societies

Societies do not provide facilities of food and shelter to farmerswhen they visit the market for the sale of the produce Managers of societies do not offer business advice to farmers, and

they often get linked with local traders and become impersonal tothe needs of the majority of small and marginal farmers

Lack of funds with societies to meet the credit needs of thefarmers against pledging of the produce brought for sale. They

also do not have storage facilities They are not capable of carrying on their business in competition

with traders and commission agents because of absence ofadequate business expertise among their employees


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Forward Trading / Future Trading

Forward Trading is a device for protection against the pricefluctuations, which normally arise in the course of themarketing of commodities. Stockists, processors ormanufacturers utilize the futures or contracts to transferthe price risk faced by them

Speculation involves purchase or sale of a commodity at

the present price with the object of sale or purchase atfuture date at a favourable price. Speculator is concernedwith profit making from price movements. He purchaseswhen prices are low, so he is not a normal or regulartrader. The difference in the prices prevailing at two timesconstitutes his profit. Speculator may lose in this process

too Hedging refers to the purchase or sale of a commodity in a

futures market accompanied by a sale or purchase in thecash market


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Charanya AroraB.B.A. Semester V

Risk Taking/ Risk Bearing

Risk is uncertainty about cost, loss or damage

Risk is inherent in all marketing transactions

The longer the lag between production and

consumption, the greater the risk Risk cannot be dispensed with as risk constitutes

the basis of profit

Most of the risk is borne by market middlemen,

who have the capacity to bear it When risks are greater and varied, the margin

taken by the risk-bearers is higher

For educational purposes only


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Types of Risk

Physical Risk: Loss is quality and quantity of the product.Probable causes of risk may be fire, flood, earthquakes,rodents, pests, fungus, careless handling and unscientificstorage, looting, arson etc. Physical risk accounts for alarge part of the loss of the produce on the individual and

macro level

Price Risk: This means the risk that arises due tofluctuating prices

Institutional Risk: This refers to the risk that arises from achange in the governments policy, tariffs and tax laws,movement restrictions, statutory price controls and theimposition of levies



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Minimization of Risks

Reduction in physical loss

Use of fire-proof material in storage structures

Use of improved storage structures and giving necessarypre-storage treatment to the product to prevent losses

in quality and quantity Use of better and quicker transportation methods and

proper handling during transit

Use of proper packing material

Transfer of risk to insurance companies

Minimization of price risk Fixing price range

Disseminating accurate price information

Advertising

Operation of speculation and hedging



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Speculation

Speculation involves purchase or sale of a commodity atthe present price with the object of sale or purchase atfuture date at a favourable price

He purchases when prices are low, so he is not a normal orregular trader

The difference in the prices prevailing at two timesconstitutes his profit

Speculating essentials

Enters the trade at current prices

Transactions of speculators are completed on some future date

Speculator is concerned with profit making from pricemovements

Physical delivery is not taken or given

Speculators are not in the business of the product

Types: Speculation proper and Illegitimate Speculation



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Economic Benefits of Speculation

Dampens price fluctuations: sum total ofspeculative activity dampens price fluctuations

Price differentials are bridged to an extent

Adjustment of supply and demand at normalprices



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Some related terms

Spot/ cash transactions

Futures transactions

Contract


co-operative mktg soc and reguilated markets

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