Agriculture Supply Chain Management : A Scenario In India

Agriculture Supply Chain Management: A Scenario in India Somashekhar I C Research scholar Institute of Management Studies Davanagere University Tholahunase, Davanagere Dr.J.K.Raju Associate Professor Institute of Management Studies Davanagere University Dr.HemaPatil Associate Professor Department of MBA Visvesvaraya Technological University Post-Graduation Centre Mysore-29 Abstract Agricultural commodities produced have to undergo a series of operations such as harvesting, threshing, winnowing, bagging, transportation, storage, processing and exchange before they reach the market, and as evident from several studies across the country, there are considerable losses in crop output at all these stages. A recent estimate by the Ministry of Food and Civil Supplies, Government of India, puts the total preventable post-harvest losses of food grains at 10 per cent of the total production or about 20 million Mt, which is equivalent to the total food grains produced in Australia annually. In a country where 20 per cent of the population is undernourished, post-harvest losses of 20 million Mt annually is a substantial avoidable waste. According to a World Bank study (1999), post-harvest losses of food grains in India are 7-10 per cent of the total production from farm to market level and 4-5 per cent at market and distribution levels. These losses would be enough to feed about 70-100 million people, i.e. about 1/3rd of India’s poor or the entire population of the states of the Bihar and Haryana together for about one year. Thus, it is evident that the post-harvest losses have impact at both the micro and macro levels of the economy. This article critically reviews the scenario of agriculture supply chain management in India by throwing a light on role of agriculture supply chain management, Agri food supply chain management, Agriculture marketing in India, market place for agriculture products, APMC, contract farming and private sector initiatives. Key words: Agriculture, Agriculture supply chain management, Agrifood Market. Introduction India with its predominant rural base is considered as one of the world’s oldest and largest agrarian country. Despite of LPG and modernization, still India in its day-today activities dependent on agricultural base. Every aspect of the economy, polity, and majority of its population are governed by the performance of the agricultural sector. Agriculture continuous to be the key sector of the Indian Economy, and contributes about 14.5 % of the GDP. It is known through surveys that almost twothirds of the population in India are connected with agriculture for their source of income. Almost 54% of employment is created through agriculture either directly or indirectly. The performance of agricultural sector during the past three decades has been with a growth rate of 2.59 percent per annum. www.theinternationaljournal.org > RJSSM: Volume: 04, Number: 07, November 2014 Page 89 Agriculture is an important sector of Indian economy as it contributes about 17% to the total GDP and provides employment to over 60% of the population. Indian agriculture has registered impressive growth over last few decades. The food grain production has increased from 51 million tonnes (MT) in 1950-51 to 250 MT during 2011-12 highest ever since independence. Agriculture plays a vital role in the world economy. However, the production of most agricultural products is affected by a lot of factors, such as the weather changes, seeds quality, culture methods, market availability, government policies, technology, coordination and role played among the supply chain members. The situation is made further complicated by the fact that there is a long lead time in the production of agricultural product. It means that it is impossible to adjust the production plan when the environment changes. Amidst all the problem, the rapid growth has helped Indian agriculture mark its presence at global level. India stands among top three in terms of production of various agricultural commodities like paddy, wheat, pulses, groundnut, rapeseeds, fruits, vegetables, sugarcane, tea, jute, cotton, tobacco leaves, etc (GOI, 2008-09)[17]. However, on marketing front, Indian agriculture is still facing the problems such as low degree of market integration and connectivity, accessibility of reliable and timely information required by farmers on various issues in agriculture. Supply Chain Management The real measure of supply chain success is how well activities are coordinated across thesupply chain to create value for consumers, along with increasing the profitability of every link in the supply chain. Supply-chain management (SCM) is ‘the management of the entire set of production, distribution, and marketing processes by which a consumer is supplied with a desired product’[13]. Supply chain management is the integrated process of producing value for the end user or ultimate consumer. SCM is a philosophy for integrating all the activities in the life of a product or a service from the earliest source of raw materials to the ultimate customer, and beyond to disposal[12]. During the 1990’s, the global competitive environment shifted towards a horizontal or virtually integrated industry structure involving close interaction among suppliers, manufacturers, and customers. A supply chain is “an integrated process wherein anumber of various business entities work together in an effort to acquire raw materials, convert these raw materials into specified final products and deliver these specified finalproducts to retailers”.The supply chain comprises the production and supply of materials and parts, and its serves both the manufacturing logistics chain and distribution logistics chain [3]. Network of organisations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer [9]. The supply chain companies are transferring towards intricate, cooperative worth networks where the partners work and research together on solving problem, encouraging inter-firm studying and also allocation of risks and profits is done. The firms that reflect these kinds of values of accomplishment and gained benefits have used their supply chains as a competitive weapon are like Zara, Dell, Procter and Gamble and Toyota.[28] Supply chain management aims at building trust, exchanging information on market needs, developing new products, and reducing the supplier base to a particular OEM (original equipment manufacturer) so as to release management resources for developing meaningful, long term relationship[5]. Supply chain management encompasses materials/supply management from the supply of basic raw materials to final product (and possible recycling and re-use). Supply chain management focuses on how firms utilise their suppliers' processes, technology and capability to enhance competitive advantage. It is a management philosophy that extends traditional intra-enterprise activities by bringing trading partners together with the common goal of optimisation and efficiency[29]. The well-known “move to the middle hypothesis” posits that firms will enter into a set of stable relationships with few suppliers [10]. An interesting question that arises is the role of the intermediary in the redefined supply chain. Intuitive reasoning suggests that the introduction of an online platform should lead to disintermediation by directly connecting buyers and planters. The intermediary plays a prominent role. This is consistent with recent in integrated supply chain that points to a new and redefined role of the intermediary in electronic supply chains [8] . www.theinternationaljournal.org > RJSSM: Volume: 04, Number: 07, November 2014 Page 90 Hajjdiab and Taleb describe about the development of agile software to make supply chain more responsive and more traceable[16]. Bechini et al. emphasize on using the IT tools and web services in collaborative practices to make the supply chain more traceable[4]. Laosirihongthong et al. [18], Schuster et al. [27], Gaukler [15], Brintrup et al. [6], and Myerson [21] describe about using and implementing RFID in supply chain to increase its visibility and traceability of inventory in the entire supply chain to enhance the collaborative practices. A key point in supply chain management is that the entire process must be viewed as one system. Any inefficiencies incurred across the supply chain (suppliers, manufacturing plants, warehouses, customers, etc.) must be assessed to determine the true capabilities of the process. While ideally supply chain management emphasizes “total” integration of all the business entities within supply chain, a practical approach is to be consider only strategic suppliers and customers since most supply chains are too complex to achieve full integration of all the supply chain members. Agri Business The concept of agribusiness started gaining academic and professional acceptability ever since Goldberg and Davis first defined the term in 1957. They viewed it as ‘the sum total of all operations involved in the manufacture and distribution of farm supplies; production operations on the farm; and the storage, processing and distribution of farm commodities and the items made from them.’ This definition established agriculture as an industry that goes far beyond simply growing crops and raising animals [25]. Agriculture-based activities remain the mainstay of developing economies in spite of their constant industrialization and tertiarisation over past four decades. Recent trends in globalization and integration of international consumer market offer further opportunities for development of agribusiness and food industry across the World which would also benefit developing countries, provided they could suitably manage their resources to tap the emerging opportunities. However, the prospective opportunities are also likely to be accompanied by several challenges. Role of agriculture and agriculture-based enterprises gains further importance in view of the fact that large portion of population in countries is directly or indirectly dependent on agriculture for their livelihood. Moreover, such economies have comparative advantage in agriculture-based industrialization. Thus, agribusiness-led growth has good potential to contribute in sustained economic development of these countries. Agriculture Supply Chain Management During the 1990s, academic and commercial interest in supply-chain management (SCM) in agribusiness rose in Europe and the USA. The driving forces included the trend towards consolidation of organisations (at farm input, farms, processor and supermarket levels), along with government deregulation of agribusiness markets. Interest was also rising in quality-management systems and food safety, and competition in markets was increasing, associated with global trade in agribusiness products. Production and marketing arrangements are responding to changing demand, driven by urbanization and diet change. Government-sponsored schemes in horticulture have mixed results, generating more jobs than cereal production. Beyond direct government interventions, new forms of contractual and sharecropping relationships are emerging between private dealers and farmers (Priyadeshingkar)[24]. Agro-industry also generates new demand on the farm sector for more and different agricultural output, which are more suitable for processing. [30] SCM implies managing the relationships between the businesses responsible for the efficient production and supply of agribusiness products from farm level to consumers, to reliably meet consumers’ requirements in terms of quantity, quality and price. Meeting customers’ requirements involves integrated management of the transactions and relationships between firms as well as processes within firms. Managing these relationships provides an opportunity for overtly negotiating the shares between chain members of the value produced within the chain. More importantly, joint planning of collaborative strategies is possible, to grow the shared value. The latter contrasts with the www.theinternationaljournal.org > RJSSM: Volume: 04, Number: 07, November 2014 Page 91 usual conflict between agribusiness suppliers and buyers about their relative shares of the value generated. Participants in volatile agricultural supply chain could only effectively manage and mitigate risk if a detailed identification and descriptions of their root causes are known. In spite of a high farm output, the status of agriculture in India looks bleak offering more questions than answers. The answer to a lot of these questions lies in the ineffective supply chain that leads to the transport of the produce from the farm to the end consumer. The supply chains of different agricultural commodities in India, however, are fraughtwith challenges stemming from the inherent problems of the agriculture sector. The agrisupply chain system of the country is determined by different sartorial issues like dominance of small/ marginal farmers, fragmented supply chains, absence of scale economies, low level of processing/value addition, inadequacy of marketing infrastructure etc. Agriculture plays a vital role in the world economy. However, the production of most agricultural products is affected by a lot of external factors, such as the weather changes, seeds quality, and culture methods, which are not in full control by the supply chain members. The situation is further complicated by the fact that there is a long lead time in the production of agricultural product. It means that it is impossible to adjust the production plan when the environment changes. For the agricultural product producers, they lack the market information and are not certain of the final output when going into production. They are more blindfold to choose what to produce and how much to produce, especially in the uncertain environment. Then oversupply and shortage of the agricultural product are quite popular in the agricultural product market, which reduce the profit of the supply chain and hurt the enthusiasms of the supply chain members. How to reduce the effects of the fluctuations and share the risks facing the supply chain members is an important topic in the supply chain management. Coordinating supply chain has been a major issue in supply chain management research. Supply chain contracts are contractual agreements governing the pricing and exchange of goods or services between independent members in a supply chain. Properly designed supply contracts are an effective means to share the demand and supply risk and better coordinate the decentralized supply chain. It is widely recognized that the supplier and retailer can both benefit from coordination and thereby improve the overall performance of the supply chain as a whole. Many well-known contract forms such as buy-back, revenue-sharing, quantity flexibility, sales rebate, two-part tariff, and quantity discount have shown to coordinate the supply chain. To understand the roadmap and importance of supply chain management in Agriculture sector, the study carried with major 5 sections. Section I discussed about supply chain management, section II on agriculture supply chain management, section III on Agrifood supply chain management, section IV about Agriculture marketing in India and section V deals with market place for agriculture products discusses the role of APMC, contract farming, private sector initiatives and information services. Agri -food Supply Chain Management While agriculture sector in India contributes one fourth of country’s GDP and provides employment to approximately two thirds of the population, today the Food Processing Industry alone accounts for 6% of the GDP. The quantity of processed food produced in the country is under 1.6% while in countries such as Thailand, Malaysia and Brazil it is 65-75%. The agri supply chains in India and their management are now evolving to respond tothe new marketing realities thrown by the wave of globalisation and other internal changes like rise in the level of disposable income of consumers, change in the food basket of the consumers towards high value products like fruits, vegetables and animal protein. The new challenges of the agricultural economy of the country have now spurred the government agencies to go in for different legal reforms for enabling and inviting private investment in agricultural marketing infrastructure, removing different entry barriers to promote coordinated supply chain and traceability. With liberalization of trade in the post-WTO regime, India has the opportunity to export agricultural and food products to the world. Over the last decade food processing has grown at a rate of 7.1% p.a. [23] www.theinternationaljournal.org > RJSSM: Volume: 04, Number: 07, November 2014 Page 92 The food supply chain in India is highly fragmented. The number of intermediaries in the chain is exceedingly high. These intermediaries are important because they act as a substitute for infrastructure where none exists. But over the years a layer of intermediaries has grown most of which add little value to the produce but collectively they add significantly to the final cost. India accounts for 10% of the world fruit production (Food and Agricultural Organization of the United Nations, 2008). Agribusiness, supply chain management (SCM) implies managing the relationships between the businesses responsible for the efficient production and supply of products from the farm level to the consumers to meet consumers’ requirements reliably in terms of quantity, quality and price. In practice, this often includes the management of both horizontal and vertical alliances and the relationships and processes between firms. In the traditional business model; wholesalers are intermediaries and a predominant link in the retail vegetable logistical chain. In general, all the retailers are inevitably dependent on the local wholesales market. The major constraints are poor transport facilities, non-availability of large scale cold storage, no clean policy guidelines from government and fragmented and small farmers. The fruits and vegetables farming for processing is not only employment intensive, but also enhance the gross as well as net returns of the farmers [1,26,31]. Changes in the macro environment were occurring parallel to the changes at consumer level. These included a trend towards consolidation of organisations (at farm input, farm, processor and supermarket levels), principally to drive down the costs of production through economies of scale, but also to gain market share and competitive strength in an increasingly global market place. Preparing for global trade also led to deregulation of agribusiness markets by government withdrawal from marketing in several countries. This created the opportunity to rethink the business strategy, and create new supply chain relationships. Traditional supply chains in developing countries typically involve many players, and are tightly linked with long-standing social structures. As developing countries enter into World Trade Organization arrangements their agricultural industries will be subject to increasing competition in their domestic markets, and have greater incentives to meet global standards in export markets. SCM provides one approach to planning the improvements needed in the management of their agricultural production and marketing systems to meet future challenges.(Elizabeth)[14]. OECD-FAO estimates suggest that with world population touching 9 billion by 2050, agricultural production will need to increase by 60 per cent over the next 40 years to meet the rising demand for food. Additional one billion tonnes of cereals and 200 million tonnes of meat a year has to be produced by the year 2050 as compared with 2005–07 levels.[22] Traditional agricultural and food businesses that had focused strongly on price were not equipped to respond to a widening range of consumer demands. Individually, they lacked the means to deliver effective consumer response. Each represented only part of the processes involved in production of an agribusiness product and its subsequent transport, processing and retailing to the consumer. Existing supply chains are long and are dominated by a number of intermediaries like assemblers, wholesalers, sub-wholesalers, commission agents and retailers. In the case of fruits and vegetables, farmers receive one-third to one-half of the final price (Gandhi and Namboodiri, 2002), indicating high marketing costs and margins (Birthal et al. 2005)[6] have estimated the marketing costs to be around 20 per cent of the sale price of vegetables. Marketing costs are also high in the case of milk, 15-20 per cent (Birthal et al. 2005; 2006)[6]. High marketing and transaction costs act as a barrier to farmers ‘participation in markets. Institutions such as cooperatives, growers ‘associations and contract farming are considered to reduce marketing and transaction costs and risks by providing markets’ to the farmers at their doorsteps (Eaton and Shepherd, 2001). Lowe and Preckel characterize the agri-food supply chain as the ones with the long lead times and misalignment and uncertainty between their demand and supply [20]. India's food supply chain leads to massive wastage and inefficiencies with 30% of India's vegetable and fruit produce being wasted. The inadequate supply chain leads to periodic shortages of food items used by Indian part of the daily diet. The main difference between the two different kinds of supply chains in this is, the number of www.theinternationaljournal.org > RJSSM: Volume: 04, Number: 07, November 2014 Page 93 intermediates in the traditional supply chain is high and thus the amount of wastage is high and transaction cost is also high in traditional supply chain. The main problem in this supply chain is the transaction cost is too high due to more number of intermediaries in the value chain. Only 30-35% of the end price reaches to the fruit growers and other part goes to the different intermediaries. Since supply chain is long and scattered, wastage of fruit and vegetables is around 10-12% of the total quantity which increases the possibility of cost rise for the consumers. The traditional retailing of vegetables are not much organized, about 97% of the total market is extremely localized and highly fragmented with large number of intermediaries. The long transport process from the growers to the final consumer occurs the wastage of 10-12% of total in addition to the transportation cost. Agriculture Marketing in India India is predominantly an agricultural country. Owing to its diverse agro climatic condition various crops are produced across the year. These produce in the process of marketing change hands from producer to consumer. The process of marketing also involves services such as grading, standardization, packing, transport and storage. Indian agriculture is dominated by smallholders; about 86 per cent farm households have landholding size of less than 2 hectares. It is often argued that smallholders are constrained by lack of capital, inputs, technology and services, and access to markets, which may act as a barrier to their diversification towards high value agriculture. Smallholders though make a sizable contribution to food production; their access to markets is constrained by scale. Their marketable surplus is small, while local markets commodities are thin and sale in distant urban markets raises transportation and marketing costs. Poor efficiency in the marketing channels and inadequate marketing infrastructure are believed to be the cause of not only high and fluctuating consumer prices, but also too little of the consumer rupee reaching the farmer. Indian farmers typically depend heavily on middlemen particularly in fruits and vegetable marketing. The producers and the consumers often get a poor deal and the middlemen control the market, but do not add much value. There is also massive wastage, deterioration in quality as well as frequent mismatch between demand and supply both spatially and over time. Several changes in the operating environment of the food and agribusiness sectors contributed to rising interest in SCM. In turn, it became clear to food suppliers that market success depended on responsiveness to consumer demands. Satisfying the consumer demands can be achieved only by integrated management of the supply chain from farm to retail shelf. Many food-industry experiences demonstrate that effective, cooperative relationships between members of a supply chain can contribute to improving the efficiency of the chain, enhancing both innovation and competitiveness. The present supply chain that connects the farmers to both the organized, as well as the unorganized retail, is highly inefficient with several intermediaries and manual handling. The result is lots of wastages as much as nearly 30% and also less remuneration for the farmers. There is no supply chain integrator or channel master for the Indian retail channels. The survey is conduct by KPMG, substances the above statements. The Indian retail cannot be competitive until the supply chain is made integrated, efficient and customer centric. Market place for Agriculture Products The amended APMR Act, the major agricultural Marketing Act of the country, beingimplemented by the different states of India, now contains enabling provisions to promote contract farming, direct marketing and setting up of private markets (hitherto banned). These measures will go a long way towards providing economies of scale to the small firms in establishing direct linkage between farmers, and processors/ exporters/ retailers, etc. Thus, the measure will provide both backward and forward linkages to evolve integrated supply chains for different agri produce in the country. Agriculture markets in India are regulated through the model APMC Acts. The number ofregulated (secondary) agricultural markets stood at 7,157 as of March 2010 as compared tojust 286 in 1950. There are also about 22,221 rural periodical markets, about 15 per cent ofwhich function under the ambit of APMC regulation. According to recommendations by National Farmers Commission, availability of Markets should be within 5 km radius (approx. 80 sq km). www.theinternationaljournal.org > RJSSM: Volume: 04, Number: 07, November 2014 Page 94 In the constitution of India, Agriculture marketing is a state subject thus each state has separate laws under APMC act for regulated market yard called mandi or APMC market. Entire Geographical area is divided into ―Market Area‖ wherein Markets are managed by Mandi committee and governed by APMC Act. Out of the total 7310 wholesale markets in the country, 7161 are covered under APMC Regulation. Organized agricultural marketing is promoted through such network of Regulated Markets through APMC Act. Farmers are required to bring their produce to APMC market yard for sale. Under the APMC systems, markets are designed to be regionalized and fragmented, which is against the basics of a structured market place. These market yards are required to have adequate infrastructure to enable farmers traders to store, grade and test the goods on quality parameters. But these infrastructures are missing in most of the markets and farmers rarely get any services. As per rule in APMC market, commodity brought by farmers for sale should be kept open on auction floor where buyers in presence of APMC officials and commission agents bid price and highest bidder are entitled to purchase. But, in reality whatever price offered by buyers has to be agreed by the farmers as he cannot afford to take back the commodity in absence of storage facilities, as it involves cost and time. Agricultural markets in India, in particular the supply chain management and business models, are inefficient. In India, farmers’ produce is generally disposed of in the village, rural/primary market or secondary agricultural market. The challenges facing supply-chain management and agribusiness in India can be broadly classified into three, namely, 1) lack of accessibility to regulated markets, 2) lack of competition under the Agricultural Produce Market Committee (APMC) Act, and 3) absence of a nationwide common agriculture market. These are challenges that run across the various channels through which the supply-chain and agribusiness models operate. These channels are (i) Producer-Consumer, (ii) Producer-RetailerConsumer, (iii) Producer-Wholesaler-Retailer-Consumer, (iv) Producer-Commission agentWholesaler-Retailer-Consumer and (v) Producer-Village Merchant-Wholesaler-Retailer-Consumer. Regulated markets do not provide any other option to the producer to sell produce. Current mandi system has multiple intermediaries and high value loss. Till few years SCM of Agricultural Commodities through NSEL back, private players were not authorized to set up a Market. APMC regulation prevented companies from directly sourcing from farmers. APMC laws were created to ensure good prices for the farmers through open auction system, but on the contrary, it has created monopolistic scenario, as described below: Only Government can create APMCs, private mandis were not allowed. Only APMC licensed Traders can buy from farmers, other traders or corporate houses cannot buy from the farmers directly. There is need to create a national level electronic transparent spot market, which can lead to development of structured mechanism for marketing of agriculture produce. Efficient marketing and fair price to farmers has always been concern of government. In an effort to improve the marketing services and leverage the technology, Government recommended model APMC Act to all the states and suggested amendments in the existing Acts. Model APMC Act has provision of electronic market place and private market yards that was not available in absence of the provision. Some states have amended the Act and have made the provision of electronic spot exchange and private market in addition to existing APMC market. Model APMC Act is yet to be implemented in all the states. Some states adopted it partially. States, where model APMC Act has been implemented with the provisions for setting up of E-Market and private market, have granted license to electronic commodity spot exchange. NSEL is a unique, noble and innovative concept that has potential to impact agribusiness enterprises who procure the commodities from market through various intermediaries on one hand. On the other hand, it has the potential to change the lives of millions of farmers by providing them better price for their produce. The very concept of the electronic spot market is to reduce the cost of intermediation, to help the buyers to reduce the cost of procurement and offer incentives to the farmers in terms of higher price. NSEL provides electronic trading platform. It also facilitates collateral financing and borrowing against warehouse receipts by having institutional formal tie up with various financial institutions, so www.theinternationaljournal.org > RJSSM: Volume: 04, Number: 07, November 2014 Page 95 that farmers, buyers or owner of the commodity could avail low cost formal credit smoothly. All the major aspects of supply chain management of agri based commodities are integrated through electronic commodity spot exchange, thus benefiting the enterprises in terms of cost saving, better planning and procurement strategy and availability of credit against the inventory. The improved supply chain management developed by NSEL provides social values in terms of connecting even the smallest farmers with national market. This is the most efficient supply chain, which enables even the marginal farmer to access the national level market. Contract Farming Contract farming is one of the most significant and powerful means by which farmers are integrated into national and inter- national commodity markets and agro-industrial markets. The nature and structure of contract farming systems vary widely from country to country, but a fundamental element is the vertical concentration of producers in which the states attempt to supervise and condition the production patterns of farmers [19].One streamof the literature related to the research is on fresh agricultural product supply chain. Samuel et al. [2] examined contract practices between suppliers and retailers in the agricultural seed industry.Wang and Chen introduced the options contracts into the fresh produce supply chain andtook the huge circulation wastages both from quantity and quality into account[17]. Cai et al. considered a supply chain in which a fresh-product producer supplies the product to a distant market, via a specialized third-party logistics (3PL) provider, where a distributor purchases and sells it to end customers[32]. In India, contract farming is also fast developing. One instant is the Kuppam project initiated in 1997 by an Indian Corporation (M/S BHC Agro) with support from the Govt. of Andhra Pradesh. Export crops such as potatoes, gherkins and chillies are grown using expensive imported Israeli technologies for dry land farming. The land is leased from small and medium farmers, who are offered work as labourers on the consolidated holding managed by the company [7]. Contract farming is popular across the country and corporate are forging alliances with state governments for contract farming. For instance HLL’s joint venture project with the Madhya Pradesh government to grow wheat. The project was started few years ago to cultivate wheat in 250 acres. The area has now been increased to almost 15,000 acres. It is the aggressive policies of some state governments that are encouraging private sector investment in contract farming. States like Punjab and Uttar Pradesh are amending the rules to promote contract farming. Uttar Pradesh government has recently amended the Agriculture Produce Marketing Committees’ (APMC) rule what said that the entire farm produce has to be kept with mandis. Because of this amendment, corporate can now directly procure goods from farmers. Punjab has also amended a similar rule. Private Sector Initiatives Contract farming The Government of India’s National Agriculture Policy envisages that private sector participation will be promoted through contract farming and land leasing arrangements to allow accelerated technology transfer, capital inflow and assured market for crop production, especially for oilseeds, cotton and horticultural crops. There are several initiatives under this scheme. Over here we mention two of them. Hindustan Lever Ltd (HLL), Rallis and ICICI formed an alliance with the farmers. Under this alliance, Rallis supplies agri-inputs and know-how, and ICICI finances (farm credit) the farmers. HLL, the processing company, which requires the farm produce as raw material for its food processing industry, provides the buy- back arrangement for the farm output. In this arrangement, farmers benefit through the assured market for their produce in addition to timely, adequate and quality input supply including free technical know-how; HLL benefits through supplychain efficiency; while Rallis and ICICI benefit through assured clientele for their products and services. Launching its agro-business in India with special focus on export of value-added processed foods, Pepsi Foods Ltd. (PepsiCo hereafter) entered India in 1989 by installing ₹ 22 Crore state-of-theart tomato processing plant at Zahura in Hoshiarpur dis- trict of Punjab. The PepsiCo model of contract farming, measured in terms of new options for farmers, productivity increases, and the introduction of modern technology, has been an unparalleled success. The company focused on developing region and desired produce-specific research, and extensive extension services. It was thus www.theinternationaljournal.org > RJSSM: Volume: 04, Number: 07, November 2014 Page 96 successful in bringing about a drastic change in Punjab farmers production system towards its objective of ensuring supply of right produce at the right time in required quantities to its processing plant [contract farming ventures 2003] Findings Through the review it is found that, the agricultural marketing sector is characterized by fragmented supply chain, huge postharvest losses, multiple market intermediaries; higher transaction cost, lack of awareness and several other socio-economic factors are some of the acute problems being faced by the Indian agriculture. As the government initiation is in understanding the importance of farmers, Agri produce, measures to control the wastage of agri food products, arranging facility to store the produce, establish channels and market to reach the ultimate consumer by efficient utilization of supply chain strategies are acting as back bone to agriculture sector. Conclusion From the review of literature it can be concluded that, strengthening the following aspects develops a better model of agriculture supply chain management which helps in solving the food problem of the country indeed the world.  Information is crucial to efficient agricultural markets. The availability of accurate price and other market information helps to reduce risks and transaction costs and enables market participants to plan and coordinate more effectively their production and trading activities. Although market information has public good elements, most of the efforts to develop public sector market information systems have failed, as most systems have lacked commercial utility and have been unsustainable.  Benefits of well-coordinated supply chains derive from stable markets that can result in greater profitability and employment. Supply chain coordination can:  Provide access to new market outlets and thus increase producers’ ability to match production and demand.  Provide access for producers and small-scale enterprises to information on technology, financing, and market requirements for qualities and quantities.  Better control product quality and safety through tracking, tracing, and certification.  Share risks among chain partners, especially for large investments.  Reduce lead-time and losses of perishable products through joint planning and coordination of supply.  Provide a means to pool production and thus develop economies of scale.  Increase employment from enhanced participation in value-adding activities. (www.worldbank.org/agsourcebook May 2006 Agriculture Investment Sourcebook) References 1. B. K. Dileep, R. K. Grover, and K. N. Rai, ”Contract Farming in Tomato: An Economic Analysis,” Indian Journal of Agricultural Economics, 57(2):197- 210, (April-June 2002). 2. B. Samuel, C. J. 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