ANALYSING INDIAN FOOD SUPPLY CHAIN: Modern system

Modern system of food supply chain comprises of public sector led and private sector led initiatives.

Public sector led food supply chain

Public sector initiative, Food Corporation of India (FCI) came up with the system of parastatals for proper food procurement and distribution. These parastatals are responsible to ensure access to basic staples for weaker section of society. Also government came up with the targeted public distribution system to ensure food item distribution at highly subsidized rate for BPL consumer. Another public sector initiative in this direction is cooperatives. The body plays an important role in processing and marketing agriculture products. But research evidencenindicates that there are limited numbers of successful and sustainable cooperatives outside the dairy sector, “AMUL”. The reason for the same is considered to be the private business.

Private sector led food supply chain:

The growth of food and groceries sales led by modern retailers in India is mammoth. The share in 2001 was around USD 140 Mn and in 2008 it grew up to USD 5.8 Bn.

In this growth, large investors like Reliance and ITC as private players played an important role as far as supply chain efficiency is concerned. The mechanism, by which these firms work, is by setting up of collection centers where traditional markets are bypassed. In this system farmers will gain, as transaction costs are reduced as collection centers are setup near to producers.

Also elimination of auction and zero waiting time for buyers results in faster turnaround. The system is supported by reliable weighing, fair and transparent pricing and immediate payments. This facilitates to overcome some of the coordination failure in traditional markets.

That ultimately economies on transaction cost.

But, as we have already discussed, the issues associated with the amendment to the APMC Act has created several problems for these private but efficient players.

To overcome several issues associated with the system and to promote healthy competition, government, either state or central, on regular basis comes up with agriculture marketing policy reforms.

The latest initiative in this direction is the introduction of National APMC of India Limited, an e-market initiative of the Gujarat Government, registered under the Companies Act as a public limited company.

National APMC will establish an electronic and transparent platform for spot trading of farm produce. This will assist in enhancing market efficiency and providing alternate channels of marketing to farmers and reducing the cost of intermediation for consumers. The farmer will be able to realize higher price by selling graded produce (rather than ungraded produce), have access to a large number of buyers nationwide and be able to avoid distress sales by getting loans from banks on warehouse receipts. Whereas benefits to consumers like industries, processors, packers, wholesalers, other bulk consumers and retailers will be procurement of graded produce directly from the mandis. In the process, multiple handling and wastage would be avoided. This will help consumers to procure better quality produce at lower prices at locations of their choice.

And as far as benefit to Economy is concerned, e-trading will result in development and expansion of facilities for scientific warehousing, cold storages, cold chains, custom packing and transportation for quality preservation of commodities traded through APMCs. Transactions through the exchange will bring about transparency in the trading of agriculture products.