Recently, the Reserve Bank of India (RBI) released working papers inflation and Value Chains.
What is the agricultural value chain?
- It involves all people and activities that bring farm products such as maize, vegetable, or cotton to consumers.
- Key stages are –
- Input and production: In this stage, crops are produced.
- Processing: Raw products are cleaned and transformed.
- Packaging: Products are packaged.
- Distribution: Finished products are transported to markets.
- Example: Food manufacturer’s value chain
- Purchasing agricultural goods from farmers.
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Use of ICT in Value Chain
- ICT refers to information and communication technology.
- Its use in value chain can enhance efficiency and effectiveness of value chain.
- Key ways ICT is used
- Information sharing: ICT facilitates exchange of information among processors, farmers, distributors, and consumers.
- Market access: ICT helps to provide producers with access to broad market by connecting them directly with buyers.
- Education and Training: ICT provides a platform for online training and services to raise productivity.
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- Processing the goods in factories.
- Selling final products in the market.
Key Findings
- Middlemen Dominance: Middlemen and retailers captured a significant portion of the price paid by consumers for fruits and vegetables during times of high inflation.
- Disproportionate Profits: Farmers receive a relatively smaller share of the consumer rupee compared to the profits earned by intermediaries.
- Varying Shares: The share of farmers in the consumer rupee varies across different agricultural products.
- Higher Shares for Dairy, Poultry, and Pulses: Farmers’ shares were higher in the case of dairy, poultry, and pulses compared to fruits and vegetables.
| Fruits and Dairy Products Earnings |
Lower Share for Fruits: In the case of fruits like bananas, grapes, and mangoes, farmers earn a smaller share of the consumer rupee.
- Bananas: Farmers get about 31%.
- Grapes: Farmers receive around 35%.
Mangoes:
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Higher Share for Dairy and Poultry: Farmers earn a higher share in dairy and poultry sectors.
- Milk: 70% goes to farmers.
- Eggs: Farmers get 75%.
- Poultry meat:
Farmers and aggregators share 56%. |
| Vegetables and Pulses Earnings |
Lower Share for Vegetables: Farmers earn a modest share for key vegetables like tomatoes, onions, and potatoes.
- Tomatoes: 33% of the consumer rupee.
- Onions: 36%.
- Potatoes: 37%.
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Higher Share for Pulses: Farmers earn a larger share in pulses.
- Gram (chana): 75% goes to farmers.
- Moong: Farmers’ share is 70%.
- Tur: Farmers receive 65%.
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Implications
- Need for Reforms: The findings suggest a need for reforms to reduce the dominance of middlemen and improve the share of farmers in the value chain.
- Policy Interventions: Government policies can play a crucial role in promoting direct marketing, strengthening farmer cooperatives, and improving infrastructure to enhance farmers’ incomes.
- Consumer Awareness: Raising consumer awareness about the plight of farmers and encouraging them to support fair trade practices can also contribute to a more equitable distribution of profits.
October 5, 2024
