Directorate of Economics and Statistics, Department of Agriculture and Cooperation, Ministry of Agriculture and Farmers Welfare, Government of India, New Delhi
Punjab Agricultural University, Ludhiana,India
 Sponsored by
Directorate of Economics and Statistics, Department of Agriculture and Cooperation, Ministry of Agriculture and Farmers Welfare, Government of India, New Delhi
Research Content
Relationship Between Wholesale Price, Retail Prices, Export Prices (FOB), Prices Realized by Farmers and Details of Contributing Factors For the Price Difference for Basmati Rice in Punjab

           The nature of markets of agricultural commodities and imperfections in these markets influence the price transmission and the final consumer prices. Changes in domestic and global fundamentals, poor market intelligence, poor infrastructure facilities, large number of intermediaries, lack of awareness about quality standards etc. are the main causes for market related risks. In this context, it is important to study the farm level crop profitability along with the analysis of price relationships in movement of these commodities from farm gate to the retail level. The present study is an attempt to analyze the behaviour of prices of basmati rice, both over years as well as across the selected markets along with enquiry into the relationship among farm harvest prices, wholesale prices, retail prices and export prices. The specific objectives of the study were (i) To study the cost structure and profitability of basmati cultivation in state, (ii) to study the relationship between movements in market prices at important markets and (iii) to study the divergence among farm harvest prices, wholesale prices, retail prices and export prices and the relationship between these movements. The study has been based on both primary as well as secondary data. The reference period for the study was 2013-14. The average operational farm size and cropping intensity on sample farms in state was 4.82 ha and 194 per cent respectively. Wheat and basmati were major crops on all the farm size categories and on average accounted for 44.77 and 32.00 per cent of the gross cropped area. On overall sample farms Pusa Basmati 1121 was the most dominating variety of basmati which accounted for nearly 90 per cent of the total area under basmati crop. The average per farm basmati production on overall farms was 123.54 quintals. The marketed surplus of basmati accounted for 97.73 per cent of total basmati production on sample farms and it increased both in absolute as well as proportionate terms with the increase in farm size. The variable cost of cultivation of overall basmati (all varieties) on the sample farms including cost involving the post harvest operations of basmati paddy was Rs. 30256 per ha. In overall variable input cost of basmati cultivation, the major share was contributed by labour cost to the tune of about 50 per cent followed by the machine cost at about 19 per cent. The other cost components like expenses on pesticides/weedicides and fertilizers and manures accounted for about 14 and 13 per cent of the variable input cost respectively. Post harvest/marketing cost on overall sample farms was Rs 1325 per ha and among various components, unloading and cleaning accounted for the major proportion of it followed by transportation cost, kind payments and marketing losses. Per ha gross returns and returns over variable cost (ROVC) on overall sample farms were Rs 164658 and Rs 134402 respectively. About 96 per cent of the sample farmers had disposed of their basmati output through regulated markets. While 3.23 per cent of overall farmers had sold in the village market there were only of about half per cent of the total farmers who sold their produce through other channel (particularly directly to processor). It was observed that sample farmers had sold 82.43 per cent of their marketed surplus during the crop harvesting period consisting months of October and November. Rice millers were the major source of supply for wholesalers and exporters where as retailers had mainly sourced their supply from the wholesalers. The decomposition of time series data of basmati paddy prices revealed the presence of considerable seasonality in study markets and prices remained relatively low during harvesting period. Movement of de-seasonalied prices around trend line exhibits the presence of oscillatory movements pointing towards existence of the cyclical patterns in basmati paddy prices during the past years. Price linkages of different Punjab markets evaluated through correlation coefficients revealed that basmati paddy markets in state were well integrated. In domestic wholesale and retail trade the percentage mark-up turned out to be 4.42 and 11.90 per cent respectively. In domestic market the farmer’s net price accounted for about 68 - 73 per cent of the consumer’s purchase price for different basmati varieties. Among intermediaries in domestic market, net margin of rice miller, wholesaler and retailer for different basmati varieties accounted for 4.31-8.06, 3.40-3.43 and 8.40-9.47 per cent of the consumer’s rupee. Export is the major channel for basmati marketing as nearly 85 per cent of the head rice of basmati is being exported, primarily to the gulf countries. The exporter’s average percentage mark-up was 10.76 per cent. Farmer’s share in export price was 77.47 to 79.52 per cent. The net margin of miller and exporter accounted for 4.34 - 4.86 per cent and 5.01- 5.92 percent of export price respectively. According to farmer’s perceptions, the marketing related problems in basmati cultivation viz. price volatility, lack of remunerative price, lack of MSP/Government procurement, lack of market information and collusion among traders were the major problems being faced by them. Major problems of wholesalers were regarding the competition from other wholesalers, poor road network and problem of high marketing charges/taxes. The major problems perceived by sample retailers were competition from large organized retail chains, competition from other retailers and the poor infrastructure. Infrastructure related problems, problem of chemical residue and uncertainty of government export policy were perceived as high and severe problems by the basmati exporters. Basmati cultivation is important from ecological as well as farm incomes point of view, thus both State as well as Central Governments should frame a policy to save farmers from price fluctuations through ensuring some minimum income support to its cultivators. Wider coverage to collecting and dissemination of agricultural market intelligence/information may help the farmers in making adequate marketing decisions. To ensure good price of farmer’s output, there is need to encourage the farmers to opt for storage through creation of efficient storage structures at farm level and realize higher prices during the lean period. The production related problems need to be handled through improvement in the knowledge of farmers regarding new techniques and technologies. Improvement in road and other infrastructure in markets can solve the problems being faced by different market intermediaries. The problem of chemical residue on account of heavy use of insecticides and fungicides in basmati cultivation needs immediate intension to address the quality concerns in exports.