Yes, there are opportunities within the Green Revolution. But only for the middlemen that is. What was at one time the backbone of our country – is now slowly turning out to be the knife at the nape of an urban consumer. Yes, vegetables; I mean just look at the way the staples cost these days in our cities!
And does anyone realize the helplessness of the stakeholders against the tight grip of the middlemen who do nothing but simply carry the rural products from villages to our cities?
Here are some startling numbers revealing the impact that – yes you guessed it right – the middlemen make in between the rural & urban markets of India.
Margins of over 300% at almost every step only prove the ailing nature of logistical infrastructure in our country. But wait a minute! Is this the silver lining for those who are interested in starting off the rural landscape? Aren’t there people who are interested in creating a value driven distribution system using technology, sense and perseverance to strike that perfect connection between the two markets? And help us lower the cost of the vegetables?
It’d not be out of place to mention here that every time there is an imbalance in a system, there is an uprising which leads to a final betterment of the ecosystem. Sometimes even dangerously. In the instant case, a great example for investors, entrepreneurs and ‘ruralists’ to follow is that of Amul. We need similar networking ( or even bigger ) to disentangle our staples from the state-owned networks of stale minds.
Using technology, internet and every other cost effective measure to lower or even eliminate the middlemen in the process will serve our country good. And profit too. In fact I did some rough calculations myself:
Only brinjals (Eggplant) can serve one a profit of Rs. 22 per kg but for an efficient distribution system. That is when one does not lower the cost of brinjals sold in the market. And our farmers produce approximately 8.2 million tonnes of brinjals every year. One vegetable, one surprise.
My personal opinion is that the government is not in a position to (rather will not want to) solve this. The failed (or rather suppressed) beginnings of Reliance Fresh, Spencers and Subiksha only show the edge of blade held by the legacy system. I would further this, by adding that only the underdogs (read startup-like people) with little visibility have some chance in cleaning up the mess. Or if one could bring Mr. Kurien on board to leave the milk behind and play with veggies this time.
What say eh 
?
Photo Credit: Tehelka
ya definitely here is the opportunity for underdogs. some have recognized this and are seizing the idea…Kaushlendra IIMA 2007 batch topper is having more than 150 vegetable carts. He has a vision to make Bihar vegetable hub of the country. His carts have computerized vending machine and he also uses different technologies. we need more like him. More visionaries to see opportunities.
Thanx Pluggd.in for covering articles related to rural India.
TamilNadu government introduced something called “Farmers Market” where farmers can directly come and sell their goods… Alas the government ultimately lost the battle with the THUGS (middle men).
The middle men rule … U can’t touch this –
I am afraid, that’s true Kasi…But instinctively I feel that the internet can kick anyone’s ass. Now how this would work, i have no clue.
Can’t believe the huge profit margin. I thought that the heavy rains is the reason for price rise, but the scenario looks very different. I agree that internet can play a big role. But when major companies entered the retail market, they also suggested of directly purchasing vegetables from farmers, there was a huge cry. But do we have any statistics related to that
Instead of loan waivers, it makes sense if Govt. makes news markets and warehouses for the farmers.
Loan waivers r only immediate solutions to avoid suicides, while creating a market and warehousing network is a long term process.
Excellent article. Kudos to pluggd.in!
Very good article. Eliminating middle man is not easy in India. Most of the big guys failed. ITC chaupal tried some different model and succeded to certain extent. Do not forget about these retailers. There is not much pricing difference between prices at Super Market and small retailers. They do not make much while wholesalers make more money. Successful model should include these retailers rather than killing him.
Recently I read that some university in TN is trying to provide latest info about prices in nearby markets to farmer over SMS. Farmers can decide where to go based on this information. Good idea about empowering farmers with information.
Thanks for an excellent article.
But I disagree with a few points made. The middlemen don’t “simply carry the rural products from villages to our cities”. They undertake real costs in transportation, warehousing & distribution. Perhaps,more importantly, they possess knowledge to find markets. Remember that cities alone do not constitute markets.
In light of the above facts, would it be prudent an small entrepreneur to take a dive? Maybe so. But I tend to agree with Pravin who instead proposes to empower farmers rather than middlemen.
Either way, it’d be monumental mistake to let the government trample upon this matter.
@naresh
Your right when you say they take real costs in transportation, warehousing & distribution. But would it add to so much as 28 rupees per kg for an goods worth 2 rupees per kg? I have doubts on that.
Secondly, possessing knowledge about the markets. That’s where enterprising galloping begins. Does it sound so Bond 007 type of knowledge? I’d disagree on that too.
Empowerment of farmers might occur through a comprehensive mobile networking solution to find bulk buyers within say 12/24 hours of “Ready for Pick up” service that would instantly “tweet” the bulk hulks sitting away on the information hubs.
Your idea of empowerment is good but it take time time to happen. First step might be sending SMSes only. Rural things does not change in fortnight. Inertia is more in rural market than urban one. Once it starts picking up it just explodes.
Build better roads, the markets would come closer, the middlemen would reduce, the prices will drop. This is the only real place where the government can shine.
And while knowledge about the markets may not require you to be genius, it’s not trivial either. Farmers don’t go the last mile ‘cos they are unsure and uninformed. Do correct me if I’m wrong.
As an afterthought, the real opportunity perhaps lies in commercially publishing real-time prices (borrowing from Ashu below) and for banks wishing to finance enterprising farmers willing to go the distance.
Advocating more middlemen, however tech-savvy they may be, just sounds like a superfluous.
That’s where probably internet/mobinet might help? publishing the information…
middlemen ! , this function could even be carried out by a govt body under the supervision of IEG / agriculture ministry etc .
The govt in any case has vendors managing far more dynamic application , how expensive can this be. Infrastructure wise we have the flexibility of the internet and 3G shall be up soon.
@arvind i think we agree. but this cannot be done by the government but individuals only
@ashu the government being the middleman doesn’t make them less evil.
Dear Arvind,
Its truly encouraging that this generation also remembers Dr. Vergese Kurien, who created White Revolution & made India the largest milk producer in the World from a situation where on one hand the country’s children where deprived of basic nutrition in form of milk & the nation was a net importer of milk and on the other hand, the milk producers of the country were provided pittance for their produce (as is the case today with vegetable farmers!!).
Certainly, what has been done by Dr. Kurien in milk can also be done in case of Fruits & Vegetables. He even started a Fruits & Vegetables cooperative concept while at the helm of National Dairy Development Board but after his exit, the project is gathering dust due to indifference of current management of the Board. Further, this revolution can not be done by middlemen in search of profit & market capitalisation (read Reliance, ITC, etc.). We dont need too brilliant people but those people who are ready to sacrifice & work with commitment towards a goal as done by Dr. Kurien, Vikram Sarabhai or Dr. Swaminathan.
Sadly, we have many management schools that can produce managers who can increase profit, income and market capitalisation of Companies & Multinationals but there is hardly any school that can produce persons like Dr. Kurien, Vikram Sarabhai or Dr. Swaminathan.
Now that’s exactly the comment I had been waiting for!!
The difference is certainly mouth watering for anyone to be in the business!
I believe a grid like system , not an exchange , should be introduced by the government . this grid should provide inter connectivity midst the producer and a registered association / vendor approved by the local state / district authority .
The interconnectivity should be real-time , where the mentioned lot can participate and further transactions can be executed . This has to be backed by a logistic support , further hedged by the logistic derivatives for various transporters to maintain the cost .
Since India in a hug country , with serious players the efficiency can be optimized and further the cost variance can be contained .
At the same time the local vendors / sabzi mandis must flash the rates as on that date and further , the prices should be covered in the local news papers . Once consumers knows the tentative price of a vegetable on a particular date , he/she will buy or might postpone the purchase , that automatically shall bring the price of a vegetable to the mean or may be lower .
This entire exercise will make the vending system far more dynamic and facilitate a superior pricing mechanism favorable for the consumer and for the government to be assessing the consumption trend.
I would disagree with all these steps: “….a registered association / vendor approved by the local state / district authority ….” They’d account for “transmission inefficiencies” as there are in the current model.
Grid, Hub-n-Spoke whatever it’s gonna be, one has to keep in mind minimization of no. of human hands involved in the transfer process. Else it would fail again.
I wish you were right ! if NSE/BSE , or any other equity / commodity exchange for that matter had limited number of players , price discovery would not have been possible . The more number of players ,the better !
and by the way , how many people manage the entire transaction happening accross India at any given stock exchange !
“transmission inefficiencies” , did we say we were doing it manually , hahah !
Man NSE/BSE are perhaps the worst examples to follow… Maximum frauds happen in that market only, with equally high number of hands.
Amul story is perfect to emulate for this situation.
i don’t know if anyone mentioned this in your comments, or if even you mentioned it in your post, but your chart is silly and misleading.
funny you should say that each step up in the producer-to-consumer relationship adds a significant amount of money to the price of the product per unit because….it DOES. it takes money to ship a product somewhere, it takes money to clean a product, it takes money to set a product outside for customers to see, it takes money to pay someone to work a register to accept money for a transaction.
furthermore, you fail to recognize the changes in quantities bought or sold of each product. of course a producer sells his product for less money–he is selling massive quantities that would be impossible to sell to even the most desperate consumer.
for a fair comparison, try looking at the gross production per capita within various sectors of an economy. even if you’re only willing to reduce the slant of your article as opposed to practically eliminate it, you can offer the value-added per step along the commercial chain.
finally, you should probably remove the line underneath the “Notify me of followup comments via e-mail”. calling commenters “anonymous cowards” only serves to alienate readers and prevent yourself from receiving worthwhile criticism. an anonymous coward won’t care whether or not he is considered so. an anonymous non-coward probably will care.
if you did include a compensation for the obviously misleading nature of your chart, then i apologize for writing all of this. if you didn’t include a compensation, then you should quit being a blind propagandist.
So according to you (@stephan) we should continue paying up 60 rupees per kg of chilli out of which pay off to the farmer is only Rs. 2?
I’d ignore your emotional crap altogether.
Middle man may not make more money always especially in vegetables business but consumer has to pay more for inefficiancies of middle man. Grain business people make lot of money. Even today most of the places cold storage unit are ice cold storage units. These units take more space and energy so charge heaviliy. No proper care is taken in packaging or transportation that leads to heavy wastage. I thought professional management of big retail chain will improve these inefficiencies but I did not see that is happening.
Thr is about 30~40 % warehouse loss that the government hides in the name of rats, rodents and shelf-life expiry.
It is impossible to free India from the clutches of the congress goons. pay for your existence now.
okay wise man , pls. tell us what to do !
OMG!
I think the farmers must be given direct access to markets and there are ways to do that. Vested middlemen will always have an interest in screwing up the vegetables.
But how? That is the question.
Can you give us the link to the original article on Tehelka which had this chart? It is obviously representative of certain regions and I’d like to find out the complete raw data as well as the source and method of collection.
Thanks.
Are you stupid Ashish? Man, take a stand (with integrity) and don’t play with facts.