Assignment

Dated: December 2009

Subject: Management of Agricultural inputs

Topic: Input marketing Channel

Submitted to: Prof Mokshapathy

Subject: Management of Agricultural inputs
Department: Institute of Departmental Studies
University: Mysore
State: Karnataka

Submitted by: Pradeep Kumar V

Subject: Management of Agricultural Inputs
Topic: Input marketing Channel
Course: MBA - Agribusiness
Department: Institute of Departmental Studies
University: Mysore
State: Karnataka

1
 Agricultural Inputs Towards Rural

Rural marketing is the process of developing, pricing, promoting, distributing rural

specific goods and services leading to exchanges between urban and rural
markets, which satisfies consumer demand and also achieves organizational
objectives.

Rural marketing involves a two way marketing process, however, the prevailing flow
of goods and services from rural to rural areas cannot be undervalued. Since the
demands (‘wants’ for specific products backed by an ability and willingness to buy)
of urban and rural folks are different, companies should manufacture products to
suit the rural demand rather than dump urban products on rural consumers.

The process should also be able to straddle the attitudinal and socio-economic
disparity between the urban and rural consumers.

Urban Rural

Rural Urban

Rural Rural
With the growth and development of agriculture, large amount of industry products
are being used as inputs for productivity improvement and maintenance. Similarly,
a large number of industrial and urban manufactured products are being used for
various consumption purposes in rural areas.

There is a definite trend in flavour of the industry laying a predominant role in

rural/agricultural production and consumption process.

If we adopt the typical business management definition of marketing as an activity of

identifying and satisfying customer needs, then rural marketing for our purposes
amounts to dealing with various inputs/products/services meant for rural market.
But, it is very crucial to precisely define a market in terms of its constituents and
boundaries.

It is here, that we need to to differentiate marketing of agricultural inputs from other

types of rural marketing activates.

Rural marketing in this sense is different from agricultural marketing, which means
marketing of rural products to urban/rural consumer or institutional markets.

It is also different from rural marketing of the consumer products, which deals with
marketing of urban/rural products goods in rural areas for final consumption.

2
Rural marketing of inputs is basically a process of delivering manufactured or
processed inputs or services to rural producers, the demand for which is basically
a derived demand.

Therefore, when we discuss marketing of inputs, we are concerned with a rural

market in which an urban product has to be sold.

So, the process of marketing becomes a case of urban to rural activity, which is
characterized by various peculiarities of rural market in terms of nature of market,
products and processes.

It is also different from rural marketing of the consumer products which deals with
marketing of urban/rural produced goods in rural areas for final consumption.

Rural marketing of inputs is basically a process of delivering manufactured or

processed inputs or services to rural producers, the demand for which is basically a
derived outcome.

Therefore, when discuss marketing of inputs; we are concerned with a rural market in
which an urban product has to be sold.

So, the process of marketing becomes a case of urban to rural activity, which is
characterized by various peculiarities of rural market in terms of nature of market,
product and process.

• The rural marketing of agricultural inputs as an activity, differs from

agricultural or consumer products marketing in terms of the nature of
transactions, which includes participants, products, modalities, norms and
outcomes.
• All of these are significantly different from those of rural to rural flows which is
also called rural marketing and rural to urban flows.
• The participants in this case will be producers, sellers, facilitators, regulators,
buyers and consumers.
• The specific participants in the agricultural inputs markets are input
marketers, dealers, farmers, opinion makers, government agencies and
traders.
• Similarly, the products are different because they are bulky, costly, used
rarely, mostly being bought on credit and have derived demand

3
Seed

The different channels used of seed are as follows:

Purpose of seed storage: is to maintain the seed in good physical and physiological
condition from the time there are harvested until the time they are planted.

Purpose of seed storage: is to maintain the seed in good physical and physiological
condition from the time there are harvested until the time they are planted.

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Stages of seed storage:

• Storage on plants: (Physiological maturity until harvest)

• Harvest, until processed and stored in a warehouse
• In storage (warehouses)
• In transit (rail wagons, trucks, cars, railway sheds, etc.)
• In retail stores
• On the user’s farm

The seed quality that is germination and vigor can be considerably affected at any
stage unless sound principles involved in seed storage are practiced and the seeds
properly handled.

Marketing: Seed marketing is the one of the most vital components of seed
technology. On it depends the size and scope of the seed industry. Broadly, it
includes such activities as production, processing, storage, quality control and
marketing of seeds.

In narrow sense, seed marketing refers to the actual acquisition and selling of packed
seeds, intermediate storage, delivery and sales promotional activities.

Seed marketing comprises the following

• Demand forecast (assessment of effective demand)

The underlined principle is that the seed supply keeps space with seed demand in
terms of quantity quality, price, place and time.

• Marketing structure

It refers to the establishment of effective channel for seed distribution. The types of
seed distribution system in India are farmer-to-farmer, distribution-to-distribution by
co-operatives distribution by departments of agriculture

• Arrangements for storage of seeds

In a sound seed marketing system it is desirable to establish seed marketing regional

in the end-use areas and to arrange food go down

• Sales promotional activities

A sound effective sales program must be based on the judicious use of three basic
tools, i.e., advertising, publicity and public relations.

• Post sales service

More emphasis must be placed on education of farmers, technical help

• Economics of seed production and seed prices

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 Seed production cost must be kept as low as possible. Seed producer should be
allowed sufficient margin, so that they are encouraged to produce good quality seed.

The Seed Sector chain – Organizational framework

SeedLegislation Agricultural Research

• Seed regulations
• Seed acts • Germ plasma collection and conservation
• Certification • Plant breeding programmes (objectives,
notices methods, extension recommendation,
• People's maintenance of breeder seed)
Biodiversity
Register
Macro –Economic Policy
Legislation
• Seed standards
• Raw material prices
• Transport policy
• Taxes and subsides
• Trade and exchange control
• Statutory wage rates
• Structural polices
• Price policy

Seed Multiplication • Central seed farm

• Nuclear seed • Contract growers
• Breeder seed • Co-operative
• Foundation seed growers The Seed
• Certified seed • Small farmers Chain
seed
multiplication
schemes
• Trader/farmers

Quality Control Seed Processing

• Field inspection • Cleaning

• Certification • Drying
• Germination, viability • Grading
and purity test • Treating
• Law enforcement • Packaging

• Centralized
• Decentralized
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 Seed Storage

• Processing plant
• Depots and sales
point
• Strategic reserves
• Centralized
• Decentralized
Seed Marketing
• Transport • Seed company outlets
• Sales points • Agricultural parastatals
accessibility • Private wholesalers and
• Market strategy retailers
and info flow • Farmer self-help groups
• Loan finance • Donor project
• Voluntary organizations
• Co-operatives

Agricultural Services Agricultural Policy

• Extension • Seed price policy

• Farmer credit • Grain price
• Complementary input supply • Complementary input prices
(fertilized pesticides, etc..)

Farmers Uptake

• Commercial farmers
• Subsistence farmers

Cropping System Market Situation

• Resource endowment • Industrial use

• Social relations of • Urban Consumption
production • Subsistence
• Indigenous technical
knowledge

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Flow of Authority

Flow of seed

The Pesticides channel

The distribution of pesticides is carried out through state departments, com-

operatives and private outlets. There is neither a fixed pattern nor any fixed terms,
regarding the distribution of pesticides.

In the distribution of pesticides, there are problems of spurious products, lack of long
term credit, high liability of non – sold stock, higher cost of small packs, lack of
extension service and dependence on dealers for sales promotion.

The small firms which do not have a high brand image and customer pull, also run
incentive schemes for dealers like target discounts, gifts on certain sales volumes,
packaged tours, and incentives on advance booking of stocks.

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 Distribution System of Pesticides

Manufacturers
Exports Imports
Indian Foreign

At least 50% of the Under 50% of the

output output

Formulators

Non - associated Associated

Wholesaler

Retailer

Farmer

The distribution of pesticides is carried out through state departments, com-

operatives and private outlets. There is neither a fixed pattern nor any fixed terms,
regarding the distribution of pesticides.

In the distribution of pesticides, there are problems of spurious products, lack of long
term credit, high liability of non – sold stock, higher cost of small packs, lack of
extension service and dependence on dealers for sales promotion.

The small firms which do not have a high brand image and customer pull, also run
incentive schemes for dealers like target discounts, gifts on certain sales volumes,
packaged tours, and incentives on advance booking of stocks.

Pesticides may pose risks to man and his environment from their stage of manufacture
until they are used, disposed of safely or completely degraded. One source of risk is
during storage and handling at the point of supply to users. The risks may be even

9
greater in developing countries which usually lack the infrastructure and suitably
trained personnel for their safe handling during the stage of distribution.

In most instances a pesticide may be imported from the country of origin and
transported by sea, then by road or rail to the warehouse. This may be followed by
transport by road to major distributors in the country who in turn send them to retailers
or dealers most of whom may be situated in rural areas.

The pesticide may be stored under rather varying conditions, which could
adversely affect its physical and chemical properties, and damage the packaging by the
time the end-user receives it. Thus pesticides must be suitably packaged to withstand
the rigours of transportation, loading, unloading and storage at various points from the
manufacturing or packaging premises until supplied to the user. It must also be
recognized that pesticides can pose danger to man and his environment through
spillage directly on persons handling them, contamination of food and other articles, or
leakage into the environment during the various stages of transportation, loading,
unloading and storage. It is therefore imperative that due care be exercised to minimize
the deleterious effects of the pesticide to man and his environment, and also to ensure
that the quality of the pesticide remains unchanged within acceptable limits until it is
used.

Transportation
General Advice

Pesticides should not be shipped or transported in the same container or

compartment with cargo that could become a hazard if contaminated, such as food,
drugs, toys, clothing, cosmetics or household furnishings. This is particularly so with
trucks transporting pesticides, fertilizers, and farm produce to or from the farm.

Pesticides should not be carried in passenger compartments of transport

vehicles. Care must be taken to ensure that persons travelling on the same vehicle with
a cargo of pesticides are not subjected to exposure to the chemicals or their vapours.
Vehicle-attendants should not ride with a pesticide cargo.

Vehicles transporting pesticides should carry "hazard warning or cautionary

notices", prominently displayed.

Pesticides should at all times during transport be kept tightly secure and
covered.

Steps to Prevent Leaks or Spills

Transport and handling operations should take the following steps to prevent
leaks or spills:

Prior to or during loading, each chemical container should be inspected for

tightness of closure of seal and for any evidence of leakage around the closure, on the
top, along the sides, on the bottom and under the container. Containers showing any
evidence of leaks should not be loaded. If a high percentage of containers in a shipment
show evidence of leakage, the entire shipment should not be loaded.

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 Pesticide containers should be loaded into the carrier and secured inside the
cargo compartment in such a way that they are held in place securely, without the
possibility of damaging each other or being damaged in transit by other cargo.

In the loading and unloading of chemicals, equipment and tools must be

carefully used, so that it does not damage the containers. In particular, the use of hooks
might puncture or tear the containers, so it is not to be permitted.

Emergency Response

All supervisory personnel involved in the loading, transporting and the unloading
of chemicals should be fully informed about the toxicity and the hazard potential of the
pesticide (s) they are handling. They should be provided with information on how to deal
with spills of the particular pesticide(s) they are handling, and whom to call in an
emergency for medical and technical information.

Personnel, especially supervisory persons, should be trained in appropriate first-

aid and rescue procedures

Record of Pesticides in Godowns

Receiving/Despatching

 Data received
 Supplier/receiver
 Truck number
 Invoice number
 Trade name of pesticide
 Registration number
 Quantity

Note:

The above records must be kept on pesticides in godowns. In addition, retailers

may keep similar records for certain highly toxic or restricted pesticides, and it should
include the name and address of the purchaser.

Agricultural Credit

Agri credit flow seen slowing down

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The credit flow to the agricultural sector has seen some slowing down due to the debt
waiver scheme. National Bank for Agriculture and Rural Development (Nabard)

Around Rs 1,96,000 crore has been disbursed by banks to the agricultural sector till
december 2008. Disbursement figure of private banks is not available.

For the financial year 2008-09, the disbursement target is around Rs 2,80,000 crore.

In October 2008, the Reserve Bank of India had temporarily provided a sum of Rs 25,000
crore under the Agricultural Debt Waiver and Debt Relief Scheme to banks and Nabard,
as the first installment under the scheme.

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Internal Constraints for Farmers and Agribusiness

Internal Constraints for Farmer

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Lack of Business Management Skills

• limited knowledge of commercial opportunities and realities;

• under-developed planning and business management skills;
• lack of technical skills in farming and processing;
• poor marketing knowledge and selling skills;
• little recognition of opportunities for product diversification or the links between
market research and product development;
• limited economies of scale in production capacities and/or under-utilized plants

Technology constraints
• limited access to modern farming and processing technology making products
often unfit for liberalized markets

Raw material procurement

• lack of reliable supplies especially off- season;
• lack of trusting relationships and formalized agreements with suppliers and
selling agents.

Quality Constraints
• problems meeting quality standards of processors;
• lack of access to appropriate seed material and pest management;
• storage constraints, outdated production technology.

Market access constraints

• poor negotiating and selling skills lack of trusting relationships and formalized
agreements with buyers.

Financial Constraints
• lack of access to capital for expansion of production or introduction of post-
harvest technologies;
• high costs of capital in relation to expected production and processing
margins;
• lack of access to credit.

External Constraints Facing Farmers and Agribusiness1

1

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 External Constraints for Farmers and Agribusiness

Adverse Macroeconomic Conditions

• Inconsistent and not transparent business rules and regulations;
• High taxes, poor tax administration;
• High levels of corruption;
• High interest rates leading to high cost of finance and/or limited access to credit;
• Exchange rate devaluation leads to high costs of imported inputs;
• Insufficient margins in farming sector.

Market Constraints
• Limited purchasing power;
• Low demand for processed goods;
• Competition with imported raw materials and processed goods.

Lack of Institutional support

• lack of coherent government agricultural/business development strategy;
• lack of government industrialization strategy or problems with implementation
• poor access to support from educational, agricultural research institutions and
business support services;
• poor co-ordination and co-operation between government institutions and the private
sector;
• breakdown of governmental extension services / absence of direct farm business
support services.

Lack of Adequate Infrastructure

• road, water, electricity, communications, storage;
• erratic supply and high cost of public utilities.

Limited Availability of Inputs

• seeds, farm machinery, fertilizer/agro-chemicals etc;
• high cost of raw materials (some sectors) and low processing margins, high overhead
costs (utility prices and labor costs) poor services;
• lack of local/affordable supplies of ingredients, packaging materials and equipment;
• inadequate equipment production by local metal workshops and inadequate training
in hygienic and safe equipment design;
Market Information
• little or no published information on markets, prices, trends, key market players.
• high cost / limited access to commercial market research.

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 The widening role of Information Technology in Indian
Agriculture

With the fast changing global environment and the adoption of latest technologies in
farming across the world, it seems apt for Indian agriculture to look into the
possibilities of leveraging technology to stay competitive. The world is no longer a
cluster of Standalone Islands; rather it has become a conglomeration of
interconnected territories. Today if the price of a commodity is changed in one corner
of the globe; it surely does impact the price of another in a distant land which is
thousands of miles away. The current context thus calls for industries to be aware
and updated about the changing trading policies. And agriculture is no exception to
the rule.

As it has been widely accepted by most that in today’s world the way information is
being gathered and shared would play a very significant role in developmental
process. And agricultural sector is also going to be positively affected if the flow of
information increases. However, it is easy to talk about the collection and
dissemination of information. But it is a difficult task to achieve the same, and more
so in agricultural sector where the information infrastructure is at the most primitive
stage. So when we talk about increasing the information flow and management of the
same we are talking about a lot of investment. However the cost associated to
achieve this target can be minimized and the information flow to the participants in
agriculture can be enhanced by leveraging information technology. Let us see how!

IT adoption in Agriculture

The effectiveness and efficiency of the information used in agriculture can be

increased multifold by the adoption of IT in agriculture. Information access and
improved communication is viewed as having direct implications for the socio-
economic development of a nation. And in Indian context we can say that the social
and economic development of the Indian agrarian community can be brought in with

16
the effective use of IT. The farmers still face the problems of inadequate information
related to cultivation of crops, the presence of which could have enhanced the
decision making capability of the farmers. IT seems to be a promising medium
through which relevant information can be communicated to help in farming and post
harvest processes.

Areas of Importance:

The following can be looked upon as the areas of development in IT to leverage

information in an effective way to decrease the order and delivery time. It would also
help in customer relationship management.

1. A database for crops can be maintained: The database repository can include
important information about the types of crops and land holding pattern. This
information can be transmitted via the internet to the database server. The
information thus accumulated can play a significant role in the decision making
process.

2. Production techniques and information inquiry system should be created. This

repository should ideally be having the best and innovative techniques developed by
R&D institutes or some progressive farmers. Would be a great source of information
for the farmers to access and utilize.

3. System for inquiry about farm machineries: This system can be developed by the
companies operating in the farm machinery sector. This can help the farmers to get
information about the best equipments to use and similarly the companies can
promote their farm equipments.

4. A similar system for agricultural inputs like seeds, fertilizers etc can be developed
by the relevant companies.

The government is not only aware of these possibilities but they have also initiated
steps to achieve significant goals in this regard. The National Agricultural Policy lays
high importance on the implementation of IT for agricultural sector. And the
Department of Agriculture has also led visionary plans for the same.

In future therefore we will witness a reduction in cost and time of information system
through the use of Information technology. IT will enable farmers to take more
precise and informed decisions through the enhanced control that they will have on
the information channels.

Some of the key concerns that IT can address and help farmers decide better are:

a. Information about the benefits of increased irrigation

b. Cost-effective use of fertilizers and chemicals
c. How and when to market the produce
d. How and when to order the agricultural inputs needed for farming

So it seems that the use of information technology will enable the farmers to come up
with cost-effective and profitable marketing and distribution strategies. Further it
would be possible to trade online thus reducing a lot of post-harvest cost. And it
would lead to a collaborative system of information sharing among the various key
players in the entire agricultural supply chain.

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However the picture is not that rosy a lot of problems beset the effective
implementation and use of IT faces a lot of challenges. When we talk about the use of
IT we are talking about users who have very low literacy rate. This would act as a
barrier since most of the applications and software are built on English language.
Other key issues are :

i) The lack of proper communication infrastructure

ii) Cost of computers
iii) Small individual farmers’ incapability to adapt to IT due to financial and education
constraint.
iv) Low adaptability to new technology due to lack of awareness.

In this regard India faces another problem of magnitude. Around 85 percent of

farmers in India are small farmers who have less than 2 hectare of land. So to expect
them to individually come up with information systems for their farmland would be an
impossible proposition. Instead the Government should encourage small farmers to
pool resources to form groups and start farming in groups so as to enhance their
spending capabilities when it comes to use of IT. This would be beneficial and a
commercially viable option for the farmers as it could lead to attainment of efficient
trading and marketing practices for the farmers. It would not be an overstatement if
we say that agricultural growth would be information driven and IT is going to be the
solution for the growing challenges for the farmers, which are brought in by rising
cost, increasing competition and globalization. Some of the companies like ITC have
already realized the business potential that they can generate through effective use
of IT. The Internet kiosks set up by ITC under their e-Chaupal initiative are a step
towards that direction. The future has to be collaboration between agriculture and IT.

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 Agri Input - Fertilizers

As per Oxford Dictionary, Logistics refer to the “ Art of moving, lodging and supplying
troops and equipment.

As per Philips Kotler, Logistics are “ Planning, Implementation and controlling the
physical flow of material and final goods from the point of origin to the points of use
to meet the customer needs.

In fertilizer marketing, logistics cover packaging, mode of transportation, handling,

warehousing and channels of distribution i.e. placement

Proper management of logistics is very essential for moving the fertilizers from the
Plant/Port to the consuming areas at the right time, in right quantity and in best
conditions.

A dynamic and efficient logistics system helps in reducing the marketing cost.
However, it calls for constant monitoring of activities within the fold of logistics.

Salient Features: India

o Agriculture continues to be mainstay of India’s economy.

o  Agriculture Contribution to GDP is 18%.
o Two Third of population lives in the villages.
o 57% of population depends on Agriculture Sector.
o With growing population, land man ratio is declining.
o Chances of bringing additional land under Cultivation are remote.
o Future increase in agricultural production has to come by way of increasing
productivity of land already under cultivation.
o Vital role of fertilizers for increasing agricultural productivity is universally
recognized.
o Share of fertilizers for increasing food grain production is 41%.

Fertilizers Consumption in India

Annual Growth Rate over

Fertilizer Cons. (‘000 tonnes)
Year previous Period (%)
N P K TOTAL N P K TOTAL
1951-52 59 7 0 66
1971-72 1798 558 301 2657 21.8 24.9 26.5 22.9
1991-92 8046 3321 1361 12728 7.1 9.7 7.3 7.7

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1992-93 8427 2844 884 12155 4.7 -14.4 -35 -4.5
2002-03 10474 4019 1601 16094 2.8 4.1 7.3 3.5
2004-05 11714 4624 2061 18398 5.7 7.3 13.5 6.9
2005-06 12723 5204 2413 20340 8.6 12.5 17.1 10.6
2006-07 13773 5543 2335 21651 8.3 6.5 -3.3 6.4
2007-08 14419 5515 2636 22570 4.7 -0.5 12.9 4.2
2008-09 15117 6595 3328 25040 4.8 19.6 26.3 10.9

Import Of Fertilizers

o The Gap between the Consumption and Production of fertilizers will go up

substantially as no new capacities of Urea and DAP are in the pipeline.
Therefore, imports of Urea and DAP are inevitable in future.

o Entire requirement of MOP (60% K2O) is met through import, as there are no
known sources of potash in the country.

o During 2008-09, 56.7 lakh MT Urea, 61.9 lakh MT DAP and 56.7 lakh MT MOP
was imported respectively.

Logistics

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 Fertilizer Distribution

 Fertilizers are produced at 147 locations in the country.

 Volume of fertilizer (indigenous and imported) dispatched in the country

during 2008-09 was 47 million MT.

 The volume of fertilizers to be handled will go up in the coming years.

 Distribution of above quantities to the Farmers scattered in about 6 lakh

villages in the country is a Herculean Task.

 This is more so due to the fact that fertilizer production is a continuous

process whereas consumption is highly seasonal and confined to 3-4 months
in a year and that too split into two seasons namely Kharif and Rabi.

 Fertilizer being a bulk commodity, its logistics is complex activity.

Fertilizer Distribution Channels

Fertilizer Manufacturer

Institutional Private Company Owned

Agencies
21 Trade Retail Outlet
District/
Primary
StateTaluka
Agricultural
Coop.Level Own Retail
InstitutionalPrivate
Cooperative
Credit
Marketing
Societies
Societies FARMERS
Outlet Agencies Dealer Marketing Wholesaler
Private Retail
Federation Dealer
Transportation

 Fertilizers in India are moved by Rail & Road only

 Rail transport is suited for larger volume and economical for longer distances

 Fertilizer Movement is done by rakes only i.e. BG Rake - 2500 to 2700 MT for
covered wagons and upto 3000 MT for open wagons & MG rake -700 to 800MT

 Number of Fertilizer rake point: 730 out of which used by the Industry is 400-
500.

Important Elements Of Logistics

o Transportation (70 to 75 %)

o Warehousing (3 to 4%)

o Handling (5 to & 7%)

o Handling, Transportation and warehousing expenses are controllable.

Comparative Energy Efficiency of modes of transportation

Transport Mode Energy Consumption

(BTU/Tonne-Km)

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Railways (Electric Fraction) 84.6
Road 1587.3
Waterways 182.0

Fertilizer Movement by Rail & Road

Quantu
m
Averag %Share
moved
Year e Lead by
by Rail
(KM) Rail
(‘000
MT)
1980-81 1100 8108 67
1990-91 940 18360 68
2000-01 862 27093 75
2006-07 827 34076 73
2007-08 827 34075 73
2008-09 827 34100 73

Availability of Railway Wagons

Total Percentage of the total

Wagons on number of
Year
line (in wagons
Units) Covered Open
1980-81 400,946 53.3 28.3
1990-91 346,102 49.1 29.6
2000-01 222,193 34.1 41
2001-02 216,717 33.2 41.7
2002-03 214,760 31.9 42.4
2003-04 227,752 29.8 44
2004-05 222,409 29 45.8
2005-06 207,983 29.4 45.4
2006-07 207,719 28.8 47.2

Warehousing
o
o Fertilizer production is a continuous process
o Fertilizer consumption is highly seasonal
o Warehousing becomes imminent
o Storage capacity at plants limited to 3 to 4 weeks
o Storage facilities in India are provided by
o - Central warehousing corporation
o - State warehousing corporation.
o - Cooperatives
o - Private
o Strategic hiring of warehouse is critical for optimum utilization and effective
control of inventory and thereby marketing cost.

Storage Capacity In India (AS ON 31.3.2008)

23
 Capacit
No of
y
Agency Warehous
(Lakhs
es
MT)
CWC 490 99
SWC 1576 187
COOPERATIV
ES 66513 149
TOTAL 68579 435

Packaging
o Fertilizers are Hygroscopic in Nature
o Tend to cake if exposed to Moisture
o Lose Nutrient Value
o Packaging provides protection.
o Packaging offers convenience of TPTN. Handling and Storage
o HDPE bags are used Packaging
o Normal Packaging Size - 50 Kg
Handling
o Handling of fertilizers is the controllable function of the marketing cost.

o Increasing the number of handling leads to loss of weight of material as well

as damage to the outlook of the bags.

o Farmers in the present scenario gives due importance to the packaging.

o Efforts should be made to reduce the number of handling thru proper

management

Marketing Channel
o Every manufacturer needs a link with the customers to sell his products.
o The set of intermediates forming this important link is called the
marketing/distribution channel.
o Selecting the right channel is the most important, complex and challenging
task for every business organization.

• _Marketing Channel in India for Fertilizers can broadly classified into

three categories:
• _Institutional Agencies
• _Private Trade
• _Company owned outlets
• _Private trade accounts for 60%.
• _Institutional agencies including cooperatives accounts for 35%.

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 • _Manufacturers own 5%

Systematic Approach to logistics Rationalization

o The first and foremost step for logistics rationalization is the assessment of
month wise / district-wise accurate demand of fertilizers.

o The demand should be assessed keeping in view the cropping area, irrigated /
un-irrigated area, credit availability, introduction of new varieties, last years
sale pattern, any new development in the area etc.

o Demand of fertilizers in the districts provides the basis for finalization of

warehousing planning.

 Warehouse planning is next important aspect i.e. Location of

warehouse and how much space to be hired is the crucial factor in
logistic management.

 _ Majority of farmers in India are small and marginal and they do not
have the resources to purchase material before the start of the season.

 _ Warehousing allows continuity of production and helps in making the

vital input to the farmers in time and in right quantity.

 _ Fertilizer should be placed in the warehouses keeping the view the

lead distance from the Plant/Port.

 Placement of fertilizers in the warehouses should be well before the

start of the season.

 _ Wrong placement of fertilizer leads to loss of sales on one hand and

increase in the inventory cost on the other hand.

 _ Efforts should be made to make available fertilizers at the doorstep of

the farmers at the appropriate time.

 The ultimate should be that no sale is lost for want of material.

Fertilizer Monitoring System (FMS)

 _ Department of fertilizers ensure sufficient availability of fertilizers in

each state at macro level.

 _ Distribution of fertilizers in different districts of the state is to be

managed by state government.

 _ There were complaints of shortage of fertilizers in some pockets

particularly in far-flung and inaccessible areas.

 _ Food grain production was almost stagnant or declining for the last
few years.

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  _ Fall in food grain production blamed on failure in timely supplies of
fertilizers.

 _ Manufacturers/ suppliers on the other hand were facing cash crunch

due to delayed subsidy payments.

 In order to infuse more and more Transparency in the distribution and

availability of fertilizers in the country, fertilizer-monitoring system was
developed.

 _ FMS is a web based fertilizer monitoring system launched by DOF ON

22nd JANUARY, 2007

 _ FMS monitor the production, dispatch and receipt of Urea/DAP/MOP/

complexes upto the DISTRICT level.

 _ This helps DOF to monitor Availability on a month wise/ District-wise/

company-wise format against the agreed supply plan.

Logistics Rationalization Under FMS

o _ Before the beginning of month, GOI communicate the month
wise movement plan for Urea, NPKs and DAP to the States.

o _ State Governments, further bifurcate the same into

manufacturer-wise/ district wise.

o _ Supplies are made as per the supply plan.

o _ In case, supply in a district is more than the plan, the same is

regularized by State Governments.

o _ The revised plan are entered in FMS by LFS between 6 to 10th

of following months every month.

Uniform Freight Subsidy Payment

 _ Under FMS, GOI is giving Rail freight on actual basis.

 _ Manufactures are uploading the copy of RR for

dispatches by Rail into the FMS and also indicate the
actual freight paid.

 _ As regard further movement from Rake-point to the

field warehouses, district-wise normative leads have
been approved and uploaded into FMS for each State.

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  _ As regard direct movement by Road from Plant/Port,
the distance from Plant/Port to the districts have been
approved by GOI and the same is uploaded in FMS.

 _ GOI has also uploaded the approved per tonnes per km

rate for each State.

 _ In case of Road Movement, the average of the rates of

the dispatching state and the receiving state is
applicable. The maximum permissible distance for Road
Movement is 500 KM.

 Presently on NPK/DAP, GOI is giving concessions

(subsidy)as well as freight payment to the manufacturers
thru FMS.

 _ As regards Urea, concession based on the retention

prices are paid thru the manual system. However, the
freight payments are paid thru FMS.

 _ The freight payments are calculated on the basis of the

quantity received in the district directly from the
rakepoint / Plant and multiplying it with the Statewise
approved lead and rates.

 _ No subsidy is paid for inter district-movement.

Suggestions

o Presently on NPK/DAP, GOI is giving concessions (subsidy) as well as freight

payment to the manufacturers thru FMS.
o _ As regards Urea, concession based on the retention prices are paid thru the
manual system. However, the freight payments are paid thru FMS.

o _ GOI reimburse the freight subsidy on the basis of first point of receipts.

o _ No subsidy is paid for inter district-movement.

o GOI allows road movement of fertilizers from Plant/Port upto a distance of 500
KMs.

o _ Therefore, economics of supplies by road from Plant/Port should be worked

out keeping in view the rates reimbursed by GOI vs actual expenses involved.

o _ Efforts should be made to minimize the under recoveries on freight.

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