AGRICULTURAL

MARKETING IN INDIA

B. B. MUKHERIEE, M.A.

CALCUTTA

;HACKER SPINK Si CO. Cms) LTD.

1937

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 PREFAOfi.

It has at last been realised that the amelior^tioa of the

economic condition of our agriculturists depend? to a large
extent on the improvement of our marketing c>rganisation
but very little detailed information is available about the
conditions under which agricultural produce is inarketed in
different parts of India. An attempt has been iliade in this
book to offer a comprehensive study of the different links of
our marketing chain based on five years' personjJl investiga-

tions have been given for the improvement of our marketing

system.

R has not been possible to include the niarketing of

milk and other dairy produce in this volume as H requires a
fuller treatment.

The author is grateful to all those businessmen and

Market Organisations in different parts of India who have
given him the necessary facilities for his investigations. He
acknowledges the help he has received in preparing the type-
script from his sons Sunil and Subhas.

B. B. MUKHERJEE.

DEPAHTMENT OF ECONOMICS,
PATNA COLLEGE,
. ^PATNA.
dQth\April 1937,
 AGRICULTURAL MARKETING
IN

INDIA
TABLE OF CONTENTS.

CHAP. I. Introduction 1
CHAP. II. The Middleman .. ... 10
CHAP. III. Markets • 33
CHAP. IV. Commodity Marketing 61
CHAP. V. Methods of Sale in Markets 92
CHAP. VI. Market Finance 99
CHAP. VII. Weights and Measures 120
CHAP. VIII. Storage 131
CHAP. IX. Adulteration and Grading 147
CHAP. X, Transportation 162
CHAP. XI Trading in Futures 185
CHAP. X I I . Agricultural Prices 197
CHAP. X I I I . Co-operative Marketing 208
CHAP. XIV. State and Marketing 231
 INTRODUCTION.

"The agriculturist throughout the world tends to seek

security rather than riches. Though the peasant's life,
judged by many standards, may be a hard one, life on the
land offers amenities which no city life can give. The draw-
backs of rural existence diminish every day; its advantages
I'cmain. But the main economic attraction has been the
sense of stability."^ In recent years however as a result of Uie
combination of a number of factors that stability has been
threatened and no efforts should be spared to rescue agri-
culture from its present plight. Agricultural development
has a close connection with the industrial and commercial
activities of the rest of the world and the instability from
which agriculture is suffering at the present moment is only
a phase of the malady which has affected the economic
systems Of all civilised countries. Thus agricultural improve-
ment can only be secured by international action aimed at
the solution of the basic deficiencies of our present economic
organisation but this must be preceded in every counti-y by
a close and searching study and analysis of all the processes
connected with agriculture with a view to rationalise it.

• Uptill recent years more attention was paid to agricul-

tural production than to marketing in India. The growing
"of two blades of wheat in place of one appealed to be more
important till the catastrophic fall in world prices made the
extra blade of wheat more a handicap than a blessing and
as a result of this the attention of the country has been
focussed on the marketing aspect as well. Three parties
are mainly interested in marketing—the grower of the
commodity, the middleman and the idtimate consumer but
the most important of these parties is the consumer as all
production has consumption for its objective. Though at
the end, the consumer plays an important part in deter-
mining the volume and nature of production and in fixing

' World Agriculture—An International Survey p.247.

'i INTUODUCTIOK.

Ihe price level, the farmer does not realise this as he has
no direct touch with the consumer, "If the Iowa farmer
[Hits a bad egg in the egg case, he does not see the expression
on the face of the New York or Boston housewife when
this bad egg is opened. Her retail grocer hears her commenl
over the telephone."*

Agricultural production is carried on under varying

conditions by people who own small plots and work on a
small scale. They are busy in the production of a few crops
and have neither the lime nor the ability for studying the
niarkcts or for marketing their produce at advantage. Their
lack of credit facilities is also another handicap and as a
result of all these is developed a class of independent local
middlemen whose function is to collect the small surpluses
of the individual farmers in the primary market and
despatch them to the bigger market which acts as a reservoir
to which the produce comes in from all sources, at all
seasons and of wide variations in quantity and quality."
By releasing the supply so that there can be an adequate
tlow to users, by keeping the markets in balance through
interchange of information and by directing commodities to
those localities where demand is the greatest; in short by "
adjusting a lluctuating supply to a constantly changing
demand, these wholesale inarkets perform an indispensable
equalising process.'f In the next stage begins the process
of dispersion under which the produce is arranged for
supply in adequate quantities for the manufacturers or for
consumption in smaller lots by the concentrated population
in urban areas. Manufacture is usually localised near the
source of the raw material and this siniplilles the process
of dispersion. In the sugar 'producing provinces of India
owing to proximity of the sugarcane area to the Mills, the
chain of middlemen is not long but where with the imiirove-
mcnt in the means of communications, decentralisation in
production has taken place e.g.. Cotton industry hi India,- the
process of dispersion is apt to become more complicated.

Boyle—Marketing of Agiicultural Products i).4.

t Clark and Weld—.^farketlng of AgricuUural Products \).VA.
 AanicuLTURAL MARKETING. 3

Tluis the iiKirkctiag liinclious incjudc primarily Ihc

asscnibling of Ihc ])roduc,e. The diincultics of this are very
great as there is a wide variation in the (lualilics of a jiarti-
cular produce from season to season and from farm to
farm. The commodities have to be marketed in large
quantities so as to secure economy in transport wliile at
the same time the supply has to be adjusted to the customer's
demand for variety. Adequate facilities liave to provided for
, the storage of the assembled produce and during the
period of the storage and before it also financial assistance
is a necessity. Those who acquire ownership of the produce
during the marketing process have to assume risks of
various kinds wliicli include risk of loss due to fall in price,
danger of deterioration in quality or of total destruction of
the 'produce. Before tlie actual sale takes place, tlie produce
has to be standardised and graded. Transportation is the
last process in this chain and often the success of the market-
ing function very largely depends on tlie cost and facilities
of transport.

Agricultural marketing has certain pecularities of its

own as the characteristics of agricultural produce largely
affect their marketing. The bulk of the produce is consider-
able in relation to its value and this makes its transporta-
tion and storage difficult and costly. The crops mature
during a short period and there is a glut in the market
immediately after the harvest depressing prices and putting
a tremendtfus strain on the means of transport. It is well-_^
known that in the sugarcane region in Bihar the crushing
season being a short one, there is a heavy congestion in the
rail and road traffic. The same is true in the case of fruits
like lichis and mangoes. This accumulation complicates
tlie problem of securing storage facilities in central markets.
There is a wide variation in the perishability of different
agricultural products or of the same product under a
diversity of physical conditions, and this h a s its correspond-
in effect on marketing. Grain or cotton can be kept for
long periods but the wastage in the storage of potatoes is
very high. The variations in the quality and the volume of
agricultural produce are so wide and estimates of the surplus
available for marketing are so difficult to prepare due to
4 TNTRODUCTION.

Irlic interplay of a uiinibcr of factors that llic marlvcl is very

often disorganised and storage rendered difTicull. This
surplus may be caused by overproduction as tlie result of a
very large increase in the acreage over a number of years,,
as the following figures about the acreage under Jute in
India will indicate :—

(000 acres)
1922 .. .. 1,446
1924 .. .. 2,738
1926 .. .. 3,610
1928 .. .. 3.062
1930 •.. .. 3.402

Weather factors to a certain extent also affect the

marketable surplus, as favourable weather conditions in
anyone year or in several consecutive years may secure, for
tlie same acreage, a greater yield and production above the
normal. Weather factors also affect acreage to some extent,
e.g., winter sowings are considerably influenced by the mon-
soon. Besides these, surplus may be caused by the fact that
"yields change over a period because of improvement in
varieties and cultural practice and because of the shifting
of production to other areas either better or less well
adapted to the crop."*

There is no doubt that the elasticity of the demand for

the non-staple foodstuffs is very great but it is wrong t o ,
assume that the demand for the staples has no elasticity.
On the other hand with the development in the science of
Dietetics systematic attempts are being made in the various
countries to improve the nature and the qualities of the
food consumed. "In the United States the changes in the
diet are very marked since the war. There is a decrease in
tlie consumption of cereal foods; sugar shows an increase
of 27 lbs. per head per year; there is a great increase in the
consumption of milkand milk products which sent up the
production of milk in the United States by 50 per cent

Black—Agricultural Reform in the United States p»8G.

 Aonicui-TURAL MARKRTING. 5

between 1915 and 1928."tin Northern India inferior grades

of grain Iil\e Jowar, and Bajra arc being displaced from the
dietary by rice and wheal- In Germany there is a market
increase in the consumption of the vegetables and fruits.
Small increases in the per capita consumption effected as
the result of the "Eat more wheat" or "Drink more Milk"
campaigns in various countries are being reflected in the rise
in the total demand in various countries. In England the
demand for margarine is showing a tendency to decline as in
the recent years the consumption of butter has gone up by
30 per cent, partly at the cost of m a r g a r i n e . " ! t
In India too, even with a very low standard of consump-
tion, changes in demand have taken place in recent years.
In an enquiry into the rates of food consumption among the
tenant cultivators in the Khanewal Tahsil of the Multan
District, it was found that "in the days when the tract was
unirrigated the Jangli population largely subsisted on meat,
milk. Ghee and the cheaper kinds of grain, such as maize,
bajra, jowar. Moth and also some rice; they have now
become wheateaters and that grain now forms their staple
food."* Elsewhere in the Punjab the same tendency is
noticeable. "In the first place barley has been replaced by
wheat or a mixture of wheat and barley. Secondly inferior
crops are neither grown nor consumed. Thirdly the principal
vegetable named Kachalu (Arum) is now givin'g place to
potatoes. Fourthly consumption of fish and meat has
decreased on account of licensing restrictions."*

In some cases there are seasonal variations in the

demand due to occasional substitution of other varieties of
food which are cheaper. In the District of Muzaffarpur
dates form the major diet in the season between June and
August and the rate of cereal consumption goes down very
much during this period from 26.25 seers per month per

t Baker—"Population and Land Utilisation" in Procedings

of the Second International Conference of Agricultural Econo-
mists" Wiscnsin 1930.
t t t^mpire Marketing Board, Dairy Produce Supplies in
1931.
' Report on the Survey of Haripur and Mangarh Tahiquas
of Kangra Dislrjct by Bhai Jlulraj pp. 120,
(! INTRODUCTION.

adiill aiiioiig i)elly owners in the April-May moullis lo 8.75

sccrs and llic former rale is again readied in Se])lcinl)er.t

II lias been suggested Ihat Ihc change in dietary is not

only as tlie result of the attempt of all communities to
improve their standard of living but is caused by the chang-
ing physiological needs due to altered conditions of labour.
The increasing use of machinery has brought about a
reduction of heavy manual labour "and this reduction carries
with it a change in the kind of food required. The manual
labourer takes ]iiore carbohydrates, the sedentary worker
more concentrated food. A manual worker engaged in some
types of farm labour might easily need food providing 5,000
calories per diem; riding on a machine the physical demand
of the same man might be 3,500."tt Thus with changes in
the cond'ilion of labour, and standard of living and with
the substitution of one variety of food for another a great
amount of elasticity is introduced in the demand, which tlie
])roducer and the middlemen have to take notice of in
adjusting supply to demand.

A study of the marketing agricultural produce in India

should begin with a brief description of the agricultural
position. Over the greater part of India there are two well
defined seasons, the rainy and the winter, yielding two
harvests, the Kharif or autumn including Rice, Juar, Bajra,
Cotton and Jute and the Rabi or Spring including wlieat,
gram, linseed, barley, etc. In the southern portion of the
Deccan tableland however the distinction between these
two seasons is not well marked. The tables will indicate
(1) the distribution of the crops in different Provinces and
(2) the changes whicli liavc taken place in the acreages under
the different crops betwe.en 1920 and 1930 and (3) the
volume of agricultural production.

t Economic Survey of Bhambu Sandila by A. B. lihan 1935.

t t World Agriculture—All International Survey p. 19.
 AoiUCULTUrtAL l\iAltKi;TiNCl. 7

TABLE I.
Area under Principal crops cultivaled in 1932-33
in each Province
(Thousands acres) (Food grains)

Province Rice Wlieat Barley Jowar Maize Toba- Bajra

ceo
Assam 4,870 X X X X 13 X

Beoi^al 21,771 142 85 6 76 281 3

Bihar &
Orissu 13,072 1,234 1,525 84 1,820 161 72

Bombay 3,135 2,627 33 8,211 178 136 5.113

C. P. 5,595 3,450 12 4,251 158 92 112

Madras 11,533 14 2 4,534 201 256 2,817

Punjab 878 8,590 617 l,ri2 1,034 66 3,402

U. P. 6;262 7,816 3,931 2,380 2,146 84 2,184

N.W.F.P. 37 1,012 137 116 207 8 207

TABLE i n . (Acreage)

Province Linseed Sesa- Groun- Sugar- Cotton Jute

mceni dnat cane

Assam 2 21 X 32 36 127
Bengal 124 ]60 X 233 58 1,611

Bihar &
Orissa 640 200 1 301 65 134
Bombay 125 255 1,194 74 4,222 X
C. P. 1,008 604 185 27 4,000 X
Madras 2 835 3,516 120 1,949 X
Pan jab 27 136 X 558 1,889 X
U. P. 227 387 47 1,773 515 3
N.W.F.P. X 2 X 53 16 X
 INTRODUCTION.

TABLE II. (Thousands of acres)

Estimate of Agricultural Production 1933-34
(Thousands omitted) (Brilish India)

Tons.
Rice . . 29,958
Wheat .. 7,576
Sugarcane (Gur) .. 4.450
Linseed 369
Rape and Mustard .. 1,029
Groundnut . . 2,514
Cotton .. 2,950 Bales of 400 lbs. each
Jute .. 7,941Balesof 400 lbs. each

TABLE 111.

1920 1930
1920 1930
Rice .. 78,120 80,632
Wheat .. 20,368 24,797
Barley .. 6,268 0,693
Juar .. 22,690 22,808
Bajra .. 12,002 13,698
Gram .. 9,464 13,644
Maize .. 6,206 6,458
Linseed .. 1.469 1,999
Sesameem .. 3,592 3,638
Rape and Mustard .. 2,979 3,297
Groundnut .. 2,706 2,869
Cotton .. 14,114 14,201
Jute .. 2,473 3,402
Tobacco 932 1,112
 INTRODUCTION. 9

Where such extensive acreages are concerned the diffi-

culties in marlieting are apt to be very great indeed and
tiaese are Iieiglitened by tlie fact that communications arc
very often undeveloped and the conditions under which
production is carried on are so uneconomic. The small
farmer cultivating his fragmented holdings, and lacking in
capital and combination falls an easy prey to unfavourable
climatic conditions. "His farming is still largely of the
subsistence type. His sales of produce are intermittent.
His day to day concern is with production and upon this
his attention must in the main be fixed. The traditional
lore and inherited experience of his craft centre round the
work on his holding: they are for the most part lacking in
th€( commercial side of his business. Until therefore, he
realiseis that, as a seller of produce he must study the art
of sale, either as an individual or through combination with
other producers, it is inevitable that he should come off
second best in his contest with the highly specialised know-
ledge and the vastly superior resources of those who
purchase his produce."* The middlemen, therefore, under
the present circumstances is performing a distinctly
necessary function and marketing reforpi in India should
aim at the organisation of the producers so as to secure for
them better bargaining power and the creation of the most
favourable conditions for the free play of the forces of
demand and supply.

* Report of the Royal Commission on Indian Agriculture

1J.382.
 CHAPTER II.
THE MIDDLEMAN.

"The two biggest losses which the farmer sustains,"

according to Jardine the U- S. A. Secretary of Agriculture,
"are in uneconomic production and uneconomic marketing."
With an increase in size and a rise in the scale of industry,
Ihc gap which separates the producer and the consumer is
rapidly becoming wider, bringing in a chain of middlemen
entrusted with the duty of rendering services for whicli
payment has to be made. In India the weaver or farmer of
the 17th Century producing for the consumer in the village
and getting his remuneration in kind has now been
replaced by mass production for far distant markets and
for aidemand the volume of which is not always capable of
accurate measurement. The dcvlopment of science which
has led to the proper preservation of food and its storage
has extended the lime factor in the market, so that it is
now possible for the Australian slock grower to supply to
the distant European market or for the Californian orange
grower and the Indian jute cultivator to exchange producls.
As a natural corollary to this, transportation has assumed
greater importance and'the services required to make the
commodities transportable have become no less important.

The consumer gradually has grown to accept every new

facility created and cvei-y new service rendered as a matter
of course and the demand has been for more, e.g., the
consumer of tea was accustomed to his supply in bulk from
the grocer, then tin and paper packets were introduced and
now he prefers home delivery. With e'very facility created
and every convenience added more people are being drawn
into the distribution business and in addition to the work of
passing on the commodity from the producer to the con-
sumer, industries engaged in making Ihe produce portable
and presentable have sprung up, and all these mean
addition to the cost which the consumer has to pay with
 THI! I\[IDDLEMAN 11

the result that values of coinmocUties are swallovv'cd up by

the costs of other services.

Machine production is rapidly lowering the cost of

production by increasing the size of the industry, by a pro-
gressive development of machine power and efficiency and by
the introduction of labour saving appliances. In the iron and
steel industry a magnetic crane operated by two men has
replaced as many as 128 men and in tlie boot industry one
man working on a lasting machine has replaced 12 hands.
In agriculture, particularly in countries where machinery is
largely employed as in the U.S.A., the output per worker
has during the first quarter of this century increased in
wheat by 41.8 per cent and in corn by 46.7 per cent while
in rice it has risen by 4 i times, in cotton by 3 times and
in sugar beet by 7i times.* In Indian agriculture too the
cost of production is gradually going down due to the
introduction of better varieties of seeds, better irrigation
facilities and improved implements, but the farmer
even after succeeding in growing the proverbial two
blades of grass in place of one, finds himself worse ofT than
before as cheap production has been followed by a lengthen-
ing of the chain of middlemen resulting in more costly
distribution. In the primary jute markets in Eastern
Bengal the grower has to give 2.7 to 4 maunds extra per
100 maunds sold to the middleman. In the Yeotmal Cotton
market, the middleman's charges are Rs. 2 / 3 per khandi of
cotton while the same for Pusad a smaller market is Rs. 1/1.
In the Anantpur District of the Madras Presidency, accord-
ing to the specimen figures submitted to the Madras Provin-
cial Banking Enquiry Committee, for a consignment of
21 maunds of Groundnuts sold by the grower he received
Rs. 91 and the middleman charged Rs. 3/12 while for a
lot of 158 maunds of Jaggery valued at Rs. 516 the middle-
man's charges amounted to 4 per cent. The jute grower
in the Rangpur District of Bengal gets on an average Rs. 6/8
out of a bundle of Rs. 10 worth of his jute sold in Calcutta.
In the Sural District of Bombay the difference in the prices
obtained by the rice grower and the ultimate consumer is

'*J. H. Barnes—America's Industrial Production Methods

(American Economic Review Suplcment. March 1924).
12 AGRICULTURAL MARKETING

often as high as 150 per cent. From the statement of a sale

transaction of 150 maunds of Gur given by.G. C. Mukhtyar*
we And that the producer received only Rs. 3/15 per maund
while the consumer paid Rs. 6, thus the difference (52 per
cent) represented the middlemen's charges and this margin
in not immaterial when we realise that the farmer in that
area lives on the margin of subsistence. In the marketing
of fruits in the Rombay Presidency cost of transport and
middleman's profits take up a large share of the difference
between the price paid to the grower and the sale price in
the Bombay Wholesale Market, as will appear from the
following figures.

Place. Fruit. Percentage of Sale proceeds received

by Producer. by Middleman.
Poona Guava 33.6. 66.4.
Poona Orange 53.4. 46-6.
Nagar Mosambi 28.6. 71.4.
Nasik Papya 36.9. 63.1.

When we consider the retail side of distribution in the

fruit trade, the postion of tjie grower recedes far in to the
background. The Report of the Committee on the Im-
provement in the Marketing of Fruits and Vegetables in
the Town of Bombay (1934) gives an illustration of the wide
margin between the producers' prices and retail prices paid
by the consumer. A "^oona guava grower sent a basket for
sale to Bombay and it was sold it to the retailer for Rs, 4 / 3
and the latter sorted the fruits into four classes and fixed
differential prices for each grade, so that the total expected
price was Rs. 19/4 but as about 50 percent of the fruits was
not sold or damaged, he received actually Rs. 9/10. Thus
the difference in the two prices was Rs. 6/10 on this con-
signment and on analysis we find that the grower received
11.6 percent, cost of packing accounted for 2.3, freight 9.7,
other transportation charges 7.6, wholesaler's profit 12.3'
and retailer's profit 56.5. A statistical comparision of the

'G. C. Mukhtyar—Ljfe ^nd Labour in a South Guirat

Village (1930),
 THE MIDDLEMAN 13

actual gains of the producer by selling through the ordinary

middlemen and through the cooperative sale organisations
is not always possible as the middlemen in India, particular-
ly in the early stages have earned a wide notoriety for their
incorrect weights and bad system of accounting. In the
marketing of fresh coconuts wc find that,"" even tliough the
prices are generally quoted per 1,000, the ryots have to give
more than 1,000 nuts to the dealer or the up country
merchant."* From the figures published by the Sub-
committee of the Indian Cotton Committee in their Report
on an enquiry into the marketing of cotton in Adoni and
Nandyal Taluks of the Bellary and Kurnool Districts of the
Madras Presidency, we find that by selling 21 maunds of
groundnut and 20 maunds of jaggery through a broker, a
grower received Rs. 91 and paid Rs, 3 / 1 2 / 6 as middleman's
charges while by sale through a cooperative loan and sale
society he received Rs. 92 and paid Rs. 2 / 1 2 / 6 as marketing
charges, a difference of Re. 1 but he was assured of correct
weights, accuracy in accounts and financial assistance. In
the case of marketing the produce direct, particularly in
fruits and vegetables, the grower makes a big saving which
makes farming remunerative for him. Some energetic
fruitgrowers of Atgam in the Sural District do their own
marketing themselves. They assemble, pack and despatch
fruits to Bulsar, Surat or Baroda.** One such man was
offered Rs. 275 by a middleman for his lot of mangoes, 5,791
in number, but he preferred to market them himself. His
gross receipts were Rs. 612/14 and his marketing expenses
amounted to Rs. 233/7. Thus his profits were Rs. 378/7
or Rs 103/7 more than what he would have received if he
had marketed through middlemen.

To illustrate how middleman's charges are gradually

pilejd up on the grower's prices, ^we may cite an instance of
a transaction in cotton from Cawnpore. The village Bania
paid the grower at the rate of Rs. 8 per mauhd and sold it
in a large market at Rs, 9 per maund out of which he had
to bear marketing costs of annas four per maund. Thus the
grower received for 100 maunds of cotton Rs. 800 and the
•Report on the Enquiry info Cocoanut Trade in India 1934.
**Mi!ktyar—Life & Labour in a South'Gujrat Village p, 194,
14 A G R I C U L T U R A L MARiiExiNG

ginner had to pay for it Rs. 1,036-5-0 or Rs. 236-5-0 more,

and out of this Rs. 107-13-0 represented the cost of
transport, packing, interest, and insurance etc. while the
balance Rs. 128-8-0 or 16 per cent on the total grower's
price are the actual profits of the middlemen. Tracing the
gradual increase in the price in groundnuts in Madras in
this way we find that when the village grower received
Rs. 1-5-3 per maund, in the next stage the rate rose to
Rs. 1-10-0 and at the exporting point Rs, 1-13-0 or 38 p.c.
higher.

Evidently the middlemen's charges vary widely

according to the nature of the commodity, the extent and
complications in the marketing organisation, the difficulties
or otherwise in the assembling and transport of the
produce. The charges for the marketing of foodgrains are
lower than those for commercial crops, e.g., the charge in
the case of wheat in the United province from the village to
the large market or to the railhead varies from 4 to 6 p.c.
as the following illustration will show;—
Marketing charges on 100 mavmds of wheat @ Rs. 5
per maund from village to Railhead in the Hardoi district

Weighing, marketing dues etc. 8—12—9.

Charity 0—1—3.
Cleaning charges 6—4—0.
Broker 5—0—0.
Transport cost 9—6—0.

Total Rs. 29—8—0.

This works out to 6 p.c. while in Travancore, in the
case of a parcel of copra, valued at Rs. 39-14-0 the charges
w6re Rs. 4-2-0 or 10. p c In the Anantpur district of
Madras, the marketing charges in groundnuts vary from 6
to 8 p.c. Jute and groundnuts are grown over a wide area
in small plots, hence an army of m i d d l e m ^ is required t a
assemble and prepare them for export. It is quite natural to
expect that in the case of such commodities as well as for
Gur, the cost of marketing will be much higher than in
others. In jute the middlemen charge 25 to 30 per cent of
 THE MIDDLEMAN 15

the value as Iheir remuneration.*! In the Calcutta Jute mar-

ket two systems of charges are in vogue, one among Bengali
Aratdars and the other among non-Bengali merchants, the
latter having a flat rate of six annas per maund for Katcha
and seven annas for Pucca bales while the former have only
the Pucca system and they charge four annas per maund in
addition to a bewildering variety of charges under various
pretexts.*2 In the Punjab too, the figures of the Shahpur
village enquiry indicate that the village dealer's margin of
profit is only two annas per maund for wheat and four to eight
annas for cotton. The cliarges that have to be paid by sel-
lers of grain vary from Rs. 2-2-3 at Gojra to Rs. 2-14-6 at
Chicha and the charges for cotton at Lyallpur are Rs. 3-4-0
while the corresponding charges for grain there are only
Rs. 2-5-6. Even in the primary markets, the charges vary
according to the nature of the commodity. Tehong village
in the JuUundhar District of the Punjab has two markets
close to it. Phegwara, a small market is 10 miles away while
the bigger market Ludhiana is at a distance of 12 miles and
both arc on a metalled road although the road connecting the
village with the metalled road is not at all good. The charges
for marketing at Phegwara Rs. 100 worth of produce are
Rs. 1-9-0 for wheat and Rs. 1-5-0 for maize while they are
Rs. 2-1-0 for cotton and Gur.t3

The number and variety of middlemen depend also to

a large extent on the scale of agricultural development. In
those districts of the United Provinces, where the Kharif
harvest consists of the cheaper foodgrains, the quantity of
crops available for marketing is small, hence the trade is
mostly concentrated in village markets and the petty
traders are numerous, but "in the western districts where
irrigation is adequate and money crops are grown, the
traders are wealthy and the markets though few are well
organised. It is in these bigger mandis that the wholesale

*1. H. Sinha—IMofussil Marketing of Jute (Indian Journal

of Economics, December 1929).
*2. Note on Marketing in villages—App 60 Punjab Banking
Enquiry Report.
t 3 . Punjab village survey—Village Tehong, District
Jullendhur Pf.' 68.
16 AGRICULTURAL MARKEfmo

Araliya is found; the financier who, by lending capital to

Beparis makes sure that the prodvice of the neighbourhood
should reach him regularly at harvest time. He is the
commission agent of the wholesale merchant and the Mill
and the most important link in the chain of middlemen who
unites the grower and the exporter.* In jute the great
number and variety of middlemen is mainly due to the fact
that the high value of the crop requires large funds and
many middlemen for moving them. The special process
of baling has given rise to another class of middlemen called
the Baler and his agents. Besides these the transport
difficulties are to some extent responsible for the lengthening
of the chain. In Eastern Bengal the villages during the
rainy season arc completely cut off from the rest of the
world and a Bepari requiring 500 maimds of jute has to go
to the edge of a small paddy field in order to get 3 or 4
maunds from one village and then go to another village and
buy another lot of 5-or 10 maunds, thus for every lot of a
few maunds he has to go 3 or 4 miles. These dealers
move about in their small boats and after making a subs-
tantial collection they ultimately go to a big village where
the Bepari's boat is anchored.'t

In the primary market, the gx'ower either sells in the

village or in the nearest market (Hat, Mandi or Shandy)
himself or sells it to some middlemen belonging to the
village or visiting it. The village middleman may be the
moneylender carrying on trade as well or the small village
grocer making purchases for sale in the nearest Mandi.
In the United Provinces about 30 per cent of the wheat of
the village is sold to the moneylender, 35 per cent to the
small grocer, 5 per cent to the village Kumhar (potter) and
30 per cent is sold directly by the grower at the nearest
Mandi. The village mahajan has priority over others as
he is the financier of the cultivator and makes advances to
him from season to season to secure the crop. He some-
times stores the produce in the expectation of a rise in the
market but the grocer does not do so and he sells soon
'Report of the U. P. Banking Enquiry Committee.
tEvidence of Mr. G. Jlorgan before the Royal Commission
on Agriculture.
 THE MIDDLEMAN 17

after the purchase. He pays cash and tlie price is paid on

delivery or immediately after sale on the next market day.
He buys at the village rate and the weighing which is done
under his supervision, gives him ample scope for cheating.
His profits come to about Rs. 2 / 8 for a cartload of 16
maunds which amounts to 3i per cent, a rate high enough
in view of the fact that the turnover is rapid and the
risks involved are negligible. In backward regions in
Assam sometimes the Beparis take with them earthenware
pots and exchange them for the quantity of paddy that a
pot will hold.

The difficulties of transporting the produce to the

nearest market for direct sale are to a large extent solved
by middlemen of the class of village kumhars in the United
Provinces who own pack animals and buy from the
growers. They make good profits on the margin allowed
by tlie village price, false weights and freight allowances.
In the backwoods of Dindori in the Central Provinces a
class of itinerant traders move about with their herds of
pack bullocks carrying grain for sale in the wholesale
market. In the United Provinces this function is per-
formed by the Banjaras, a class of nomadic middlemen who
buy grain in the villages in the Terai and Bhabai, give
advances to the Tharu and Bhoksa ryots and keep a tight
, hold over tliem so as to secure favourable prices and exercise
a close monopoly over this trade. In the Amritsar District,
cotton is purchased by village traders called Khojas who
own pony carts having a loading capacity of 16 maunds
and the produce is carried to the Amritsar market. These
village buyers are very useful to the petty ryots who do not
own carts and have very little surplus to sell at one time or
who have to supplement their meagre income from land by
working as labourers and have no leisure to go to the
market with their produce, but this service is obtained at
rather high cost. In such cases, sometimes the village
watchman or Taula acts as a part-time middleman. In
United Provinces, in some areas in addition to his normal
function of weighing wheat sold in the village, the Taula
takes samples weighing one chatak ( l / 1 6 t h of a seer) of each
lot to the nearest Mandi and after obtaining orders returns
18 AGIUCULTIJRAL MARKISTING

lo Ihe village and arranges for the delivery of the produce

to the middlemen in the Mandi. He realises his commission
and other charges from the grower. Even where the
activities of the Taula are confined to his normal function of
weighing, he exercises a great influence on the ryot in
determining the prices and the persons to whom the produce
is to be sold. In the mango trade in the Bombay Presi-
dency, the Hundekari or the transport agent plays an im-
portant part in deciding as to which of the Bombay
brokers the consignment is to be sent. His normal
function is to take charge of the parcels from the grower
at the railway stations in the rural areas, to weigh and
label them, arrange for their loading in the waggons and
make over the railway receipt to the grower or what is
more common to the Bombay consignee direct. He gets
his commission from both the parties and plays a great
pai^t in determining the direction of trade.

Besides these in many areas the tendency is for a

more prosperous ryot to buy up produce from the poorer
ones and start as a middleman. This has been promoted
by the increasing competition among merchants which has
reversed the practice of the growers going in search of
buyers. In the toiiacco trade in North Bihar, a few of the
villagers buy up the standing crop from the other growers
who mainly cultivate it in small patches, and pay a small
sum as earnest money, after which they reap the crop and
rough cure it and sell the collected produce to outside
Beparis when they visit the village. In some areas like
Nowgong in Assam, the Pradhans or Sarkars (headman) of
villages exercise great power over the smaller ryots whetl*r
they are indebted to them or not. Jute and paddy in this
region have to be marketed through them often at rates not
favourable to the growers.
In addition lo all these, the Faria, Bepari or Paikar
plays an important part in moving the produce from the
village. The Faria is usually a man of the locality and
he goes about collecting small lots from the villages and
supplies to the Bepari who is above him in the chain. In
some calses the Faria purchases on his own account and
 THE MIDDLEMAN 19

sells to llie Bepari at current market rales, thus under-

taking all the risks of the business himself, but usually he
works as an agent of the Bepari and buys with his own
money, being entitled to a commission only. During the
sowing season in the Jute areas of Bengal, the Bepari
directly or through the Faria advances money to the Ryots
on hypothecation of the crop on Satta patas by which the
borrower agrees to deliver a stipulated quantity of Jute to
the lender within a specified date in repayment of the loan.
The Faria transports the Jute to Jute collecting stations
or mokams for delivery through the Bepari to the balers or
exporting houses. The charges realised by Farias or
Beparis from the growers vary from station to station as
the following figures will show:—

Excess charged from sellers per 100 maunds.

Station Muthi Bachat Dhalak Total
Seers. Seers. Md—Sr Md—Srs
Lalpur 20 20 3 0 4. 0
Munshirhat 13 12 2 20 3 5
Mirzapur 5 5 2 20 2 30
Bachat denotes the quantity to be rejected as of
inferior quality. Dhalak is the customary allowance.
Muthi means the quantity taken at random.* Where
the Bepari is sent out and financed by a dealer or
Aratdar with instructions about the rate to be offered, he
will get only 9 pies per maund if he works on the com-
mission basis and if he works independently, he is free to
pay any price below he rate fixed and appropriate the
margin himself. It is only when he finds that the grower's
rate and the Aratdar's rate leave him little margin that he
takes- recourse to underhand tactics. He damps the Jute
for increasing the weight so as to give him a high rate of
profit. Another method is to water the Jute and to
strew sand on it to hide the moisture or to place a clod of
earth or piece of stone inside a tightly tied bundle of loose
Jute to increase the weight. "It is certain that little
"Mofussil Marketing of Jute—Dr. H. Sinha in Indian Journal
of Economics, December, 1929,
20 AGRICULTURAL MARKETIKG

watering of fibre is done by the cultivator and that this

evil is perpetrated by the petty dealer."*!

In the tobacco trade in Northern Bengal, purchases are

made in the villages from the growers by merchants through
Dalals or Paikars. These merchants stay in the house of
the Paikars and go about with them for their purchases.
The Paikars get commission at the rate of 4 to 6 annas
per maund from both parties for their services. In some
areas Dalals employ Paikars for making their purchases
and store their produce in their warehouses. They
advance money through the Paikars to the growers some-
times even at sowing and enter into agreements for the
purchase of their crop at very-low rates.

In the marketing of cotton in the Madras Presidency

the village buyer goes round the villages with local brokers
who get a commission of - / 4 / - to - / 8 / - per pothie. In the
Tiruppur tract, "on the Shandy day at Avanshi, petty
merchants visit the village or wait on the road side under
the trees with the Salters' spring balance tied up and make
purchases of headloads of ' Kapas brought by small
cultivators. Such a trader is not popular as he is believed
to tamper with the spring balance to his advantage."*2
While in the Adoni market in Madras Presidency, the grower
usually takes his produce to the market himself and sells
outright through a broker, in Bellary the brokers dominate
as through their itinerant agents or dealers they make
advances to growers with a view to secure their crop.

In the marketing of paddy in Assam, Beparis from

Bengal visit the villages as soon as the rivers begin to rise
and make their purchases in Hats and in villages usually
on a cash basis. In the marketing of the famous Nellore
rice of Madras the rice millowners advance money to
the growers at 12 per cent rate of interest and fhe
purchases are made through "Dalals" or brokers who buy
paddy in the villages on a commission of Rupee one per
*1. Report of the Jute Enquiry Committee, page 13.
*2. Finance, Sowing and marketing of Cultivator's Cotton
in the Tiruppura Tract by S. V. Duriaswami (Agriculture and
Livestock in India. January 1935),
 THE MIDDLEMAN 21

pulti ot 720 Madras measures and arrange for the

transport of the produce to the mill. In Cocanada, the
millowner sends his broker for the purchase of the paddy.
Payment is usually made one week after the receipt of the
bags in the mill, but if the grower is in the need of funds,
the Broker gives him a slip called "Baratam" on the
following form "Please pay to or to his
order a sum of Rs and debit the amount to my
account." The broker arranges for the transport of the
bags to the mill and during the period of transit he is
responsible for the commodity. In Bengal the Beparis
who deal with the Calcutta market are under a great
disadvantage as they cannot sell direct to the rice mills but
have to do so through the Aratdars, who usually adopt
various devices to cheat the Beparis. In the Backerganj
district however a large percentage of the paddy is exported
after being husked and here the Beparis play an important
part as they go in boats to the villages and bring the rice
to buskers at important centres of rice trade.

In the marketing of groundnut in the Madras

Presidency the village merchant plays an important part
as he usually finances the grower on condition of sale after
harvest at a stipulated price. If the merchant happens
to supply seeds also on credit, the Ryot has to return the
seed plus 50 per cent of the quantity supplied just after the
harvest. This system known as "Nagu" is very favourable
to the merchant as he obtains a high interest, and makes
further a double profit in the shape of purchase at low
rates and in the weighment of the produce. In South
Arcot is to be found a system known as "Unfixed Contract"
The ryot is paid upto 80 per cent of the market value at
the day's price but no price is fixed at the time of sale. If
the price falls, the buyer may call on the seller to make up
the difference, while if it rises, he does not inform him.
If the seller insists on having the price fixed on a particular
day when the price may have risen, the buyer pleads his
inability to fix the price for the entire lot and the seller is
compelled to agree to it and if the price falls immediately
after that he loses heavily. "The most remarkable thing
22 AGRICULTURAL MARKETING

in Ihis gamble is tliat the actual stuff held under the unfixed
contract would have been shipped to Marseilles days ago."*l
In sugarcane the chain of middlemen is not large as the
cane plantations are usually in the neighhourhood of the
mills and the growers supply direct to the mills, usually on
the receipt of an advance. In the Darbhanga district of
Bihar the growers plant cane without any agreement but
in July when the cane has attained a fair height they are
given an advance without interest on condition of supply
at a definite rate, which is nominal as the actual rate is
higher, being fixed on the basis of half anna per maund for
each Rupee of the current price of refined sugar plus half
of one anna. The cane purchase system in the Saran
district where mills are located mainly on railway lines,
admits of middlemen in the form of a contractor with a
defined terrtorial jurisdiction. No advance is given and
the ryot has to deliver his produce at the railway station to
be weighed on the contractor's weighbridge. The ryot
rarely gets an advantageous rate as it is difficult for him to
dispose of his produce elsewhere. In the purchase of Gur,
the itinerant Beparis manipulate the prices as they like. In
the Gur trade in Poona district the producers carry the Gur
on their carts to the shops of commission agents at Poona
who sell on their behalf. In the Surat district gur is
transferred into earlhen pots made locally and the unit of
of sale is such a pot with Gur filled to the; brim. The Bulsar
merchants make their purchases tlirough the village
Bania or a "Fatakia" Dalai. The fatakia Dalai keeps
himself in touch with the Gur producers of the locality and
helps the merchant to make his selection and he is also
entrusted with the work of despatching the commodity to
the town market.
In the cane growing areas of the United provinces a
special type of Mahajan has been developed called the
Khandsali whose function is to ^dvance money to the cane-
grower before the crop is ready on the condition that the
juice will be sold at a rate much lower than the market
rate. The grower uses the canecrusher supplied by the
Khandsali for whicli he has to pay rent.
*1. Chetty—Cooperative Marketing of Agricultural Produce
in South India p. 15,
 THE MIDDLEMAN 23

In the marketing of fruits, particularly of mangoes, the

common practice in Bihar and Bombay is for the plantation
to be sold while in blossom to a class of middlemen called
Kunjras in Bihar and Bagwans in Bombay. They base,
their offer on their estimate of the yield, the nature of
demand and transport facilities. Purchase is usually by
contract although auctions sometimes take place. The
price is payable in full before occupation or in instalments,
one half at the time of signing the contract and the balance
when half the crop is harvested. In Assam the orange
growers sell fruits to Beparis who attend all the hats and
they in their turn sell to Aratdars who arrange for their
despatch in boats. In Sylhet, in addition to local Beparis,
agents of merchants of Calcutta or Narayangunj collect
frails in the orchards or in their camping grounds near the
Bazars. Sometimes they purchase an entire orchard when
the fruit is young and suffer losses due to failure of crops.

In the secondary stage of marketing the Aratdar or the

commission agent plays a leading part in moving the produce
nearer to the exporting or consuming point and in keeping
the market steady by arranging for the storage and gradual
adjustment of supply to the demand. In the wheat Irade
in smaller mai'kets the growers directly or through Beparis
sell to the Banias. The produce is put to open auction
and the seller has the option of rejecting the offer of the
highest bidder. In the bigger markets however, in place
of one Bania middlman. there are two. the Kacha A.-lhi and
the Pukka Arthi. The former acts as a commission agent
io the growers and petty dealers and exporters. The Pukka
Arthis make their purchases through the Kacha and as they
work on a very small • margin their profits depend on the
volume of their business. In the market, the Kacha Arthis
sell the produce by open auction at which the Pukka Arthis
bid after which the Kacha Arthi has to perform an important
duly, viz, the fixing of the Karda or allowances for dirt and
Ihis depends on the purity of the produce. Delivery is
given in the warehouse or Ahata of the purchasing Arthi
where weighment takes place and on the actual weight
certain deductions are made. Payment of the price is
made by the selling Arthi on his receiving the purcha or the
24 AGRICOLTURAL MARKETIN6

slip of the purchasing Arthi who makes his payment either

on the evening of the same day or as is more usual on the
third day after the sale. Thus the Kachha Arthi as tire
agent of the seller is interested in securing as high a price
as is possible and in arranging for the correct weighing of
the commodity. His duty is also to see that the seller is
not saddled with any undue allowances or deductions and
lie makes the payment soon after sale and takes on himself
the risk of realising the amount from the buyer later on.
The P u k k a Arthi as the agent of the buyers saves them
from the expense of having to maintain their own agents at
important centres, and he is in touch with the market, his
advice about the purchases is invaluable. In many Punjab
wheat markets there is a third class of Arthi called
Kachha pakka, who work both for the buyers and the
sellers. These Arthis are to be distinguished from Dalals
or brokers who act merely as the connecting link between
the buyer and the seller. They have no godown of their
own and the only capital which they own are "a towel and
a notebook." Owing to their great intimate knowledge of
the trade they give valuable advice to the buyers about the
condition of the market and they are execellent judges of
the quality, colour and weight of the produce and the
proportion of foreign substances present in it. They are
indispensable in the organisation of urban wholesale
markets. Yet as sometimes they act both for the buyer and
the seller, they try to take undue advantage of their iJosition
and publicity is the only safeguard against this tendency.
The following case illustrates how the interests of the parties
suffer. "I found one buyer, protesting against an Arthiya
settling an auction of a heap of wheat by purchasing it on
his own account at Rs. 3-1-0 per maund. When the bid
was at Rs. 3-0-6 per maund the Arhtiya suddenly said
"Rs. 3-1-0 per maund Koi bolega" and then in the
same breath added, "ho gaya", thus giving the others no
chance of bidding higher. A buyer was ready to give
Rs. 3-2-0 per maund but the Arhtiya said that he should
have spoken earlier. The seller was not present at the
auction."*
'Finance and Marketing of Cultivators' Wheat in the Punjab
by Shah ad Dawar p. 63.
 THE MIDDLEMAJ? 25

Tluis as the Bepari links the village with the small

market, the Kachha Arthl acts as the link between the small
market and the big organised market. The Pukka Arthi
on the other hand, "is the primary distributor of agricultural
produce and as such he stands at the apex of the structure
of Indian marketing with the Kachha Arthi and dealer in the
small mandi in the middle, and the village Bania, Bepari
and cartman at its base."*
The Aratdar dealing in Jute in the interior of Bengal
does not boast of large warehouses as the Pakki Arthf in
the United Provinces can. Their main function is to
arrange for the collection of Jute from the villages, and its
delivery to the Baling and Pressing Company. They have
to make advances to the Bepari occasionally and this is
done mainly on the guarantee of the brokers or Daials and
in these cases he is assuerd of a steady supply. In some
areas like Serajgunj the Baler is developing a tendency of
eliminating the Aratdar and of dealing with and financing
the Bepari directly. The small Baling stations where
Kuchha Baling is chiefly done have a small staff under a
Manager, who gets a share in the profit besides his pay.
Thus in the rural areas, the Aratdar's position in Jute is not
very important and he is at best a commission agent, but in
the Calcutta market particularly in loose J^te and Kachha
bales his influence is very great.
With the exception of Cossipur the Aratdars at other
centres have their own godowns where they carry on busi-
ness on their own account as well as on behalf of Beparis or
dealers from the interior. The Aratdar pays the freight as
well as other transport charges and on the delivery of the
goods he advances upto 50 per cent of the value. The
Aratdar at the Cossipur market is purely a commission
agent and he arranges for inspection by intending purchasers
of the goods in the railway warehouses. The business
terms of the Calcutta Aratdars may be grouped into two
classes, the Kachha and the Pukka. In the former there is
no liability on the part of the Aratdar if the purchase money
is not paid by the buyer, while in the second, the entire
'Report of the U. P. Banking Enquiry Committee.
26 AdRICULTURAL MARKETING

responsibility for payment is accepted by the Aratdar.

Among the charges realised besides the commission are
godown rent, insurance for the period of storage, Dalali for
payment to the buyer's broker, Ojan Sarkari or weighment
fee, Cashiery and Jalpani paid to meet the establishment
charges of the buyer, and hire of the Tarpulin used for
protecting the Jute.
In Cotton the importance of the Arhatiya or commission
agent varies from place to place. In the Adoni market in
Madras Presidency the ryots prefer not to wait for the sale
of their cotton and the commission agents put the buyer
and the seller together, but in the neighbouring Bellary
market, if the cotton is not sold on the same day the
growers leave it with commission agents who sell them on
their behalf and accept an advance of 50 to 60 per cent of
the value. The growers are completely at the mercy of the
Adatya and he has to accept whatever rate the latter obtains
for them. In Berar where the markets are regulated, be-
sides acting as the seller's agent, the Adhatiya on behalf of
the seller's fixes with the buyers the ruling local rate M the
day at which the sales are to be made and also supervises
the weighing of the cotton carts in the ginning factories.
Like Adoni, at the Yeotmal cotton market in the Central
Provinces the Adhatiya has to pay up the grower the price on
the evening of the day on which it is to be sold, but at
Dharwar the Adhatiyas sell the cotton on behalf of the grower
and pay him at his convenience although the latter has the
privilege of demanding payment at the daily market price
of cotton on any day during the next two months. The
Adhatiya thus not only finds a buyer and settles the bargain
but also undertakes the responsibility of payment and in
many cases has to pay the amount himself and to settle his •
acceunt with the seller later on. In west Khandesh the
Adhatiya sometimes advances money to the growers on
condition that they sell their produce through them. When
the grower brings his cotton to the market the Adhatiya's
Dalai tak6s a sample from the cart, shows it to the intending
purchaser, settles the bargain with them, takes the cart to
the ginning factory and gets it weighed and gives the grower
a slip showing details of his account on the presentation of
 THE MIDDLEMAN 27

which the Adhatiya pays him the full amount and charges a
Commission varying from Rs. 1/8/- to Rs. 2/- per cart.
The Adhat system in tlie Dhulia market is so well organised
that it ensures prompt and cash payment and a high order
of business honesty.
In Madras Presidency the buUc of the paddy trade is
carried on by the Khaida merchants who in many cases pay
advances to the growers and petty dealers and their remune-
ration includes commission, kolagaram or weighmenl fee,
Dharmam or charity contribution, Gumasta Rasum or pay-
ment for' account keeping, interest for the advance and rent
for storage. The rate at which the grower will be paid is
usually pre-arranged. In the Kistna Delta, the ryots take
paddy by cart to the mraket town and sell it to the
merchants direct or through commission agents, in the latter
case they are completely at the mercy of the agents for the
price they get. In Bengal paddy is usually marketed
through Arhatdars who supply to the shippers or ricemills.
The Aratdars sometimes combine trading on their own
account with commission business and this often injures
the interests of the Beparis. In the Central Provinces the
merchants employ an army of agents who receive twelve
annas per cent on the purchases as their remuneration.
These wholesale merchants buy outright and sell to retailers
on credit giving them 8 to 15 days time. In the province of
Orissa the Arhatdar controls the supply mainly by giving
advances which may be of two types;— (1) Small advances
given on condition of delivery at stipulated price and
stipulated date but carrying no interest and (2) advance for
delivery at market prices at interest varying from 12 to 181
per cent. The Cuttack Arhatdars undertake to pay the
Beparis in 7 day's time and if a cash payment is demanded
a discount at the rate of 4 annas per cent is deducted.
The system of agricultural marketing in India is
saddled with a long chain of middlemen, and the remune-
ration for their services increases the load of the consumer
although the producer does not derive a similar benefit, but
considering the lack of organisation of the farmers and
their economic weakness it must be admitted that the
middlemen perform the great function of oiling the wheels
28 AGRICULTURAL MARKETING

of trade and make them smooth running. Petty culti-

vators engaged in making a precarious living on their small
holdings often hail the Bepari or Paikar as the sole means
of converting his surplus produce into liquid resources.
These BepariiB move about from village to village with their
carts, boats or donkeys or camels collecting these little
driblets which later on swell the mighty stream of commerce.
The advances which they make to the growers from time to
time no doubt creates an obligation to market through them
but these are of the greatest importance to them as they
keep them going through all the months of waiting till the
next harvest is ready. "In the present system of com-
munications, this indigenous system which has grown up
spontaneously to meet an existing demand, has worked and
continues to work on the whole satisfactorily and although
it is easy to complain that these persons make their living
out of the cultivator it is obvious that all persons have to
earn their living in one way or other."*

It does not require much imagination to recount all

the abuses and the iniquities of this system, many of them
are real and demand reform but some of them arise out of
the chaotic state of marketing and lack of any organisation.
In the tobacco trade in the Guntur district of Madras, the
grower brings the cured leaf in bales to the market without
grading or sorting it. Had the tobacco been graded properly
the Arhatdar would have been able to quote for each quality
separately and the grower would have obtained the maxi-
mum price for it. Further, on the average 5,000 bales come
every morning to the market on 800 to 1,000 carts. A
perfunctory examination of the bales is made and the
price fixed accordingly and this is usually to the dis-
advantage of the seller. Further as there is no organisation
in the market, and only 200 men have to handle daily 5,000
to 6,000 bales, and deal with each seller individually, it
means time and, the grower has to wait indefinitely
or if he is unwilling to wait he leaves his produce at the
mercy of the middlemen. Besides this, in the marketing
of many commodities like cotton although the seller is

•Report of the C. P. Banking Enquiry Committee page 199,

 THE MIDDLEMAN 29

present when the sale is made he is quite ignorant

of the offers made by the buyer or his agent as the
allowance for dirt is usually settled by the seller Arhti
and in doing so he favours the Pukka Arhti as "the secret
understanding is that if he gives a good allowance, the pur-
chase money will be paid that evening, otherwise according
to the custom of the Mandi, on the third day." Thus the
interests of the seller' are sacrificed by those very persons
wliom he employs to safeguard them and this is so because
there is no market regulation.

The middleman, as a moneylender exercises a great

influence over the producer and this is very often used
against him. At Bellary the Dalai dominates the market
mainly because he gives out liberal advances to secure the
produce and this business fast degenerates into pure money-
lending. When due to a failure of crops, the grower is
unable to repay and the bad debts of the Dalai increase or
his assets become frozen, the business of marketing suffers.

The use of false weights and cheating at the time of

weighing are too common with our middlemen. Some
merchants while buying in the villages represent that they
would buy at current Town market rates but they make up
for the cost of transport and their profits by a clever
variation in weights.
Adulteration either by damping the produce or mixing
it with other stuff is mainly done by the middlemen and
rarely by the growers as is comonly supposed and this
increases when prices rise and supply declines. It has been
pointed out by the Indian Cotton Committee that mal-
practices of this type are rampant in the ginning factories.
"The Okara commission agents admitted that a good
portion of the shortstaple cotton is mixed with long stapled
American cotton but asserted that exporters insisted upon
this being done and that any factory refusing to do it would
be ruined."

In view of the fact that the middleman has to shoulder

all trade risks, the margin of profits, on the whole is not
30 AGRICULTURAL MARKETING

large. The bulk of his profits depend upon the fluctuations

of prices and on the economics of large scale business. The
risk of loss is equally great. One of his main functions is
to hold up and store produce and for this he has to borrow
at 7 to 9 per cent rate of interest, pay for storage accomoda-
tion and provide' for allowance for wastage which in the
case of -wheat varies from 2i to 5 per cent. According to
the estimate of Mr. W. Roberts, Managing Director of the
British Cottongrowers Association, it would not pay to hold
up wheat in the Punjab unless there was a margin of 6
annas per maund in the maximum and minimum prices of
wheat and this margin was available only twice in 7 years
between 1924 and 1930, thus during these years the middle-
man's losses must have been very heavy. In his study of the
Canal Colony Markets Mr. M. L. Darling points out that in
view of the large volume of work handled by them the in-
come of the commission agents is not high.

Market. Annual Income of Average Income

the Market from per Commission
Commission busi- Agent,
ness.

Gojra. Rs. 2,29,189. Rs. 1,647.

Okara. * Rs. 1,11,248. Rs. 1,100.
Toba Teksingh. Rs. 69, 000. Rs. 1,325.
Chichawatni. Rs. 82,356. Rs. 2,165.

The real evil perhaps is in the tendency of the

middleman to exploit the ignorance and helplessness of the
farmer and to increase his profits by manipulating the rates.
The farmer is accustomed to being exploited by the agents
of the landlord and by the village mahajan, hence he has not
struck out against the middleman boldly to keep down the
tflaring inequalities in the prices. In Rohilkhund, for
example, when wheat sells in large Mandis at the rate of 8
seers per Rupee, the grower has to sell in the village Mandi
at 9 seers. In the Lucknow District, the Bania keeps
ordinarily a margin of at least 12 per cent in the rates
 T H E MibDLEMA>f 31

which is unwarranted in view of the low transport charges

there.

Thus tlie middleman carries on his important function

of facilitating the course of trade in the midst of a popula-
tion, ignorant and unorganised, economically weak and
helpless. The abuses which have crept in are real no-
doubt but these are mainly due to the lack of control and'
organisation of the market. Till any other suitable system,
is devised the middlemen can not be done away with'
although their number may be reduced.
The antiquity of this institution of middlemen goes far
back in history. Plato in his ideal Republic recognised
that in the market there will be "people there, who seeing
this want (of the producer) will lake upon themselves the
duty of sale. All they have to do is to be in the market,
and receive money of those who desire to buy goods and in
exchange for goods, pay money to those who desire to sell."
In a scheme of economy based on division of labour, the
middlleman has an important place as by taking up the
function of distribution he saves time and labour for the
producer and the consumer and brings about a proper
adjustment between production and consumption. Elimi-
nation, of the middleman, therefore, is not a practical
proposilion as the tendency of the consumer is to utilise
the services of the middleman in as many ways as possible
and "the problem before us today is not how to produce the
goods, but how to produce the customers. Consumptionism
is the science of compelling men to use more and more
things." It is no doubt desirable to reduce the cost of dis-
tribution by organising these services better and making
them more direct. Marketing reform to a large extent
depends on improving the productive system, the better
assembling of goods, their classification and standardisa-
tion, proper storage and transportation, diminution in trade
risks and better publicity. When an improvement has been
effected in all these liijks in the chain, then can we
expect to improve the actual marketing organisation and
reduce the cost of the distributing service. Efforts have
32 AGRICULTURAL MARKETING

been made in the United States to malce a direct attack on

the high cost of distribution by the development in the
sphere of retail sale of a system of chain stores and
mail order houses while cooperative organisations have
effected economies in a number of ways by lowering the
cost of distribution. "The graded standardised product of
uniform quality and grade means cheaper transportation,
cheaper storage, lower sale costs, cheaper credit. These
are substantial savings in cooperative marketing which
benefit both producer and consumer"* In India cooperative
marketing is yet in its infancy and the organisation is now
far from perfection, yet the investigations of the Indian
Cotton Committee have shown that in some areas of the
Madras Presidency, in marketing a parcel of groundnuts
and jaggery, the cost of distribution was 1.5 per cent less in
the case of cooperative marketing and the producer was
assured of correct weights. In the Punjab in the grain
trade where the ordinary midilleman's charges vary from
Rs. 2-5-0 to Rs. 2-14-0 per cent, the cooperative commission
shops charge 43 to 55 per cent less. In the Canal Colonies
alone, as estimated by Mr. M. L. Darling, "were the whole
business handled cooperatively the. saving would probably
be about Rs. 2 lakhs and it may be Rs. 40,000 more were
there no charges for religion or charity."

* Boyle—Marketing of Agricultural Products page 95.

 CHAPTER III.
MARKETS.

Marketing in India starts in the village, or in tlie

nearest Bazar or Hat from where the goods passes to the
consumption points through a series of markets. The Hat
or periodical market is a socioeconomic institution as in it
not only the purchases and sales of the produce of the
neighbourhood and also of imported goods takes place but
very often it is the centre for the collection of rent by the
landlord's agents or realisation of interest by the mahajan
and in regions like Chotanagpur these Hats afford great
opportunities for promoting the social intercourse of the
people of the villages.

In the Central Provinces Bazar villages have sprung up

at a distance of 5 to 10 miles from one another where weekly
or biweekly markets are held. Many of these later on
develop as cattle markets with permanent sheds for the
cattle awaiting sale. Many of these are under the control
of the District Councils who construct platforms and sheds
and also look after the sanitation of the locality. In rural
Bengal, permanent bazars do not exist but Hatkhola
or market places are to be found at a distance of 5 to 6 miles
from one another. In Bengal the number of hats is 6786,
in Assam 897 while in Bihar and Orissa there is one market
for every 29 scj. miles and for 11,700 persons. The average
attendance at these Hals, on the supposition that the male
adults of the locality above the age of 15 go to the hats once
a w(iek. varies from 5,000 to 9,000 in Bengal in Assam
'500 to 1,000, and 1,000 to 5,000 in Madras. The average
area served by a; market varies in different provinces and
even in different districts of the same province according to
transport facilities, existence of roads, nature of commodities
produced and the economic condition of the people
themselves.
34 AGRICULTURAL MARIiETING

Province. District. Area served by ar

average market.
Sq. Miles.
Bengal West Bengal ,, .. 31.
North Bengal ,, .. 57>
Central Bengal • <« .. 30.
East Bengal .. 49.
Assam Goalpara ,, .. 36.
• Kamrup .. 94.
Nowgong ., .. 86.
Sylhet .. 15.
Madras Godavari ,, . . 52.
Bellary . . . . 114.
North Arcot ., . . 85.
Rainnad , , ... 88.
Coimbatore ,, . . 93.
South Kanara ,, . . 134.

In Bengal, 50 per cent of the Hats have no more than

20 shops, the average number of shops varying from 28 in
west Bengal and 41 in central Bengal, 34 in north and 66
in eastern Bengal.

In many of the Punjab Districts, the average sized

market serves villages within a radius of 35 miles. From
the figures collected by Shah and Davar in their enquiry
into the flnance and marketing of Cultivators' Wheat in the
Punjab we find that "while 44 per cent of the total amount
of wheat sold was brought from a radius of 10 miles, the
average quantity per seller was greater for longer distances."
In the transport of cotton, the farmer prefers a cart to a
camel or a donkey, hence where the roads are good, the
market commands a wider area. Chichawatni in the
Montgomery District has three markets within a radius of
30 miles while Sonepat has two within a distance of 12
miles. With the expansion of motor communication the
radius served by a market is increasing. The stock of carts
in the rural area has an importance influence in determining
 MARKETS 35

the location- and size of the markets. Thef following table

will give a comparative estimate of the stock of carts in
different provinces : —
Province. Stock of carts per 1,000
Population.

Bengal .. .. .. 17
Bihar & Orissa .. .. 14
Bombay .. .. .. 31
Central Provinces .. .. .. 71
Madras .. .. .. 26
Punjab .. .. .. 11
U. P. .. .. .. 20

It may be noted that in C. P. and Bombay the number

of carts is fairly high as it is necessary for the transport of
cotton while Bengal has few carts in view of its lack of
roads and the large percentage of the carrying work is done
on boats.

Even though with the improvement in the means of

communication in India, the village is being taken out of
its ageold isolation and linked with the chain of markets of
all sizes and grades it can not be said that the road between
the producer and the consumer is open and direct and the
farmers have, a free and competitive market in which to
dispose of their products. Our system of marketing is
responsible for increasing the cost of distribution and waste
in various ways which affects the producer as well as the
consumer. It has already been stated that in our price
structure the middlemen's charges figure very prominently,
yet Indian wheat gets a low price in the foreign market due
to the presence of impurities. Indian cotton is very often
found to be damped and adulterated and the packing of fruits
is so bad as to make them unfit for h u m a n consumption.
Thus although the cost of distribution is high, the services
rendered by the distributors are not at all efficient and
there is ample scope for reform in this direction.
36 AGRICULTURAL MARKETING

In Northern India, the marketing of wheat is principally

confined to the Mandis. In the U. P. many Mandis
deal in all kinds of agricultural produce but in some
of the more important centres, owing to favourable
local conditions gradually some markets have specialised
on a commodity basis, e.g., the Mandis of Deoband, Shamli,
Ghaziabad, Hapur and Meerut trade in wheat and the
Mandis of Khekara and Dankuar are Gur Mandis.
The smaller Mandis in big village centres or
subdivisional towns are mainly engaged in the collection of
wheat during harvest for despatch to the bigger Mandis.
There is very little competition at this stage and the dealers
and sellers have little information of world markets, the
rates at these Mandis depending on the prices at the bigger
market centres. Some of the bigger Mandis like Ghaziabad
are unorganised while Hapur which has the biggest wheat
Mandi in the U. P. is well organised. Before 1924, no
Mandi was organised in the modern sense but there was an
unwritten code of conventions which governed business
practice and it was enforced by the Panchayat. With the
increase in speculative transactions and forward contracts,
this code of conventions could not give any guidance or
control the abuses which soon cropped up. The law courts
condemned these speculative transactions as pure gambling.
To improve this state of things and to bring about a better
organisation of the market at Hapur a Chamber of
Commerce was started in 1924. It was registered as an
association of the Arhtis, Millowners and grain merchants
under Act VII of 1913. Its main objects were "to protect
and promote the trade and establish just and* equitable
principles in trade and to form a code of practice to simplify
and facilitate transactions of business between merchants
dealing in grain." Thus it was purely an organisation of
merchants aiming at the safeguarding of their interests.
The" grower had no place in it and his interests were likely
to conflict with those of the middlemen. However some
advance was no doubt made. The Executive Committee of
the Chamber have codified the market practices and some'
of the most glaring malpractices have been checked. About
 MARKETS 37

60 per cent of the Commission agents at Hapur have joined

it and this movement has spread to other Mandis. The
Hapur Mandi is in telegraphic communication with the
ports and foreign marl^ets, e.g., Cliicago, Liverpool and
London and it broadcasts market information through an
evening daily journal called "Vyapar" which has a wide
circulation among the other Mandis. That the organisation
inaugurated at Hapur has helped to cheapen the cost of
distribution, which is a direct gain to the producer is
illustrated by the figures of the middlemen's charges taken
from an organised Mandi (Hapur) and unorganised Mandi
like Ghaziabad.

CHARGES AT DIFFERENT MANDIS

(Value of wheat is Rs. 100).
Sold by Gi•ower.

Items. Ghaziabad. Hapur.

Rs. A. p. Rs. A. p.
Oclroi 0 8 0 Nil.
Tolai 1 9 0 1 4 0
Charity 0 1 0 Nil.
Dane 0 10 0 0 10 0
Extra weight 0 8 0 Nil.
Bag Allowance 0 8 0 0 3 0
Karda 0 5 0 0 5 0
Wages 0 3 0

4 3 0 2 9 0
In some of the smaller and less organised wheat
markets the charges are even more varied:—
(per 100 Rs. worth of wheat).
Item of charges. Gojra. Batala.
Rs. A. p. Rs. A. p.
Arit (commission) 0 0 3 0 0 3
per bag. per bag.
Chungi (octroi) 10 seers for 10 seers per
100 bags. 100 bags.
38 AGRICULTURAL MARKETING

Kat (discount on cash Nil. 0 0 3

payment). per Rs. 100
Karta (deduction for dirt) Nil. Nil.
Rolai (cliarge for rolling 0 0 2 0 0 2
wheat). per bag. per bag.
Tolai (weighing) 0 2 6 0 0 6

Palladari (Labourer's wages) 0 2 6 0 0 4

per bag.
Shagirdi (Apprenticeship) 0 1 0 Nil.
Chhani (cleaning) 0 0 9 0 0 6
Payment to the Mandi oflEicials -
(a) Chuha (sweeper) i seer per i seer per
heap. heap.

(b) Mehra (watchman) i seer per heap i seer per heap

(c) Changar 4 seer per heap i seer per heap
Chaukidar i pice per bag
t Bs. A. p.
Dharmao (charity) 0 0 6 0 0 6
Goushala 0 0 3 0 0 6

It may be of interest to compare with these the rates of

deductions made in the marketing of cotton in the different
parts of India. At Jalegapn in Khandesh, the buyer pays
six annas per cart containing cotton weighing 480 seers
and the sellers pays nine annas which include discount and
weighment charge 0—6—0, Dharmao 0—1—0 Bhatta
0—0—6, Pinjrapol 0—1—6. In Broach the cultivatorseller
has not to pay any customary charges, while in other
markets charges at the following scale are levied:—

Brokerage 0 8 0 to Re. 1 0 0 per Bhar.

Dharmaday 0 2 0 to Re. 0 5 0 per Bhar.
Discount 0 6 0 percent if payment is made
in cash.
Insurance 0 4 0 to Re. 0 8 0 per Bhar.
Mehta Sukhadi 0 4 0 per Bhar.
Sample 1 to 3 lb. per Bhar.
 MARKETS 39

111 Sind the deductions ai'e more varied. "Tabro" is a

charge of 3 to 5 seers on account of weighment. Dalali is
at 0—0—3 pies per maund of Kapas sold. Any small
quantity less than one maund left after weighment is not
weighed but goes to the Sowcar bania as "Burno." The
Hindus have to pay for Dharmao and Muslims for "Toiki"
at the rate of 0—0—3 to 0—1—6 pies per maund. Sethai
is a small charge per maund realised from the sale of the
produce of the Sowcar's debtors while Panchayati is
realised from all at the rate of 1/8 seer per maund.
The following table gives a comparative estimate of the
total market deductions in cash per Rs. 100 worth of wheat
in the difTerent markets of the Punjab.
Ferozepore Cantt. 2 7 6 to 3 4 6
Moga 1 0 0
Fazilka 0 14 9
Chak Jhumra 1 5 3 to 1 10 3
Toba Tek Singh 1 7 6 to 1 15 6
Jaranwala 1 13 3 to 2 6 3
Besides these in many cases, deductions in kind are also
made, e.g. 3 seers per cart at Moga, 2 seers per cart plus
4 chataks per maund at Fazilka.
In the organised market it may be noticed that some
of the unnecessary items like Charity, extra weight etc. have
been omitted while the others have been reduced. Thus
the charges at Ghaziabad are double that of Hapur.
Analysing the: charges paid at these two Mandis, we find
that the Seller Arhti gets 32.9 per cent and the Buying
Arhti 40 per cent as their remuneration^ while as much as
27 per cent is eaten up in miscellaneous charges. The
corresponding proportion at Hapur are for the Sellers'
Arhti 48.7 per cent, Buyers Arhti 43.9 and miscellaneous
charges amount to only 7.4.

There is very little inlertrading at these Mandis as all

of them despatch directly to consuming centres like the
40 AGRICULTURAL MARKBTIN«

Flour Mills of Delhi, Cawnpore and Calculla or to the ports.

Many of these Mandis have arrangements for storing up the
produce, even for long periods and the banking facilities
which they can avail of are quite sufficient.

The Grain market or Ganj in the northern part of the

C.P., is open square without any covered shed or paved floor
while the shops of the merchants and commission agents
are around it. The space in front of Ihe shop is claimed
as his by the Aratyia and he keeps that space clean and
plasters it with cowdung and mud. The Ganj is the pro-
perty of the; Municipality or a Notified Area Committee
which licenses the agents and weighmcn and also charges
rent, but there is very little effort to control the market
with the result that the middlemen's charges are high.
They may be divided into three groups (a) Marketing
expenses including (1) Octroi in big towns at 4 annas per
cart or 2 annas per bag (2) Adath or warehouse charge from
8 annas to Rs.. 1 per cent, (3) Dalali for the broker at
4 annas per cent, (4) Majuri or wages at the rate of one
anna per bag for unloading the bags from the carts, kattai
or opening out the bags, Dheri or heaping the grain. Safari
or cleamng, Chadai or placing the grain on the scales and.
sewing up the bags, (5) Tulai or weighman's charges which
amount to 8 annas per cent, (6) Mutti is an additional pay-
ment, (b) Charily funds including contribution for Dharma-
daya or charity funds for Ramlila or religious operas at
one anna per seller, temple, school and Gowshala funds,
(c) miscellaneous charges including the money-changer's
discount when farmers have to encash the currency notes
in which the Aratiyas have paid them and also petty dedura-
tions called Bhunj for procuring small changes required to
square accounts.

In the canal colonies in the Punjab the market consists

of shops built round three sides of a rectangular plot having
a wide brick pavement where the produce is unloaded,
weighed and bagged. The central place is intended for tlie
parking of carts. The number of shops in a market var,'.5S
from 40 in Sonep^at to 91 in Lyallpur and about 55 per cent
 MARKETS 41

of the dealers belong to the Arora caste, while 18 per cent

are Khatris and 16 per cent Banias. Most of these markets
have a committee to control them under the auspices of the
Municipal Committee of the locality with usually an official
as president. A noticeable feature about these committees is
that about one third of the membership is from agricultural
classes, but these committees do very little to safeguard
effectively the real interests of the producers. Some of
these markets have informal Panchayats of market Chau-
dhuris in place of these committees. Although the arbitra-
tion work done by these Panchayats is often very useful,
they have a poor record of continuous work owing to
frequent differences of opinion among the Punches and the
lack of any code of practice. The following three cases may
be cited to illustrate the type of arbitration which they do.
These are taken from a study of "Marketing in villages and
Mandis" which Mr. M. L. Darling, I.CS. contributed to the
Punjab Banking Enquiry Committee. At Chichawatni the
Punchayat rejected the application of the local Ginning
factories for permission to pool their business. In another
case, it was alleged that firm "A" had persuaded the credi-
tors of firm "B" which had gone into insolvency to accept
10 annas in the rupee on the private understanding that its
own claims would be paid in full. The Punchayat fined
firm "A" rupees 25 and the money was paid to the Goshala
fund. (3) The lack of strength of the Punchayat was
brought out in a' case where it was alleged, that the bigger
firms were using full sized bags in buying and smaller bags
in selling.' As many of the prominent merchants were
involved the Punchayat did not take any penal action but
resolved that any proved defect in the weight should be
deducted from the price.

As an illustration of the attempt to improve the market

organisation by voluntary efforts of the dealers, the history
of the Amritsar Sugar and Grain Association may be cited.
The development of forward trading in grain at Amritsar
made the organisation of such an Association imperative
and it was started in 1917 on a share basis, open to grain
dealers at Amritsar. The value of each sharei was Rs. 1000
42 AGRICULTURAL MARKETING

and the maximum holding was limited to 5. The Associa-

tion makes it compulsory for registration with it of all future
sales and the deposit of Rs. 100 for every 500 maunds of
wheat bought with a view to cover price fluctuations. The
Association arranges for the arbitration of business disputes
and for giving out of advances against grain to dealers at
.very low rates of interest. It has constructed warehouses
called kothas which carry a rental of Rs. I l l per month per
kotha. The members have to deal only with members and
only the Dalals recognised by the Association can be
employed and these Dalals are required to sign in the books
of the Arhatiya immediately after a bargain has been struck
with a view to bind them to fulfill the contract within the
stipulated period. The Dalai has to pay a licence fee of
rupees 11 per head and if he ever makes a ready purchase
on his own account, he would not be allowed the customary
market allowances which are ordinarily given to bonafide
buyers. The Association has provided for the checking of
weights and scales in the markets and has installed out of
his funds one Dharm Khanda (standard scale) at a central
place in the market.

The Indian Merchants Association was started at

Lyallpur with the commission agents as members with a
view to promote trade and to settle disputes. The admission
fee was Rs. 18 and the monthly subscription Rs. 2 and the
members were given the privilege of paying brokerage at
rates much lower than those paid by nonmembers. The
Association tried to improve the tone of business morality
by stamping all weights used in the market with its own
seal and also laying down a rule whereby if anyone who
being indebted to the commission agent tried to sell through
another, the latter was to pay up the debt or refuse to deal
with him. The arbitration procedure was also effective.
The parties in disputes were to select one arbitrator each
from the members of the Managing Committee and the
Committee was to appoint a third arbitrator. The un-
successful party had to pay costs of the arbitration at scales
laid down by the Association, half of which went to its
funds and half was paid to the arbitrators. This Associa-
 MARKETS 43

tion was however wrecked by the growth of factions and it

was replaced by the Lyallpur Commission Association in
1929 which ensures that prices are not depressed by under-
hand dealings and unfair competition.
In Bengal an attempt has been made in recent years to
organise Market Associations in the paddy trade by volun-
tary effort, the details of one of which may be stated as a
specimen. The Daspara Dhanya Aratdar Samiti (Daspara
Paddy dealers Association) is one of the latest additions to
the list. The rules provide that on admission to member-
ship every Aratdar has to give some pledges which include
the nonpayment of bribes or presents to Beparis with a view
to secure trade and to allow the inspection of the books by
the Association staff. The general meeting takes place
every Friday and any member failing to be present without
sufficient cause has to pay a fine of rupee one which is
described in the rules as a deposit to uphold the honour of
the Association. Every member has to pay an admission
fee of Rs. 51 and a monthly subscription of Rs. 2. The
Association has laid down elaborate rules governing busi-
ness transactions and market charges. If a member
commits any breach of rules, he has to pay a fine of Rs. 101
for every act of violation. The Association does not allow
any member to stock in his warehouse paddy purchased
from neighbouring markets. A novel feature of the Asso-
ciation is the code of regulations for safeguarding the
interests of the Beparis and Dalals.
These Associations represent the attempt of the dealers
to improve the organisation of the markets and ensure
business honesty. Although niuch advance has been made
in this direction and the Association functions well in
normal times, the strain on the loyalty of the members
becomes very great when the market is depressed and the
Association shows signs of disintegration. In view of the
pronounced individualistic tendencies of the merchants the
work of forming any voluntary organisation is not
an easy one and the difilculties are much more increased
when it comes into conflict with the vested interests
of other classes. In the marketing of Gur in the Surat
44 AGRICULTURAL MARKETING

District, there was no organisation before 1917 and up-

country mercliants used to pay whatever rates they liked as
they were almost monopolists. One of them tried to
introduce a new practice by which the local seller was to
send Gur to the railway station at his own cost. This
innovation was resisted and the producers formed an Asso-
ciation to arrange for better marketing and to secure better
terms. They succeeded for a time but when the immediate
danger was over, disunion among the members broke out
and some of them fell an easy prey to the tempting offers
of the merchants. The doom of the Association was finally
sounded when one of the Kathiawar merchants who had
purchased a large quantity failed to pay. The history of
the Coimbatore cotton market illustrates how the best
efforts of a section of the people to organise an Association
with the support of the Government were resisted for a long
time by the active opposition of the local merchants. At a
meeting of the cotton growers of Coimbatore in July 1918
it was decided to form a Cotton Marketing Association and
to request the Municipality to start a market at Tiruppur
to be controlled by the Association. The Municipal Council
agreed and the Governor of Madras laid the foundation
stone of the market next year. The draft rules of the
Association were approved by the Municipal council but
the opposition of the commission dealers, Dalals and
merchants increased in volume. At first it was directed
towards the location of the market and when it was settled
they attacked the very idea of the Association and its
rules. Attempts to arrive at a compromise were made in-
volving much loss of time and in the meantime the term of
oflQce of the old Municipal Council expired and the new body
was unwilling to accept some of the main principles under-,
lying the rules of the Association. Thus ended for a time
at least the attempt to develop a Marketing Association
at Coimbatore.

Official regulation of markets has been attempted in

some provinces and the degree of official control often does
not extend beyond the provision of shops or the main-
tenance of peace inside the market or the publication for
 MARKETS 45

general information of the prices ruling in important

markets. In the Madras Presidency markets are main-
tained by Local Boards and Municipalities where anyone
can sell on payment of the scheduled fees and no attempt is
made to standardise weights and measures. The regulation
of markets began in India with the Berar cotton and grain
markets Act of 1897 under which a more direct attempt
was made to purge marketing of many of its abuses. It
provided for the notification of markets and bazars and
their control by the committees. Rules were framed for the
levy and collection of fees, for the licensing of brokers and
weighmen and also for the checking of weights and
measures. In the Central Provinces there was no separate
Market Act but the Municipal Councils were empowered to
frame by-laws for the regulation of markets. The Berar Act
no doubt proved very useful as it put the grower in direct
touch with the purchaser and made it easy for him to obtain
competitive prices.

The grower, further, is assured of proper weights and

this system enables the buyer to satisfy himself by seeing
actually the commodity and to offer prices according to
quality. In spite of these disadvantages, the basic difflculty
remained, viz., the committee was more influenced by the
middlemen and placed their interests above all other con-
siderations. The common experience is that the commis-
sion agent is partial to the buyer even when he is employed
by the seller although in some of the markets of the Canal
Colonies in the Punjab, for every transaction two men are
employed, the commission agent working for the seller and
the broker for the buyer. The position is also the same in
the Punjab. "The colony market inquiry suggests that a
powerful factor in deterring cultivators from marketing
their own produce is the way the ordinary market is
organised. It is dominated by the trader and the culti-
vator, when he goes there."* Attempts have been made
recently to improve market regulation by limiting the
number of licensed Adatyas and making the rules more

'Report of the Punjab Banking Enquky Committee p. 51.

46 AGRICULTURAL MARKETING

effective as well as by associating the growers in the control

of the markets.

In the Central Provinces formerly the Municipal Coun-

cils managed their markets but the law gave them no power
to include in the Market Committees those who were not
Municipal Councillers. hence neither growers nor business
experts could be appointed to the Committee and the
members had other things to look into, hence these Com-
mittee were inefficient bodies. As a result of popular
agitation and the recommendations of the Banking Enquiry
Committee, special legislation for the purpose of market
regulation was undertaken and the CP. Cotton Market Act
of 1932 was passed which marks a distinct improvement on
the Berar Act. Under this Act on the Market Committee
"not less than half shall be persons elected by cotton
growers of such area as the Local Government may pres-
cribe" Rules would be made by the Local Government for
the election of members of the Committee, management of
the market, licensing of brokers, weighmen and warehouse-
men, inspection of weights and measures, and trade
allowances to be paid in all transactions in the market. The
fees collected by the Committee would be spent on the
maintenance of the Market, repair of buildings, payment of
establishment charges etc. Only the trade allowances
allowed by the Committee could be enforceable in
a Court of law and deductions on account of Dharmadaya,
Gorakhana etc. were prohibited and anyone making
collections on that account would be "liable to a fine
which may extend to fifty rupees for each offence." It
was further laid down that no new market could be started
within a specified radius of the regulated market without
the sanction of the Government. If any Committee failed
to perform its work efficiently it was liable to be superseded
by the Government.

At present in Berar there are 31 regulated markets

which deal in about 800,000 bales of raw cotton.
Even with the increase in the number of these markets, a
large proportion of the sales is carried on in the villages.
 MARKETS 47

although ryots having more than one cart-load of cotton

have been known to go 50 miles to sell it in a regulated
market. Some markets attract brisk business due to their
good reputation and growers get usually good prices due to
keen competition among buyers. In some cases the rate of
Ginning charges in the market also determine the amount of
trade, as a high rate maintained by the combination of a
small number of Ginning factories tends to scare away
trade. Although open bidding is enjoined by the law it is
not actually practised in many cases, due to the fact that it
is. unsuitable for ungraded cotton. The staff of an average
Committee consists of the Daroga, two Clerks, Watchman,
Conservancy men, fireengine men, and gardeners.
In the Bombay Presidency, the Bombay Cotton Markets
Act (Act XVII of 1927) has made the establishment of
regulated markets possible and one such has been established
at Dhulia in West Kharidesh. The following extract taken
from a note on this cotton market prepared by the Director
of Agriculture will give some idea of the benefits which the
grower now derives from this market:—"The rates of each
individual cotton cart are now made known to the owner,
who formerly had no knowledge of such rates as the
bargains between the agent who acted for him and the one
who negotiated for the purchaser were in former times
made under cover and were not declared to the owner of
the cotton carts. There are now no unauthorised deductions
or trade allowances, the contents of the carts being actually
weighed and accounted for. Previous to the regulated;
market there was no control over the weights and cotton,
weighing less than a maund or fractions of a maund was'
not weighed and was unaccounted for." Through the;
efforts of the Committee 175 disputes were settled in 1930,
and 628 in 1931. Everyone in the market is aware now o^
the Bombay prices which are posted on the notice board!
daily and an attempt at the grading of cotton, particularly
of the higher grades, has been started and admixture of
sand or damping of cotton is being discouraged by the pay-
ment of a lower price. The monetary value of the gain
which the ryot has derived from the regulation of this
48 AGRICULTURAL MARKETING

market may be assessed at 4 to 10 annas per maund by way

of better prices and lower trade allowances in addition to
correct weighment and prompt despatch of business. The
open bid system of sale has, however, not proved a success
as (1) the cotton received in the market is not of uniform
quality or classified into well-defined grades, (2) as the
number of Adatyas is large, they bid for different lots at
different places hence there is the risk of sales at different
rates for the same quality on the same day, (3) where the
grower has a number of carts to sell and there are many
purchasers, it is difficult for him to attend the sale at all
places at the same time.

The comparative success obtained in the regulation of

cotton markets in the CP. and Bombay has led to sugges-
tions for the extension of this system in Northern India.
Where the production of a particular commodity is not
localised, it is not desirable to have regulation on the basis
of specialised markets but general control over the market-
ing of all kinds of produce over a particular area will at least
result in raising the level of marketing, and remove many of
the common abuses, mal-practices which form a common
feature in our unregulated markets. At Patna in Bihar,
there are two important grain markes at Marufganj and
Bakarganj, the former dealing in imported mill husked rice
and the latter in locally grown rice. Both are unregulated
and there is a wide disparity in the market practices of
these two. The rate of trade allowances, the period of
credit allowed to traders and the date of the closing of the
annual accounts, to cite a few instances, are not the same
and the arbitration performed by the so called Panchayats
o£ these markets is not at all satisfactory. In such a case
even a general regulation of the market by a recognised
authority will prove very useful.

Although the regulation of markets in Berar leaves

much room for improvement the fact that the grower makes
a distinct saving by dealing in it is sufficient ground for the
introduction of this system in a more improved form in
other areas, particularly where a particular commodity is
 MABKETS 49

more localised. Bengal affords ample opportunities for the

development of a network of regulated markets. It is
true that the holdings on which Jute is grown are very
small and the Jute growing area is too scattered, but the
smallness of the yield is counter balanced by the high yield
per acre so that the per capita outturn compares very
favourably with that of Cotton. Dr. J. C. Sinha very apply
remarked that "the present marketing arrangments are
chaotic, antiquated and prejudicial to the interests of the
growers." 'The economic condition of the Jute grower can
never be improved unless this state of things is improved
and he is assured of correct weights, prompt payment and
above all a square deal. The great importance of the
grower's getting correct information of Calcutta prices,
which can be diffused through a regulated market,
will be realised from the following extract from the
evidence of a Jute merchant of Narayanganj given before
the Bengal Jute Committee:—"If the Calcutta price rises
by one rupee, the tendency to raise the price at Narayanganj
will be by 8 to 10 annas. On the other hand when the
Narayanganj price rises by 8 annas the Beparis raise it only
by 2 annas." It is true that the difficulties in organising
regulated markets in Bengal are very great. In many
areas in Eastern Bengal the Hats are held on boats or on
the banks of rivers and if woulB be difficult to fix definite
places for the weighment of Jute. The commodity is
usually brought from long distances and it would be
difficult to define the jurisdiction of the markets. The
difficulties of transport also give a great impetus to village
sales, but once these difficulties are surmounted and the
grower gets the facilities in the market itself of correct
weights, licensed warehouses and market information, village
sales would in no time be replaced by market sales at least
for the bigger growers. Market regulation in Bengal should
be developed on the basis of special legislation. The
local bodies, as we have seen in the Central Provinces, are not
quite competent to undertake it, as on them the interest
of the grower is not represented and these bodies, mainly
interested in the financial aspect of the market administra-
50 AGRICULTURAL MARKETING

tion, may act sometimes in such a way as to injure the

interests of the growers themselves. Besides this different
bodies may have different systems of management making
imiformity an impossibiUty.
 CHAPTER IV.
COMMODITY MARKETING.

In this chapter it is proposed to make a brief survey of

the different stages of marketing through which some of
our principal commodities like rice, wheat, cotton, jute,
oilseeds, sugarcane, tobacco, fruits, etc. have to pass in their
progress from the ryots, farm to the consuming and
exporting points. ^

The marketing of paddy is not complicated by the

existence of a long chain of middlemen and its production
is mainly localised in Bengal, Bihar, Orissa and Madras
Presidency. The rdative importance of the acreage under
rice in the three provinces is indicated by the following
figures: —
Peg. to total acreage sown in 1931.
Bengal . . 78.1
Bihar & Orissa . . 46.7
Madras . . 29.3

As it forms the staple food of the population, a large

percentage is stored by the growers for their consumption
and does not enter the market at any stage. Assuming an
annual consumption of 34 maunds per head, the Bihar and
Orissa Banking Enquiry Committee have estimated that
"the 22 millions of ordinary cultivators consume, without
any marketing at all, 60 percent of the total quantity avail-
able. The rest of the rural population 10 J millions
consume another 29 percent and this mostly goes no further
than the rural markets which are held at places 6 miles
apart" (p. 59). Thus practically 89 percent of the rice
produced may be ignored for the purpose of n»arketing.
Adopting this mode of calculation we find that m Bengal
72 percent and in Madras 89 percent of the rice produced
are so consumed. In addition to this, these three provinces
have heavy imports and exports as welj. Jn 1918, Bihar
52 AGRICULTURAL MARKETING

and Orjssa exported 3.1 percent of her total rice production

and about 8 percent moved away from the area of produc-
tion, within or without the province. In Bihar and Orissa
"the trade in rice or paddy that reaches tlie primary markets
may be put in the neighbourhood of Rs. 20 crores, of which
about 5 J crores go on to the big markets and perhaps
Rs. 1 crore is railed or shipped out of the province.* After
the threshing operations are over, the farmer has to set
apart a portion of the paddy for making payments to the
village labourers and artisans and also for the payment of
the rent where it is payable in kind. Then he stores up
the amount required by him for the consumption of the
family and sells the balance in small or big lots as necessity
demands. The bigger ryots try to hold up the produce so
ss to -aWaii heiier prases. Thus is ihe pnm&ry siage, the
sale of rice is in driblets and is spread over several weeks. In
those cases where the grower has taken advances with an
obligation to sell at a stipulated rate he has to do so. In
Orissa, the bigger Beparis usually give advances up to 25
percent of the value of the expected supply in November for
delivery in February next. Where the prices are fixed
beforehand no interest is charged but where delivery is to
be at market rates the usual rate of interest varies from 12
to 8 3/4 percent. In the seacoast regions of Orissa, short-
period loans given by Mahajans are repayable in paddy
after the harvest, and the price given is usually 2 annas per
maund lower than the market rate. "The ryot who repays a
loan in paddy at the threshing-floor measured by the credi-
tor and charged up at threshing-floor prices with charges
for measuring, a little for charity, and a littie for deity gets
very little for the trouble he has taken to cultivate his land
and has thus no inducement to put moi-e in his hand."t
The bigger ryots not only hold up their produce, but where,
as in the Godavari Delta, they carry on trade on a small
scale on their own account, they borrow at a low rate of
interest against the security of their paddy and buy more
paddy at harvest prices with a view to store them till atleast

•Report of the B. & 0, Banking Enquiry Committee, p. 59.

tReport of the Madras Banking Enquiry Committee, p. 107.
 COMMODITY MAUKETING 53

September when the market is usually very brisk, those

who are free from debt, of course, have ample scope to sell
at the best market possible.

The purchase of paddy is usually made by Beparis or

Paikars in the villages or the Goladars, Aratdars at impor-
tant Hats and markets. In Assam, Beparis from Bengal go
up with their boats when the rivers rise and Marwari
traders who have their godowns near railway stations
purchase there from ryots who bring their produce on pack
ponies. In Eastern Bengal the Beparis collect the paddy
from villages and Hats and supply to the husking firms at
big centres of the rice trade like Angaria, Chamta, Neamati
and Jhalkati, after which the husked rice is despatched to
the Aratdars in Calcutta. In Bihar ryots also sell through
Goladars who give them an advance up to 75 percent of the
value of paddy deposited with them and charge 7 to 9 per-
cent interest. The owner of the paddy gives some instruc-
tions about the rate at which the paddy is to be sold and if
the Goladar can sell at higher rates, he takes the profit.
His advances are made against book entries and repayments
are likewise noted and interest is charged on daily balances.
In the Kistna rice region of Madras the ryots or petty
traders take the produce on carts direct to the mills or to
the Khaida merchants in the town. These merchants act
as commission agents and arrange for the sale of the paddy
to mills who sell it to the exporters. The Khaida merchants'
charges include commission at one anna per bag, kolagaram
or charge for weighing at Re. 1 for 25 bags, Dharmam or
charity at 4 annas percent, the fee for the merchant's clerk at
i annas percent, interest and godown rent. In many cases
the mill-owners send out their own men or employ com-
mission agents or Beparis directly. In Nellore the Dalals
of the mills are paid commission at the rate of rupee one
per putti of 720 Madras measures.

At the exporting point, the exporters buy from the

Aratdars or mills and the Beparis or the mofussil traders are
completely in the clutches of the Aratdars. The bigger
exporters despatch direct to the foreign ports and make
54 AGRICULTURAL MARICETING

their realisation through exchange banks but the smaller

exporters carrying on coasting trade draw Hundis on the
consignee and get them discounted by local banks.

Among the wheat growing provinces of India, the

Punjab and the U.P. among themselves account for about
70 per cent of the total acreage while Bombay Presidency
has 8 percent and Bihar and Orissa 4 per cent. In the
Punjab the gross value of wheat produced annually varies
from 27 crores of Rupees to 35 crores. Although wheat is
widely consumed in Northern India, it is usual for the
poorer classes to substitute millets, maize and other inferior
food grains for it in their consumption from September to
March and peas, barley and gram in summer so as to make
a larger proportion of wheat available for marketing. To
illustrate this the following figures of consumption scale of
different groups of people of the villaiAGijhi, (District
Rohatak) Punjab may be cited :— \ (

Scale of consumption (per month in seers).

Well-to-do landowners and tenants.

Person. Cereal. Wheat. Gram. Bajra.

Below 5 yrs. 7i 5 2J 6^

5—10 15 11 4 12
10—15 16 11 5 13
15—25 25 19 6 21
Over 55 13 10 3 10

Small landowners and tenants,

Below 5 yrs. 7i 3J 4 6
5—10 15 li 7i 12
10—15 18 9 9 . 14
15—25 30 15 15 24
Over 55 13 a 7 10
 COMMODITY MAKKETING 55

Agricultural labourers.
Person. Cereal. Wheat. Gram. Bajra.
Below 5 yrs. 8 14 74 74
5—10 15 1 14 14
10—15 15 1 14 14
15—25 30 3 27 28
Over 55 13 1 12 12
In village Nuggal, District Ambala the total requirement
for consumption is 3185 maunds and the total average
yield of wheat, gram, rice, and maize is about 2073 maunds,
thus there is a deficiet of 1112 maunds, yet this village
exports wheat and gram and imports for consumption
maize, paddy, and pulses. The gradual increase in the
Punjab and Central Provinces and in the eastern portion of
the U. P. of the rice acreage between 1925 and 1935 with a
simultaneous rise in the wheat area and the decline in some
other valuable crops as bajra (millet) or pulses possibly
points to a tendency of rice entering more largely in to the
diet of the people of these provinces setting free larger
volumes of wheat for trade.

The following figures give an estimate of the consump-

tion of wheat in In3ia :—

Amount (Tons.) 1909—1914. 1924—1929

Produced in India 9,570,000 8,567,000
Imported into India 1,118,000 142,000
Exported from India 1,308,000 383,000

Thus even making allowance for the marked decline in

production due to bad weather conditions the balance avail-
able for consumption within the country was in the post-
war period higher by 63,000 tons. From the figures of pro-
duction of wheat in Punjab, as stated by the Punjab Bank-
ing Enquiry Committee we find that the balance available
for consumption has also increased considerably. "Another
56 AGRICtJLTURAL MARIiETWG

significant feature is that, whereas in the earlier period the

wheat imported from Karachi was equivalent to 90 per cent
of the total amount exported from the Punjab, in the latter
it was only 59 per cent. In other words not only does the
internal consumption of wheat appear to be increasing in
the Punjab, but a larger proportion of its surplus seems to
be going to other parts of India".* In the Delhi Province
about 45 per cent of the wheat produced is marketed as the
following figures taken from the Delhi and N.W.F.P. Bank-
ing Enquiry Report will show: —

Name of Quantity of Quantity kept Percentage.

village. grain pro- at home.
duced.
Mds. Mds.
Jhangola 1474 315 21
Akbarpur 1346 1062 76
Majra.
Muhammad- 5348 3344 62
pur Majri
Jafarpur 6738 2951 43
Kalan.
Jonapur 7431 2274 ,f 28

Thus unlike rice, wheat is of greater importance from

the marketing point of view as it not only enters more
largely into the inter-district and inter-provincial trade but
the export trade is also not Inconsiderable. In 1931 the
Calcutta port imported 80,576 tons of mostly Australian
wheat valued at Rs. 49 lakhs while Karachi imported
7,932 tons valued at Rs. 5 lakhs and exported Punjab wheat
amounting to 18,664 tons valued at Rs. 11,78,283. There is
no doubt that the great bulk of wheat is exchanged within
the area of production. In the pre-war period which were
years of good harvest, the export of wheat out of the Punjab,
the U.P., the C.P. and Bihar and Orissa averaged only 60
million bushels per year or about 20 per cent of the average
crop, and out of this 76.6 per cent was exported out of India.
^Report of the Punjab Banking Enquiry Cprifi!^!!;;;!!!}?. ^^-
 COMMODITY MARKETING 57

About one-third of the wheat sold by the growers goes

to the Mahajan who has either advanced them on the pledge
of the crop or has a hold on them arising out of other forms
of loan, e.g., mortgage, pawns etc. Even when the Mahajan
pays him at village rates, he realises the Mandi kharcha or
the charges payable when sold in the market and the cost
of transport. The village grocer usually buys cash and
sells at the next market and as his margin is not wide
enough he tries to cheat in weighing- He sells usually to a
town grocer or Arhti with whom he has business connec-
tion as he gets from him favourable commission rates and
thus he makes profits at the rate of 7 per cent on the
transaction. The village Kumhar, the Bepari and the
Banjaras in the U.P. buy from the growers in the villages
and move the produce to the markets. In. the Punjab, the
Arhti of any big market sends Beparis or Agents round the
villages. They interview the village Dharwai, who is
weighman cum broker and secure information about the
owners who are likely to sell their wheat. The Dharwai
and the agent discuss and fix up the rate to be paid and if
the grower accepts it, the bargain is struck, which is signi-
fied by the payment of rupee one. After this the grain is
weighed out by the Dharwai and cash payment is made to
the farmer before the commodity is removed. In the
Central Provinces the Beparis have no capital of their own
and they have a cash credit account with the Adatya for
short periods usually without interest provided they can
supply the stipulated quantities of the grain. The bigger
farmers in U.P. sometimes bring their own produce on carts
to the large markets and they are usually met some miles
away by Ihc servants of the Arthi who try to persuade them
to come and sell in their own Arha'ts. In these mandis the
grain is inspected by brokers and buyers after which in
some cases, the produce is put up to open auction or the
rate is fixed "under the cloth" and deductions due to the
presence of dirt are settled, after which payment is made,
but in doing so, the mandi charges and the remuneration of
the middlemen are deducted. In selling in small Mandis,
the grower's marketing expenses are high as they include
68 AGRlCULTURAL MARKETING

the Mandi charges of the market where he is actually selling

and the Mandi charges of the marliet where his purchaser
will sell. If a grower sells directly in the Hapur market his
charges amount to Rs. 2-9 per cent but if he sells through
a small mandi he has to pay 163 per cent more- Ignorance
of market conditions, risk of delay in. bigger markets and
difficulties in transport often stand in the way of the
grower's making this saving in cost by selling in the bigger
markets.

In the bigger mandis the farmers or small dealers arrive

at the shops of katcha Artis early in the morning. The
pakka Arhtis or their brokers come there and inspect the
goods after which each cart-load is sold separately by open
bids. The seller Arhti settles the karda deduction or allow-
ence for dirt which is ordinarily i seer per maund. The
buyer may make the payment on the same day or on the
third day but in any case the katcha Arhti has to pay the
grower the whole or a part of it at once. If the grower does
not accept the rate of the karda deduction, the wheat is to
be sieved and he has to pay at the rate of * chhatak per
maund as charge for sieving, hence he has to accept what-
ever rate of deduction is settled. The cart-load is then
taken to the enclosure of the pakka Arhti where it is
weighed and stored. In course of the weighment in many
cases the buyer tries to raise the rate of Karda deduction on
the ground that the quality is not uniform and as the
transaction has proceeded far enough for the grower to
back out, hence he has to agree to it. In the Central Pro-
vinces, in place of the open bid, wherever the Hat system
of sale is prevalent, the ryot is often defrauded by Arthi
and this system "tends to perpetuate the monopoly of the
merchants in the matter of buying in the market."

The next step is either to store the wheat in Khaltis to

take advantage of a rise in price or to sell to agents of
exporting firms or lo merchants of other provinces. When
a Khatti or Kotha or storage chamber is filled, its Parclia
or slip giving details of quantity and value, is made over to
the Bank, which after scrutiny lends up to 75 per cent of
 COMMODITY MARKETING 59

Ihe value stored and formally lakes possession of the Kliatti.

Ill cases of despatch to other centres the merchants are
given an advance up to 90 per cent of the value of the
consignment on their endorsing the Railway Receipt in tlie
name of the Bank along with a Darshani Hundi drawn by
the sender against the consignee. In many markets the
consignors usually consign to themselves while despatching
goods, so as to raise on the bill of lading an advance with-
out difficulty from his Bank and to safeguard, against any
risk arising out of the inability of the purchasing firm to
pay. The Bank sends the Bill with the Hundi to its branch
or to some other Bank in the market to which the goods
have been consigned. When the purchasing firm honours
(Sekar) the hundi. the railway receipt is endorsed in its
name and it can take delivery. In course of its transit
from the big upcoimtry market to the point of shipment,
the wheat is burdened with various charges which include
transport from market to the railway station, porterage,
railway freight unloading at the port station and loading in
ships, charges from F.O.R. to F.O.B. and charges subsequent
to shipment including freight, insurance etc.

As we proceed frorri wheat to cotton, the marketing

organisation becomes gradually more complicated and the
number of the middlemen increases. The commodity is
not marketed in the shape in which it is produced and
several processes are required to make it marketable. The
acreage under -cotton in British India gradually rose between
1903 to 1931 by about 3.5 per cent but due to continued
slump in the cotton mill industry an'd consequent low
prices of raw cotton the acreage in the Indian Empire in
1934 fell by 5 million acres and the production declined by
l i million bales.

Unlike wheat and paddy, cotton cultivation is more

widely distributed all over India, almost all the important
provinces have fairly considerable areas under it. In 1933
Bombay contributed 28.5 per cent of the total raw cotton
produced in India and the corresponding figures for the
Punjab are 24-4, C P . 14.3. Madras 8.1. the U.P. 3.8, Hydera-
60 AGRICULTURAL 1\1ARKETING

bad 10.1, Central India 3.6, Burma 2.1, Baroda 1.8, Gwalior
1.2 and Rajputana 1.3 per cent. In 1927 raw cotton
accounted for 12 per cent of the total gross value of agricul-
tural produce in the Madras Presidency and 10 per cent in
the Punjab. Due to this wide distributipn of the cotton
growing area and localisation of the cotton mill industry
in a few centres in recent years, the amount of movement
to which cotton is put to, is considerable, and the inter-
provincial and inter-district trade in raw cotton has
assumed great proportions. Over the important Railways
in India, 1070 million tons of cotton, both raw and manu-
factured were carried in 1933 as against 1046 millions tons
in 1932. In our foreign trade too raw cotton figures very
prominently as in 1933-34 our exports of raw cotton were
18.4 per cent of the total export trade in merchandise and
the value of this was Rs. 26,97,67,000. The following figures
will give some idea about the direction of our export trade
in raw cotton :—

Percentage of total exports of raw cotton (1933-34).

«^.i-iittJU XXlligULTilX . . . . -L X*£i

Japan 37.0

Italy 7.3
France 5.8
China 11.0

Belgium 5.1

Germany 7.2

The chain of the marketing of raw cotton may thus be

illustrated;—
 COMMODITY MARKETING 61

COTTON GROWER

I I I
Village Dealer. Agent of Exporter Village Mahajan.
I or Mill. I
I I I
Mandi or Market. Ginning Factory Itinerant Dealer.
I or I
Ginning Factory. Exporter, Mill, Adatya of Market.
I I
Commission Agent Commission Agent,
at the Port or I
Mill centre. I
1 Exporter or "Mill,
I

I I
I I
Exporter. Mill
Buyer.

Thus the course of marketing starts with the grower

and through diverse channels it proceeds till it converges
on the exporter or Mill buyer. As a rule, the grower sells in
the form of Kapas or seed cotton and in North Gujrat bolls
(Kallas) are also sold while in South Gujrat, many well-to-
do farmers sell after ginning the cotton. The grower sells a
large proportion of the cotton in the village itself to the vil-
lage Sowcar or Mahajan, village dealers, agents of mills or
ginning factories. In many cases the Mahajan gives an
advance on the standing crop on the stipulation of sale at a
lower rate, which may be Rs. 30 to 100 per Khandi below
the prevailing rate. Except in the case of very poor ryots this
Hold of the Mahajan is not so serious as it may appear to
be, as besides the Mahajan he has other sources of credit
and he can borrow from them and repay the sowcar or
pledge the cotton with an Adatya and raise funds on it.
The investigation conducted by the Indian Cotton Com-
62 AGRICULTURAL MARKETING

mitlee in the Adoni and Nandyal Taluks of the Bellary and

Kurnool districts show that 70 per cent of the cotton growers
had borrowed at the commencement of the cultivation season
and the average loan per acre was Rs. 12.4 and the value of
the average yield per acre was Rs. 26-2 thus the rough index
of borrowing was 47, yet even in this area cultivators in
general were not hampered by borrowings in the disposal
of their "Kapas". One of the reasons for the iridebtedness of
the farmer and his inability to hold up the crop is that he
has in some provinces to make payment of his land revenue
assesment before his cotton crop is ready. The Indian
Cotton Committee have pointed out that the'dates on
which the instalments of land revenue fall due are, in all
cases, suitable except in Bombay Presidency exclusive of
SiTifl, wViexe in -viWages m wTnicYi l\ie principal wop?* ?iTe Vtit
cold weather crops, the dates of instalments have been fixe'd
as the 5th February and 5th April. In none of the cotton
growing districts of Bombay, -except Khandesh, where
cotton is a hot weather crop, is any crop ready for market-
ing by the 5th February. "In an enquiry into wheat
marketing in the Punjab it was found hqwever that among
the reasons for the early disposal of the crop by the growers,
payment of land revenue accounted for 51 p-c. and pay-
ment of debt 30 p . c The amount of produce sold in the
village itself in some form or other varies in different areas.
In Sind the percentage is pretty high being 79 per cent due
mainly to the comparative need of the people and their
tendency for speculation in cotton prices. In Khandesh
the percentage of village sale is higher \ii. 81.4 and in
Central Gujrat it is rather low (51 per cent) and in Kar-
natak 70. In the Dhollera area of Northern Gujrat the
farmer usually has a running account with the village
Sowcar and markets through him, yet the pencentage of
village sales is only 52 per cent. In Berar vvith its well
organised system of cotton markets managed by market
committees, the amount sold in the villages is far below

*Wheat Prices in India by A. Hamid, Agriculture 'and

Livestock in India Vol. V, p. 256.
 COMMODITY MARKETING 63

that sold in these markets, the percentage of the former

being 32 and that of the letter 68.

The respective percentages of village and market sales

may be tabulated thus :—

- Village sale. Market sale.

Khandesh 81.4 18.6
Middle Gujrat 51.0 49.0
Sind 79.0 21.0
Punjab 80.5 19.5
Madras 87.0 13.0

Various factors have comhined to make the village sale

popular. The growers have not much familiarity with the
market conditions and they fall an easy prey to the machi-
nations and subterfuges of the middlemen and their salel-
Ites. Kapas is rarely sold in these markets by open bids but
mainly by the "Hatta" syetem. The official market rate
which is posted on the market is rarely effective as due to
his weak bargaining power the grower is compelled to
accept any terms he gets and also to agree to any amount
of deductions under various pretexts. The weighing at the
Ginning factories is not always very fair and the very
brokers whom he employs and pays for are not always
honest. Thus the grower finds it on the whole more remu-
nerative to sell in his village where he can look after his
cultivation also. Besides this, the rates offered in the
villages compare very favourably with those prevailing in
the markets. In Sind, the Ginning factories have their own
paid agents in the villages who are in some cases also the
village inoney-lenders' and they receive daily instructions
about buying rates from the factories, thus a close corres-
pondence is maintained between the market and the village
rates, eg., the normal rates in the villages was Rs. 13 per
maund of 42 seers betv,^een October and J a n u a r y while the
market rates were as follows: —
64 AGRICULTURAL MARKETING

Nawabsah Rs. 12-13 to Rs. 13 on 3-12-27.

Tando Adam Rs. 12-15 to Rs. 13 on 6-12-27.
Mirpurkhas Rs. 12-10 on 21-1-28.
In middle Gujrat, the same similarity is also noticeable.
Village sale. . Market sale.
Early. Late. Early. Late.
Barodaprant Rs. 7-8 Rs. 7 Rs. 7 to 8 Rs. 61 to li
Panchmahals Rs. 7 Rs. 7 Rs. 61 to li Rs. 61 to 74
"In a few cases, particularly in Madras, the village rates
were even better than the rates current in the market. The
explanation for this phenomenon is to be found in the
anxiety of village traders to fulfill their forward contracts
within the stipulated time."*

When the itinerant dealers or village sowkars bring

the produce on their carts to the cotton market, they go to
the shop of the Adatya with whom they have business deal-
ings. The buyers go round the market inspecting the
quantity and quality of the arrivals and meet the Adatyas
with a view to discuss and settle the local rate of the day
on the basis of the telegraphic communication about Bombay
rates. The Adatyas on behalf of their clients accept these
rates and proceed to despatch to the compounds of the
Cotton Gin the number of carts required. The grower has
very little say in this transaction. In the Ginning factory
the cotton is weighed on beam or platform scales. When
the 'dokra" or gunnybag into which kapas or cotton-seed
is packed in the South Marahatta country is opened, disputes
often arise about the lack of uniformity in the quality and
consequent increase in the deductions is made. In the
Punjab this deduction is called " W a t t a " and is realised not
only for lack of uniformity of quality but also for the damp-
ing of cotton or its adulteration with earth or sand, or
country cotton being mixed with American. In many cases
these are therefore perfectly legitimate while in others no

^Report on Eight Investigations into Finance and

Marketing of Cultivator's Cotton, p. 28.
 COMMODITY MARKETING 66

doubt the grower's weakness is exploited fully. An investi-

gation into it in village Chichawatni in the Montgomery
District of the Punjab shows that Watta was deducted in 40
per cent of the sales at rates varying from one to twenty annas
per maund and in the local co-operative commission sale
shop it was deducted in only 12 per cent of sales and at
rates as low as one to eight annas. In the Bellary markets
the produce is stored in the godowns by the Dalai at the
risk of the seller and sometimes there may be a delay of
some months for the sale to be effected. In Adoni on the
other hand, the sale takes place on the same day, and the
producer-seller and the buyer have a chance of meeting one
another and settling terms and the seller gets ready cash,
thei role of the Dalai being to secure customers and to look
after the weighing and deductions. When there is a pros-
pect of rise in prices the Bellary system is better as the
produce is stored in the godowns for any period. The Dalai
usually pays the grower less than the current pi'ice and
takes commission from both parties and divides with the
buyer cotton taken by way of sample. In the Coimbatore
District many gin factories employ their own men who buy
direct from the growers. In the Central Provinces, the
Arhtis working in the markets have to take out a license
from the' municipality or market authorities. The Arhtis of
the Central Provinces are pure commission agents as they
act as brokers and effect sales, but the Berar Arhtis very
often trade on their own account. To cite a typical example,
the Yeotmal Cotton market commences its official season
from the first week of October. The arrivals during the
year vary from 28,000 to 48,000 carls, the highest
number of carts arriving on any day in 1931 being 1400.
There are 55 Adatyas holding a licence from the committee.
Sales are made by open auction and the Adatya gets 12
annas per Khandi (or one cart-load) as his commission and
the total market charges which are levied on the cart-load
amount to about Rs. 2 / 3 including Adat charges, weighing,
charity, Cotton market cess, Hamali or porterage for draw-
ing carts on the scales etc.
(JG AGRICULTURAL MARiiExiMci

The Hubli market is the largest in the Kumpta Dharwaf

area and the annual turnover in it is about one laiiii haies
of raw cotton. Though the market is located close to the
railway station the area is so small that there is little room
for the parking of carts and also where the cattle may take
rest, although the produce comes to it from a wide area by
road and railway. There are no covered sheds and the
"Dokras" lie unprotected. There is a wide difiference. in
weights used in this and the neighbouring markets, e.g., at
Hubli sale is on the basis of 1 Nag.=1344 lbs. of Kapas and
one Nag. of cotton lint—336 lbs. but at the Bagalkot market
the basis is of one Nag—200 lbs. Annigeri has a Nag of
1456 lbs., Bail Hogal 448 lbs. e t c
The Ginning factories are a necessary link in the chain
between producers and consumers as on the proper ginning
of the seed cotton much of the value at the exporting or
manufacturing end depends. The cost of ginning is
important for the producer as the buyers in quoting prices
take into consideration the, ginning and pressing charges.
In these factories barring a few, single and double roller
gins are used although the use of saw gins would enable
them to turn out a cleaner class of cotton and save much
manual labour as they are fitted with a suction feeding
arrangement for Kapas and an exhaust delivery of lint in a
condenser form. These ginning factories have in many cases
formed themselves into pools, which lay down an uniform
charge for ginning and pressing for all factories and a fixed
percentage of this charge sufficient to cover the actual cost
is retained and the balance is paid into the pool to be
divided at the close of the season on a pro rata basis amdhg
the members. This combination among these gin owners
has no doubt safeguarded their position but have forced up
charges very much to the cost of the cotton growers. In
Nagpur, for example, "Under pool the charges for ginning
this year is Rs. 6-13-3 per Bojha of 392 lbs. out of which about
Rs. 1-12 has to be paid into the pool and this ultimately
comes out of the pockets of the cultivators."* In the Punjab
^Evidence of Messrs. Volkart Bros., Ltd. before the
Indian Cotton Committee, Vol. IV.
 COMMODITY MARKETING 67

evei-yone who buys Kapas has to pay in addition to the usual

rate for ginning a contribution of - / 4 / - to - / 8 / - annas per
maund of Kapas into the pool. The difference in the
charges in pool and non-pool regions often is from Rs. 4 to
Rs. 6 per bale. These gins are responsible to a large extent
for the quality of the cotton lint and unfortunately un-
controlled ginning has been the source of many abuses in
the past which have induced the Government to check them
by legislation. The damping of cotton is sometimes done
intentionally by the grower But more often it is the doing
of the middleman. The Indian Cotton Committee have
remarked that "the malpractices for which the cultivator
and the village Bania are responsible are of minor import-
ance compared with those which are carried on in ginning
and pressing factories". Some of these are due to defective
methods of working while others are deliberate. To cite a
few instances, cotton is mixed with mill-waste, good cotton
is mixed with rain-soiled cotton, various varieties of cotton
are deliberately mixed up. The crushed seed is allowed to
enter into ginned cotton to increase the weight. Due to the
floor of the factories' not being paved and there being a
general lack of cleanliness, the admixture of dirt is the
least of the evils of our ginning factories. The Cotton
Transport Act of 19^3 and the Cotton Ginning and Factories
Act of 1925 have been passed to control these factories and
to combat these evils.

In the export trade, many exporting firms contract with

the ginning firms or big Adatyas for the supply of a fixed
number of bales of lint of a particular quality and if the
lint falls below the standard, and is rejected, no ginning
charges are paid. In Tuticorin the exporter makes a con-
,tract with a dealer for the supply of lint. The dealer makes
his purchases in. a Pettah or market from growers through
the agency of a Tharagan or Commission Agent and makes
over the Kapas to the exporter's, ginning factory to be ginned
for him and at his cost, the seed being returned to him and
the lint taken against the contract made. This ensures to
the exporter proper ginning as well as good qualtiy of the
68 AGRICULTURAI, MARKETING

cotton. An improvement upon this system has recently

been inti'oduced by which the dealer in order to keep up his
contract makes a covering contract for lint with sub-dealers
who buy Kapas outright from growers and deliver them
direct to the exporter's ginning factory on the sub-dealer's
account and this in turn is credited in the farm's books as
lint supplied by the dealer against his contract. This
system, by ensuring delivery of the Kapas from the grower
direct to the exporter, avoids the risks of admixture and
adulteration which are common features in cotton
markets. When cotton is despatched to an exporting
point, e.g., Bombay, the railway receipt is made over to
the Mukaddam or carting agent who cleairs the cotton
from the station and transports it to the Cotton Green
or to ware-houses, his charges being 8 annas to 12 annas
for carting. After this the regular Mukaddams or shippers
take charge and they weigh, pile and give delivery to the
buyers, charging for their services about Rs. 2 per Khandi.,
When the cotton is intended for export, it has to be weighed
and marked and transported to the docks for shipment or
it may have to be stored on the Cotton Green if shipment is
not available atonce.
It may be of interest, in passing, to describe briefly the
system of cotton marketing in the U. S. A. There the
grower takes the cotton to the nearest gin for getting it
ginned and baled after which it is transported to the nearest
trading centre for sale. The country merchant cuts a hole
into the side of the bale to get a sample and to And out its
grade and makes his offer accordingly. Next he despatches
it to bigger cotton markets or the port directly when it is
graded according to established standards. Brokers acting
on behalf of Spinning Mills and exporting firms examine the
samples and offer prices based on information of the world
market. If the cotton is bought by an exporting firm, it is
sent to the baling house before it is shipped. "In recent
years the producers in many places and states have been
. forming Co-operative Selling Associations which, are per-
forming the function of local buyers as well as those of the
dealers in the concentration points. These Associations are
now providing for the ware-housing, grading and classing
 COMMODITY MARKETING 69

of the cotton into lots of similar quality so as to be able to

deal directly with the spinners, brokers and exporters."

In Jute, India has a world monopoly although in recent

years, competetive forces have been at work all the world
over which may have serious consequences for the Jute
industry of India. Due to long continued trade depression,
the attention of many countries has been concentrated on
the lowering of the cost of production and in the finding out
of cheaper substitutes for Jute in the packing and storage
of merchandise. In the United Kingdom, Australia and
South Africa the use of paper bags in major industries as
well as in retail trade is on the increase. In Denmark 80
per cent, in U.S.A. 40 per cent of the cement produced is
packed in paper bags. The annual consumption of bags in
the cement trade of South Africa is about 3 millions and the
tendeincy is towards a substitution of Jute bags by paper.
The use of cotton bags in U.S.A. is on the increase due to
the fact that "the diminished demand for cotton has stimu-
lated American cotton interests to take active steps to foster
the adoption of the cotton bags and bagging in preference
to Jute both internally and in foreign markets." The adop-
tion of bulk handling of grain in the U.S.A. and Australia
on a large scale is reducing the demand for Jute packing and
this moveVnent is fast expanding. Recently the Argentine
Government have sanctioned the construction of a long
chain of grain elevators. East African and Mexican sisal
mayi in the near future prove a good substitute. Whatever
the future may have in store, with Jute cultivation is bound
up closely the economic life of 3 millions of small farmers
in Bengal, Assam and Eastern Bihar. The total acreage
under Jute Jin these provinces increased from 19,99,000 to
34,85,000 in 1930 and then declined to 21,43,000 in 1932 and
as the result of the Jute Restriction Scheme inaugurated by
the Government has further declined in 1935.

Jute is produced by unorganised growers over a vast

extent in Eastern and Northern Bengal, Assam and the
eastern districts of Bihar. In Bengal, Jute accounted for
*Boyle^r-Marketing of Agricultural Products, p. 391i
70 AGRICULTURAL MARKETING

10.7 per cent of the gross cultivated area in 1921-30 as

against 72.5 per cent of rice. Its importance from the
marketing point of view will become apparent when we
consider that the annual value obtained by growers by the
sale of Jute between 1920 and 1930 amounted to Rs, 35
crores as against Rs. 20 crores for food-grains actually
marketed. Mr. D. P. Khaitan's estimate of the value of
marketable crops in Bengal gives the following interesting
analysis: —

Year. Value of Jute crop Percentage of the

at market prices, value of Jute crop
• rupees). to the total value
of marketable
crops.
1920 15.74 25
1922 23.73 31
1924 42.99 58
1926 43.67 68
1927 36.92 85
1929 36.76 52
1932 8.62 26
During the decade 1920-30 Jute accounted for about
48 per cent of the total value of marketable crops in Bengal
and even with the unprecedented fall in prices in 1932 it
represented 26 per cent of the total crop value. Its
importance from the point of view of marketing is much
greater than that of rice or wheat. The cultivation of Jute
is scattered over a wide area but its manufacture is concen-
trated within a very short radius round the ports of Calcutta
from where the exports also take place. The following table
shows how the raw Jute is utilised;—
Percentage to total production.
Year. Consumed in India. Exported.
1913-1917 65.1 34.9
1918-1922 65.8 34.2
1928-1929 57.6 42.4
1932-1933 59,7 4X.3
 COMMODITY MARKEtiiVfi n
Thus home consumption and export are not far from
one another in importance. In 1933-34 Jute accounted for
22 per cent of the total exports of India as against Cotton
raw and manufactured 20.2, Tea 13.5, Oilseeds 9.3 and Grain
8.0. The course of marketing therefore means the collection
of small parcels of Jute from the grower's villages in areas
where the means of communication is quite undeveloped
and leading them through variovis courses to Calcutta and
its neighbourhood either for export or for being manufac-
tured in 94 Jute Mills equipped with 60,000 looms. The
following may be taken to represent the chain of marketing
of Jute in Bengal.
Grower
I

I I I
Faria Bepari Aratdar ]VIahajan
I I I
I I
I I I I I
I Aratdai Mahajan I I
I I I
'
I
Calcutta Kutcha Baler
Aratdar I
- . , I
I
—-- Pukka Baler Calcutta Mills

Eastern and Northern Bengal, where the major portion

of the Jute is grown, is intersected by a network of rivers
and channels and vast areas are approachable by boats
alone during the best part of the year. Hence the main task
of assembling the commodity lies with the middleman at it
is not always possible for the grower to market it himself.
The grower cannot hold up the crop for any length of time
as it is difficult for him to arrange for its storage in his
thatched house as it is liable to get burnt. The fibi-e has a
72 AGRICULTURAL MARKETING

tendency to deteriorate in colour and strength if it is not

completely dry before it is stored. Further by the time the
Jute is ready for marlieting, the river routes are all open
and transport by boat is much cheaper than sending it
on carts.

The first link in the chain is supplied by Farias and

Beparis. The Faria buys from the grower at his home or
at the nearest "Hat" and sells to the Bepari, who in his
turn sells to the Aratdar or Mahajan. The grower may also
sell direct to the small Aratdars or Mahajans. Usually
the Bepari works on behalf of a Kutcha Baler or Aratdar
who may lend him funds for making advances to the
grower, if required. In these cases, advances are given at
sowing on the crop on 'Sattapatras' with the stipulation of
delivering the stipulated quantity by a fixed date in repay-
ment of the loan. The Bepari gets instructions from the
Aratdar about the price he is to offer and where he works
in commission, his remuneration is 9 pies in the maund
and if he works on his own, he has to purchase within the
rate fix^d by the Aratdar and if the market is not favourable
he takes recourse to unfair means to keep a fair rate of
profit for him. These malpractices include cheating in
weighment, watering the Jute and strewing sand on it to
conceal the moisture and placing a lump of earth or a piece
of stone inside a tight bundle of loose Jute with a view to
enhance its weight. The grower is not in touch with the
big merchant and has no information about the trend of
world markets, he "lives in an atmosphere of darkness,
ignorance and helplessness," hence he falls an easy prey to
the exploitation of the Faria or Bepari.

The next links in the chain are the Aratdar and the
Kutcha Baler. The Aratdar has no important function to
perform in storage as his confrere in the wheat or paddy
trade does. In fact as Dr. H. Sinha has pointed out*
"strictly speaking there are no Aratdars in the Mufussil as
their godowns arp very small and they have to arrange for
*Dr. II. Sinha—Muffassil Marketing of Jute (Ind. Econ.
Journal, Dec. 1929).
 COMMODITY MARKfitiNd 73

agents for the Mufassil traders. On delivery at the Arat,

little capital of his own and he advances money to the
Beparis with funds borrowed from guarantee brokers or
balers and he is very useful in the collection of Jute from
the villagers. "When the fibre is ready, buyers of Jute
make ready their own arrangements. An auspicious day,
usually the Rathjatra day is chosen for the inauguration.
The Aratdar sits in state with his scale liberally smeared
with Vermillion paste. The Beparies and others attend the
feast and the religious ceremony held in this connection."

Jute may be sold as Pucca Bale, Katcha Bale, Bojha and

loose Jute. The Pucca Bale is always intended for export
and this Jute is "cut", i.e., the root is cut off before baling.
This Jute is classified according to five grades based on
strength, colour and quality. Most of the Pucca baling
v/ork is done in Calcutta. The loose Jute is consumed to
some extent in the interior in the manufacture of rope etc.
The Kutcha baling house in the Moffusil is well-equipped
with the requisite machinery. The Jute is classified accord-
ing to the standards laid down by the buyers in Calcutta
before it is pressed and baled. The Kutcha bales are lighter
in weight than the pucca for facility in handling. It has
four sections: — (a) Importing Shed where the incoming
Jute is weighed by Koylies or weighmen, (b) The Assorting
shed is under an Assorting Master who supervises the work
of sorting and baling done by Khatawalas or contractors
who receive remuneration at a rate varying from six annas
to ten annas per bale. All bales are marked with signs
denoting quality.

The allowance payable by the seller include (1) "Excess"

which is ordinarily one seer in the maund,—a reminiscence
of an old custom of delivering 103 maunds against an order
for 100 maunds, (2) Sample—2 chattaks per maund,
(3) Kabari—1/5 seer per maund, (4) Bachhat—1/5 seer per
maund, (5) Dhalta—allowance for dryage varying according
to the condition in which the commodity is sold, (6) Muthi—
one seer in 10 maunds. Thus these amount to about > 4
76 AGRICULTURAL MARKETING

Brokers. These purchases are usually on forward contracts

of a month or months and the brokerage paid does not
exceed IJ per cent. Where the broker has no personal
liability he gets one per cent, but where he is responsible
for the due performance of the contract, he gets IJ per cent.
Usually full payment is made on the production of the bill
of loading but in many cases, particularly in dealing with
small firms, the practice is to pay 90 per cent when the bill
of loading is handed over to the Mills and payment of the
balance is made after actual delivery and weighment. Very
few European management Mills have any dealings with
Indian brokers. They mainly carry on their transaction
through 8 European brokers who arrange for deliveries
through Indian brokers. They charge as brokerage l i per cent
while the Indian under-brokers receive only i per cent. The
transit insurance of the Jute delivered to the mills have to
be effected with the buyers, agents and as the managing
agents of the Mills in many cases are also the managing
agents of the Insurance Companies, the Mills
prescribe the mode of transport, which is invariably by
railway or steamers and rarely by country boats with lower
freights. In addition to these, there is a considerable
amount of future trading in Jute in Calcutta which will be
discussed elsewhere.

The importance of sugarcane in the economic life of

the Indian agriculturist has been very well emphasised by
the Indian Tariff Board. "At all times it occupied a proini-
nent position in agricultural economy as being one of the
few crops on which the cultivator relies to meet his cash
requirements, and at the present time, when the prices of
other agricultural products have fallen to very low levels,
the importance of maintaining the area under cane and its
prices cannot be over-estimated. The payment of rent and
irrigation dues depends to no small extent on this crop and
any serious setback to its cultivation wo6ld not be without
effect on the finances of atleast some of the local Govern-
ments."* In the cultivation of sugarcane and the manu-
*Report of the Indian Tariff Board on Sugar.
 COMMODITY MARKETING 77

facture of Gur approximately 15 million people are

employed. While tlie acreage under sugarcane in India is
close upon three millions, among the Provinces the United
Provinces have about 3.5 per cent of the total cultivated
area under sugarcane, the Punjab 1.4, Bihar and Orissa 1.0,
Bombay 0.2, Madras 0,2. The area under sugarcane in
1935-36 was roughly one million .acres more than in 1926-27.
A rough estimate of the price of cane crushed by sugar
factories was Rs. 833 Lakhs,, of the value of cane consumed
by the Khandsari factories was Rs. 2565 Lakhs while the
cane growers received about Rs. 3393 Lakhs.
In recent years, on the recommendation of the
Tariff Board, a high wall of protection has
been raised behind which the Indian Sugar Mill industry is
fast developing and consolidating its position. Till recent
times the Government were mainly concerned with the
improvement of the agricultural aspect of sugarcane and
perfection of the process of manufacture, but lately the
marketing side has gained prominence in the face of the
complaints made by the public that the cane-grower was not
deriving his proportionate share of the benefit which the
import duty had conferred on the industry and as a result
of this the Government have taken steps to secure fair prices
to t h e cane-growers by legislation. Thus state intervention
in the marketing of sugarcane has proceeded to a great
extent.

Sugarcane is marketed in the form of Gur and Rah as

well as in the raw state for the manufacture of white sugar
in factories. Of the total cane production in In-dia amount-
ing from 61 fnillion tons per annum, about 83 per cent
is utilised for the manufacture of Gur and the rest for white
sugar. Sugarcane marketing for factory purposes is more
or less quite simple. In between the grower and the manu-
facturer there may or may not be any chain of middlemen.
Minimum recovery of sucrose depends on the reduction
of the period between the harvesting of the cane and its
crusjiing by the Mill, hence the closer the canefields are to the
Mills, the better is it for production. In India, for cane
78 AGRICULTURAL MARKETING

transported on carts a radius of 16 miles should be the

limit while in areas served by railways the cane should
reach the mill within 24 hours of cutting. Thus the condi-
tions favourable to concentration of production and direct
marketing by the consumer are present in most of the cane
regions in North India but not so in Bengal, and in the non-
irrigated tracts of Madras and Bombay. In Bihar, parti-
cularly in areas not served by railways, the Mills attempt
to secure their cane from the neighbourhood and for this
purpose give out heavy advances in November at the time
of sowing to the grower on 12i rate of interest and this
loan runs for 14 to 16 months till the harvest is reaped when
accounts are settled, on delivery of the produce at rates pre-
vailing then. Under another system, smaller amounts are
advanced for short periods usually without interest and in
the contract a rate is stipulated but actually market prices
are followed. The receipts given by the Mills on the delivery
of the produce freely circulate in the villages till they are
encashed at the end of the week by the holder.

In the Saran District of Bihar where the Mills are better

served by railways and can command a wider area, a class
of middlemen called contractors have been entrusted with
the work of securing cane. These contractors set up their
weighbridges at the railway stations and growers bring to
them their produce in carts. They have no fixed area of
their operations, hence the competition among thgrn is very
great and each one tries to outdo 'others in offering seem-
ingly favourable rates although very often cheating iiL
weighment t&kes place and deductions on account of alleged
dryage are made. Various ingenious tactics are' very often
employed in securing the cane of a farmer who has come
from a long distance and who realises that unless his cajie
is sold quickly it would deteriorate, and fetch lower prices
or become unsaleable. Many of these contractors "some-
times refuse the cane on the ostensible grounds that they
have no storage room or that they have bought all they want,
but really in order to induce the producer to take a lower "
•Report of the B. & O. Banking Enquiry Committee, p. 64,.
 CoMMODiiA- MARKETING VJ

price."* These contractors are paid at a flat rate by these

Mills. Some European contractors also take contracts from
the Mills for the supply of canes from their estates and they
pay the tenants at the same rates as the Mills ant? receive
from the Mill a commission as their remuneration.
It has already been stated that the major, portion of the
cane is converted into Gur either for being marketed as such
or for the manufacture of white sugar from it. Betv^^een
1908 and 1928 the average Gur production of the main Gur
cane growing provinces has increased by about 37 per cent.
The cane is crushed in the villages by bullock turned three
roller mills and the juice is converted into Gur by the
growers themselves or in partnership in Rohilkhund with
the sugar-broker called Khandsari. Where the unit of culti-
vation is small, a few well-to-do ryots join the Khandsari
in starting the manufacture of Gur. Juice is sold by weight,
the unit being 100 kutcha maunds called Cikra. In some
areas the Khandsari gives the grower an advance in July
and August on condition that he would deliver a stipulated
quality of juice at a fixed price failing which he would be
liable to pay interest at the,rate of Rs. 2 per month from the
date of the loan. When the loan is given at the time of
sowing the grower is compelled to agree to a lower price and
this means a loss to the cultivator of about Rs. 10 per
Cikra. After manufacture the Gur is purchased by the
Beparis who sell through the Aratdars in towns. The
charges in the United Provinces for the marketing of Gur
from the village to the consuming point amount to Rs. 35
per 100 maunds out of which Rs. 5 or about 14 per cent
represent porterage. In Western India the grewers or
Beparis bring the Gur on carts to the commission agents at
Poona which is the most important Gur market in Western
India. The commission invariably pays the seller in cash
but he deducts 8 to 12 annas per palla and 9 per cent of the
price as discount, as he has to give the buyer credit for 9
days. In the Vizagapatam district of Madras merchants
congregate at Ankapalli and form a temporary pool of four
months where they make their purchases for sale to the
factories and distilleries.
80 A G R I C U L I U & A L MARKEtING

In Gujrat, Bulsar is an important centre of Gur trade.

Aratdars make tlieir purchases from the producers in the
villages through the Fatkia Dalai. They accompany the
buying merchants to the villages and inspect the quality on
the spot and strike the bargain after which the Fatkia looks
after the transport.

In some markets of the Bombay Presidency Gur is sold

by open auction while in others by secret bargaining. In
the manufacture of Gur particularly of the Handi Gur,
imiformity in size and weight is very necessary as other-
wise it is liable to be damaged in course of transit.

The price which the consumer of Gur has to pay is

burdened with the profits of middlemen and other incidental
charges, to the extent of 45 to 55 per cent. The incidence
of this on the consumer will become apparent when it is
realised that Gur occupies an important place in the dietary
of the masses and as the following figures prepared by the
Tariff Board will show the consumption of Gur is greater
in villages particularly among poor people than in towns
among the well-to-do classes.

Proportion of Sugar and Gur Consumption.

Province. District. Rural Area. Urban Area-

Proportion Consumed Proportion Consumed
Sugar. Gur. Sugar. Gur.

U.P. Gorakhpur 1 10 1 1.5

Etah 1 .75 1 1
Bihar Manbhum 1 11 7 * 1
Muzaffarpur 1 3 4 1
Madras Anantapur 1 8. • 2 1
East Godavari 3 7 1 1
-=>
The cultivation of tobacco is more or less centralised in
certain portions possessing the conditions favourable to its
growth, although it is cultivated in small plots attached to
the farmer's homestead in various parts of the country.
 COMMODITY MARKETING 81

The Ankapalle jaggery lends itself to long storage and

wider marketing as the syrup is boiled up to the proper
standard and the shape of the blocks looks like inverted
flower-pots so that very little of its surface is exposed to the
weather. The Ankapalle Co-operative Society was started
in 1926 and its success in the organisation of the co-opera-
tive marketing of jaggery has been considerable. Bengal
(292,800 acres), Bihar (141,600), Bombay (158,423); Burma
(91,900), and Madras (268,800) are the main tobacco grow-
ing provinces. The most important tobacco belt of
Northern India is in North Bihar and North Bengal com-
prising the districts of Rangpur, Dinajpur and Jalpaiguri in
Bengal, and P u m e a , DarbTianga and MuzafFarpur in Bihar
having an acreage of 338,800 or about 29 per cent of the
total tobacco acreage in India. In Bombay Presidency cul-
tivation is localised in Gujrat which has 35 per cent of the
Bombay Presidency acreage, Satara District 12 per cent
and Belgaum in the south 31. In Burma, the delta District
(Henzada), and Central Burma (Pakokku) are the main'
centres. In the Madras Presidency Vizagapatam District in
the norh,,East Godavari (the famous Lanka tobacco) in
the centj-e and Coimbatore (the Manavari) and Madura
(Dindigal tobacco) in the south are important. This loca-
lisation indicates that although the primary stage of market-
ing is simple, the distribution of the produce all over the
country and to the exporting points has given rise to a well-
developed network of middlemen. India exports about 29
million lbs. of unmanufactured tobacco valued at Rs. 90
lakhs of which 43 per cent goes to the United Kingdom, 16
per cent to Aden, 14 per cent to the Netherlands and 12 per
cent to Japan.

In North Bengal different varieties of tobacco are grown

to supply different markets, e.g., for Bhengi tobacco the
market is Burma while Matihari is despatched to Assam
and the Manilla and Sumatra varieties to Madras. The
growers sell to local Mahajans or Paikars or to bigger ryots.
These Paikars work usually as agents of Dalals or Aratdars
to whom come the dealers from Madras, Akyab, Moulmein
and Rangoon, and Western India. Where the grower has
82 AGRICULTURAL MARKETING

borrowed from the village Mahajan and sells to him, he has

to give him an additional weight of 2 seers per maund and
in many cases he suffers also in the rates he gets. The
weights used vary from place to place e.g., in liabiganj (Dist.
Tipperah) 80 tolas make one seer, in Rangpur 90 tolas and
in Jalpaiguri 93 tolas. These Dalals have warehouses of
their own and in addition to acting as commission agents
for the buyers who come to them, for whicli they receive
4 annas to 6 annas per maurid, they trade on their own
account also and sell to bigger Aratdars in towns or to fac-
tories. Guntur tobacco in the Madras Presidency has a large
export trade as it is eminently suitable for cigarette manu-
facture. The export trade is in the hands of a few European
firms and in recent years Indian firms have also taken it up.
The Indian Leaf Tobacco Development Company have a firm
•S^\Y> O ^ ^^^ -maikftlmg oi fee "ftvit-t-iiiftd"toV>a«-c.c>mli:odvited
by them. They give advances for the construction of barns
on condition that the barn cured tobacco must be marketed
through them. This tobacco is classified into the four grades
by the growers and is purchased by the Company if it meets
with their approval. Paikars go round the villages and
make purchases for the big Aratdars who supply to the big
exporters. The charge made by the Paikars amounts to
Rs. 5 per candy or 12 per .cent and the A r a t ^ i ' s commission
rate varies from 2 to 3 per cent, thus 15 per cent is swal-
lowed up in the remuneration of the middlemen- at this
stage. The grower does not get a good price a§ his tpbacco
is not graded and the leaves are not uniformly cured. In
the Guntur market only very superficial inspection of the
tobacco bales is liossible owing to copious supply, which
averages about 5000 bales daily, hence the price is offered
usually for the average quality in the bale and provisiqn is
made fpr the possible loss to the grower due to the necessity
of regrading before export. «

It is difiicult for the Indian merchants 'to carry p n '

foreign trade directly as (1) they cannot grade the tobacco
according to the standards required and cannot prepare an
exact sample of the consignment. The foreign buyers as a
 COMMODTTY MARKETING 83

result of bitter experience are no longer willing to quote

prices without seeing the goods and this often is a great
handicap for the exporter. The merchants have no agents
of their own in London and the agents in London "quote a
low price from London and if the Guntur merchants accept
it they sell tobacco at a higher price and pocket the difference
but if the actual price realised when the consignment arrives
at London falls below the quoted price, the loss is trans-
ferred to the account of the consignee."* (3) Their-capital
is not large enough to enable them to carry on business
continuously as it takes five months for the merchants to
realise their money. (4) They do not possess the facilities for
pressing and baling so as to keep the freights low and also
for hedging themselves against fluctuations in the exchange.

Various regions in India are pre-eminently suited for

the growing of fruits. The Himalayan slopes as well as the
Gangetic plain and the eastern and western coast strip of
Deccan grow a large variety of fruits the marketing of which
if properly organised would contribute in no small measure
to improveinent in the economic condition of the -grower
and give an impetus to the development of fruit growing on
a commercial scale. In the present disorganised condition
of marketing the grower receives a very small portion of
the prices paid by the consumers.
Province. Fruit or Vegetable. Peg. of gross return
to grower.
• Bihar (Sabour) Mangoes 21.9
Bombay (Nasik) Papya 36.8
Bombay (Nagar) Mosambi 28.6
Bombay (Bulsar) Mangoes 61.0

The regions of the consumption of these fruits are

mostly in the towns and the fruit season being relatively
short, the supply is apt to be heavy resulting in a glut in
*Evidence of Prof. N. G. Ranga before the Madras Banking
Enquiry Committer,
84 AGRICULTURAL MARKETING

the market. In Calcutta alone as many as 2147 baskets of

mangoes in 1933 and 1512 in 1934 were received from the
principal centres of South Bihar. In Poona City the imports
of fruits were as follows :—

1930 .: 2,20,552 maunds.

1931 .. 2,12,214
1932 .. 3,19,756
In Bombay markets in 1928 the import of home grown
fruits amounted to i,824,'953 packages and 63 waggon loads
in addition to foreign fruits imported into the Presidency
valued at Rs. 1,0(5,893 in 1928 and Rs. 2,78,889 in 1932.

The supply of certain fruits like bananas, lemons and

santras is spread over the major part of the year while in
cage of others like mangoes, litchies, muskmelotis, guavas,
etc., the season is quite short. Hence the work of the
plucking of the fruit, its assembly, packing and transport to
the big centres and its subsequent distribution to smaller
markets for retail sale to the consumers has all to be rushed
and finished within a short period.

The conditions under which the fruit is grown vary from

region to region. Commercial Orcharding is to be met with
in the Himalayan slopes while in the plains, large orchards
are usually owned by landlords or by big ryots only where
irrrigation facilities are well-developed. In most cases smaller
orchards therefore predominate. Ari enquiry into fruit
gardening in the Poona District showed that out of 43
growers, 23 grow one fruit only and 16 grow only two kinds
of fruits. Of these 43 growers, the number of growers
having an acreage of: —

More than 10 acres under fruit 3

More than 5 but less than 10 acres 6
More than 2J but less than 5 acres 9
More than 1^ but less than 21 acres 9
More than 1 but less than IJ acres 8
Less than 1 acre 8
 COMMODITY MARKETING 85

Thus in this case about 37.2 per cent of the growers

have gardens of l i acre and below it. In the Baramati and
Indapur Taluks on the Nira left Bank Canal the correspond-
ing percentage was about 50. From these figures it is clear
that in most parts of India, fruit growing does not give whole
time employment to the farmer but is secondary to his main
business of farming. This great fragmentation of fruit
growing makes the assembly of the fruits difficult and
affects the marketing of the fruit .also by making the direct
marketing of the produce by the grower to distant markets
not remunerative. The practice of selling the standing crop
to middlemen is therefore common in many parts of the
country. In Poona district the Khatidar who has great
experience in this business buys up the standing crops and
incidentaly undertakes many risks of damage and under-
production which it is difficult for the growers to bear. In
the case of bananas the standing crop is not actually sold
but the Khatidar enters into an agreement to buy all the
bunches that may be produced at a price which is fixed in
advance at the commencement of the season, or in some
cases the agreement is for the purchase of a fixed number of
bunches. In the Purandhar Taluk of Poona District in
o,range orchards the contract of sale is for a number of
years. The usual form of the Khoti system is for the sale
of the crop for one year to the Khatidar or Bagwan or the
Khatik as he is called in Bihar. The buyer makes an esti-
mate of the crop and in making his offer, takes into account
the condition of the season, e.g., in mangoes usually the
crop is good in alternate years. The actual sale may be by
contract or open auction. The buyer has to arrange for the
watching of the orchard and the plucking of the fruit. In
some cases e.g., figs, the sale is made quite early, when the
fruit is just on the tree and here the buyer has to look after
the irrigation, removal of the weeds, stirring of the soil and
even of manuring it. The payment of the price is usually
made in two or three instalments, usually 50 per cent at the
time of signing of the contract and the balance after half
the crop is harvested. As the transaction is highly specula-
tive, it is not uncommon for the middleman to avoid making
86 AGRICULTURAL MARKETING

payment of the subsequent instalments, if the instalment if

the crop does not prove vilimately to be a good one. As
many of these middlemen work on capital, borrowed from
wholesale dealers or brokers of the town markets, there is a
growing tendency for them to default in paying the subse-
quent instalments if the prices go down. Gadgil points out
that "another general complaint made by growers regarding
the class of Khotidars, was that they never give any agree-
ment in writing to the growers. The growers on the other
hand, usually passed a receipt in writing for the first instal-
ment, in which the total purchase price and the period of
the contract were specifically mentioned. The other condi-
tions of the contract are usually not reduced to writing.
This leads to the position of the grower being very weak in
case of dispute."

Big growers also despatch fruits to 'markets from their

gardens and in many cases in Bihar, the wholesale mer-
chants of Calcutta sometimes depute their own agents to
purchase the standing crops or to give larget "^advances to
Bagwans or other middlemen on condition thf "^ produce
is exclusively sent to them. In Bombay Presil.-iicy, a new
class of middlemen has sprung up called Hundikaris who
take charge of consignments at railway stations,
and forward them to the commission agents in city markets.
They book the fruits. load them in vans, pay railway charges
and facilitate the quick transport of the goods in every way.
Their charges, which vary from 4i pies to 9 pies per parcel,,
are usually paid by the commission agent who deducts it be-
fore making payment to the grower, thus although the
Hundikari serves the important function of giving technical
assistance to the ignorant grower in the despatch of .his
produce, he plays a great part in determining the destina-
tion of the consignments and in this he acts more in the-
interelsts of the Commission Agents than of the growers
themselves.

The Commission Agent or Dalai in city markets

arranges for the delivery of the fruits and transports them
to their wareliouses where tlie lots are sold to who)esale
 COMMODITY MARKETING B?

dealers by open auction or private treaty or auction with

ticcret bidding. The open auction is restricted to the lower
grade of fruits while the auction with bidding "under the
cloth" is mainly for higher grades and also for fruits re-
maining unsold overnight. The lot of each consignee is
auctioned separately after some of the baskets have been
exposed at random for inspection. In the case of the sale
of Kashmir fruits by the commission agents at Rawalpindi,
the practice is to auction them to highest bidder. Com-
modities, like guavas, figs or mangoes the supply of which
during the season is quite plentiful, is usually sold by
private treaty. The sales are continous during the morn-
ing and the prices are fixed by higgling and are to some
extent determined by the quantity of arrivals in course of
the day. The Commission Agent may base his remunera-
tion as a percentage of the sale price or levy a flat rate per
basket on a scale based on the rate at which it is sold, e.g.,
in Calcutta market the flat rate is 2 annas 6 pies for Behar
fruits and 2 annas per basket for Madras fruits. This cor-
responds to the rate of Dalal's commission of &i per cent on
fruits coming from outside the Presidency while those
coming from within the Presidency pay 4 annas per package
or at the rate of one anna per Re ad Valorem. In the Poona
market, for pomegranates the rate is one anna per basket
if the sale price was less than Re. 1, 2 annas if the price was
below Re. 1-8 and 8 annas if Rs. 3 or more. The commis-
sioi;^ includes various payments made by the salesman on
behalf of the consignor, including railway freight, cost of
transportation, postal charges and octroi dues, if any arid
in Poona, a charge called Kasar for money changing. The
agent aJso makes a demand on account of rent for the ware-
house or enclosure where he exhibits the produce for sale.
Realisation is also made on account of "Dharmadaya" or
contribution for charitable funds. In Calcutta the agent
deducts 5 annas 6 pies from the price paid by the buyer and
makes the usual realisations from the consignor on account
of commission and other charges. In the fruit trade of
Rawalpindi the commission agent realises from the pur-
chaser commission at the rate of Rs. 3-2-0 per cent.
6& AGiticULttjRAL MARKETING

The foUci'vving statement prepared J[roin various sources

will give an estimate of the charges paid to middlemen and
other incidental expenses incurred in the second stage of
marketing from the producing centre to the city markets.

Place Fruits Percentage Sale price of Other Total,

to Freight & Agents Charges
Transportation Commission

Calcutta Mangoes ,17.2 9.0 5.0 31.2

Poona Mosambi 31.3 * 11.5 9'.7 52.5
Bombay • Orange 18.5 11.3 0.8 30.6
Bombay Grapes 18.7 . 17.7 0.3 36.7

The nominal rate of commission is not high in view of

the services rendered by the l/alarbut*. when thg cost of
packing and transport from the garden to the station is
added to the above cost, the burden becomes well nigh un-
bearable. The cost of packing varies from 7 per cent in
the case of Mosambi to 12 per cent for Grapes and Papyas.
In the figures for Poona given above, "Other charges"
include carting 6.7, Dharmadaya (Charity) 0.7, Postage 1.4
and Rent 0.7 per cent. The actual rates charged would not
be so objectionable if the transactions were fair and honest
always. Mr. K. C. Naik, Horticulturist to the Government
of Bihar in course of his study of marketing of Bihar fruits
in Calcutta writes:—"Detailed enquiries made from various
sources confirm the suspicion that the agents do not all live
upto the expectations of the consignors and unle^l steps are
taken to license the agents, the syst^"^ ^can hardly be
capable of improvement". In the Pet fruit trade, the
sales accounts sent by agents to their cllC'^ts do not usually
disclose the details of actual sales, the price shown being
"a combination of both averaging and adjustment". Where
the agent also trades on his own account, "the commission
salesmen themselves admit that the actual prices are not
returned."* The wholesaler buys at the auctions held by
commission agents and where the number of wholesalers
is not large as in Poona the retailer also buys there. Where

*Gadgil & Gadgil—Marketing of Fruit in Poona—p. 68.

 (COMMODITY ^fARKEttNO 80

Ihe wholesaler buys it, he tries to keep the fruit for a few
days in his warehouse, where cold storage facilities are not
available, or consigns it to other centres or markets. From
the Calcutta market, mangoes and other fresh fruits are
regularly exported thrice a week to Rangoon and the whole-
sale merchants handle this trade by buying in the local
markets, hence on the shipping days there is usually a rise
of Re. 1/- per basket and the wholesale price for unripe
fruits is at times -higher than that for ripe fruits which are
not suitable for exports.

For sale in the city market the retailer is an important

link, although in the case of some fruits having a short
season as the bananas grown in the J u m n a r Paleka, the
produce is bought directly by the wholesalers who also carry
on retail trade themselves and they sell through their own
retail shops or by hawkers and stall-holders.

The retail sale is carried on through retailers in the

Municipal markets, street hawkers and vegetable vendors.
The stall-holders have to pay rent to the Municipal autho-
rities at monthly rates while some who occupy small patches
of uncovered area within the market enclosures and carry
on retail sale in the morning and hawking in the afternoon
pay a daily rent. In the Stuart Hogg Market of Calcutta
there are 25 whole salers and 80 retailers and the Corpora-
tion, in addition to rent levies one anna per basket sold
from the wholesalers and two annas per basket from the
retailers. In the College Street Market of the same city
however the wholesalers have not to pay any rent but the
rental for the retailers is 8 annas per day. Every whole-
saler has to pay a charge of 3 pies per basket and "is further
bound by an agreement to import at least 7200 baskets per
month. If import falls much below this figure, a rate of
one anna per basket is charged." In the Crawford Market
of Bombay the retail section is covered with 1027 stalls in
r'oWs having an average dimension of 6 ft. by 7 ft. the rent
varying from Rs. 20 to 300 per quarter according to location.
There are storing chambers below tBe stalls but the ventila-
tion is poor. An important function which the retailer
90 AGRICULTURAL AIARKETING

perlorms-is to grade Uie i'ruils before sale. He gets credit

I'rom the commission agents and also occasional money
loans.

The hawliers carry tlie fruits from street to street

to the consumer's houses. In Bombay lliey are licensed and
they have to pay Rs. 7/8 per month to the Municipality for
stationa)-y handcarts. They take their nosition at impor-
°lant street corners or crossings or jiear the business centres
or just outside the markets. The itinerant hawkers are of
three types :—-(a) the basketman pays Re. 1 per month, the
man with the handcart Rs. 3 and the bullock cart Rs. 5.
They have very little capital of their own and work with
money borrowed from the money-changers in the market
paying interest which varies from six pies per rupee per
day to one anna per rupee. Inspile of this they make good
profits and can compete with the vegetable ^and fruit shop-
keepers as they have not to pay any rent and their turnover
is pretty rapid. Gadgil estimates that in Poona "the daily
purchases of these hawkers range in value from Rs. 2 to
Rs. 5 and they estimate the daily earnings at from annas
ten to Re. 1." In Bombay and Calcutta there is a class wf
vendors called squatters who squat on the pavements aloiig
im])ortant^^thoroughfares and for his privilege they haye to j'
pay rent at the rate of Rs. 3 per month for an area ;> ft. by,
3 ft. There is an extensive interproj^incial trade in certain *
fruits which properly regulated w4ll increase considerably
the proiiis of the fruit growers. Large consuming centres'
not only attract the fruits frojn the neighbouring districts
but also fronr distant areas and this trade is certain to
increase with improved transport facilities. Poona masambi
goes not only to Bombay city bwt also t(3 Gujrat and Berar
while Poona santras have a rcyidy market in Lahore and
Ludhiana in Punjab, and Meerut and Lucknow in the U. P.
in the north and Madras and • Ilydcj-abad in the south.
Bombay city 'derives lis fruit sujiplies from the district of
Poona, Nasik, Ahmednagar and -Ratnagiri. In Calcutta
60 per cent of the total impQrtsj'"f fresh fruits consists of
mangoes and the snppl-y of this fruit is derived from the
 COMMODITY MARKETING 91

Godavari, Vizagapatam and Salem districts of Madras,

15hagalpore, Miizaffarpur, Darhhanga and Palna districts of
Bihar, Moradabad, Rampur, Benares and Luclinow district
of U. P. Tlie Kaslimir fruits are marketed through the
commission agents at Baramula and Srinagar who despatch
tile produce to the bigger markets through the Rawalpindi
dealers.

In recent years under the auspices of the Bombay

department of Agriculture an attempt has been made to
promote the export of mangoes to England. The results are
({uite encouraging but any profitable trade can only develop,
where a proper selection of the suitable varieties has been
made and the picking has l)een done at the correct stage of
maturity. Proper methods of packing and the right storage
temperature during the transit are also necessary factors.
In the experiments made the Alfonso variety of mangoes
was selected owing to its attractive appearance, its hiscious
taste, its good keeping quality and its lack of fibre. An
attempt was made to grad^ the fruit into special and com-
mercial classes according to their weight and the number
which could be packed in the standard trays. It was found
that direct shipment to England by sea was more economi-
cal than the overland route via Marseilles."* On an average
the landing cost per fruit came to annas five and pies six in
the case of direct shipment by sea while through Mar.seilles
by railway the cost came to nine annas and eleven pies.
The average price obtained in London was eight annas
three pies per fruit leaving to the exporter a net ]M-ofit of
50 per cent. Thus properly organised the export trade in
mangoes has a great future and in course of time the export
of other fruits like oranges and bananas may also be taken
up.

*G. S. Cheema and P. G. Dani—Report OH the Export of

Mangoes to Europe in 1932 and 1933.
 CHAPTER V.
SALE.

There is no doubt that much of the prolits which the

j.(j\ver expects depend on the method of sale in the local
^grket. Selling is an important link in the marketing
j.0cess and it involves securing a buyer and obtaining the
viest possible prices under present conditions. The grower
. jil-equipped to act as an eflScient bargainer as he is not
^ jjiiliar with the market practices and he cannot afford to
igvote much time over the sale of his goods. He has there-
fore to sell his produce in the village to agents of merchants
J. to market it through commission agents. The market is
QI well organised, the commodities are n^^ well graded and
•n most cases these commission agents are not licensed,
hence abuses are rampant and the grower does not
always receive the full value of his produce. Sales-
manship of a high order is no doubt required in this work,
,jiich would really prove beneficial to the ryot if the honesty
f the agent could also be guaranteed. Where this is not
gQ^ the method according to which the sales are usually
conducted in our markets have to be improved so as to
ensure better prices to the seller and to minimise the risks
of abuse and fraud.
In the markets of India, sales may be said to be con-
ducted according to four methods: — (I) The Hatta or sale
jjV secret bidding is very common all over IndiB, parti-
cularly in the sale of grain. The actual procedure differs
jn different localities. In the northern part of the Central
provinces, "the grain is heaped on the ground or is kept
open in bags. Then the Dalai comes and stands before the
heap and asks the buyers for their offers. One by one the
{juyers offer their rates, not openly but secretly, by means'
of finger manipulations with the Dalai. The Dalai hold^in
jjis hand a piece of thick cloth covering the fingers and the
palm. If a buyer wants to offer Rs. 15-4-0, he pushes his
jifind underneath the piece of cloth and says loudly Rs. 14
 SALES 93

and grasps one finger of the Dalai with an upward jerk.

T h i ^ s supposed to mean Rs. 14 plus one or Rs. 15. Then
he shouts " a n n a " and grasps four fingers which means four
annas. Then he shouts "pies and grasps three fingers."*
In the Punjab however the code is different. There the
value of each finger depends on the prevailing price of the
article. If the rate is Rs. 5, each finger indicates one rupee
but if it is higher, the value of each finger rises. The annas
are indicated in terms of 'paos' or quarter rupee. In Jute
sales, when the sample is approved the Aratdar and Dalai
join hands under a piece of cloth and the former writes with
his finger t h e ' a p n a portion of the price per mavind on the
palm of the Dalai who indicates by the shaking of his head
approval or otherwise of the offer. When the bargain is
struck the Dalai strikes the hand of the Aratdar and the
cloth is removed. Usually one bid is allowed by each buyer
and when all have given their offers, the middleman declares
openly the highest bid and the bidder's name and the tran-
saction is closed. Where repeated bids are allowed, after
the first offer has been secretly given by all the bidders, the
middleman asks all of them to offer more and bids are con-
tinued till no one is ready to bid higher. This system has
some variations, e.g., under the Phullarwan method, the
Dalai accompanies the buyer but only to advise him as the
offer is made by the buyer himself. At Jaranwala the bids
are made by the Dalals while in Amritsar both the Arhatiya
and the buyer are represented by Dalals.
(2) Sale by "quotfng on samples" is carried on at many
places, in gram, cotton as well as chillies and tobacco trans-
actions. The commodity is not heaped up but kept in bags
on carts and the Arhatiya collects from the sellers samples
of one to three lbs. and takes them round and offers are
made on the basis of these samples. After the price is
settled and the bargain struck, there is usually a wrangle
over the quality an the cart and that of the sample. Allow-
ances are c l a i n ^ r on that account and every effort is made
by the buyer t o ^ o beyond the bargain.
* P . D. Nair—^Grain Markets in North C.P. (Agriculture
jind Livestock jif India, Vol, I, 1931, p . 364),
94 AGRICULTURAL MARKETING

(3) Another common system is known as the Dara sale,

in which heaps of grain of cJifTerent qualities are sold at a
flat rate. The great advantage of this system is that
within a sliort lime a large number of sales can be efTectcd.
In the Guntur tobacco market where the daily arrivals < f
carts are very large sales are made practically on these line .
Although in making pay ments the Arhtias try to apportion
the prices according to the quality of the article tendered by
each seller, as a matter of fact, the seller rarely gets good
value for superior quality. Even when apportionment is
made, the seller may try to favour some of his patrons by
calculating prices in such a way as to benefit tliem, as the
following example will show. "Suppose that two Iieaps of
different qualities, one of 50 maunds and the other of 20
maunds, are sold at a flat rate of Rs. 3 per maund although
the 20 maund heap may be better in quality than the
latter. The Arhtiya may give Rs. 2-14-0 per maund for the
inferior and Rs. 3-2-0 per maund .for the superior quality.
It thus looks as if he has been pffl>^ Mly fair but actually he
pays only Rs. 206-4-0 although he gets from the buyer
Rs. 210 thus making an extra Rs. 3-12-0 for himself.*" This
practice stands in the way of the cultivation of the
better varieties of crops.

(4) The Auction System has been used in the Punjab

in improving the quality of cotton and in many well
developed markets it is preferred to any other method of
sale as it ensures fair dealing to all parties and secures a
premium for superior quality.
In 1906 when the Department of Agriculture in the
Punjab tried to introduce an acclimatised variety of
American cotton from Dharwar, it arranged with sdhie firms
to sell this cotton at a premium of Rs. 1-8 per maund over
the price of Deshie, but as this did not prove satisfactory
the Department, introduced a sj'stem of auction sales of the
unginned cotton to enable the farmer to obtain
better prices for superior quality. Sales were held on fixed
dates after due notice to all parties concerned and at these
*L. R, Dawar—-Market Practices in ,the Punjab, 1934, p..33,
 hALES 95

sales cotton was rouglily graded by the officers of the

department. This system proved a success as in 1908 tliere
were only 2 auctions at whicli a few hundred maunds of
cotton were sold at a premium of Re. 1-5-0 to Re. 1-9-0 per
maund over Deshi and in 1918 twelve Government and two
private auctions were held at which 122,000 maunds of 4F
cotton were sold at a premium of Rs. 3-8-0 to Rs. 5 per
maund over Deshi and Re. 1-8 to Rs. 2-8 over other
American varieties. Although this system gave the farmer
a premium, it had this drawback in that if the demand on
the auction day happened to be weak, the prices would not
rise and the farmer would be dissatisfied. The Indian Cot-
ton Committee were of opinion that "their sphere of use-
fulness is limited though, upto a point, they have proved of
great value and in fact is the best agency available. We regard
them, however, as only a temporary step, if for no other
reason than that the Staff of the Agricultural Depart-
ment is totally inadequate to handle very large quantities of
cotton."* A recent development in this connection is the
holding of auctions by private agency and by Co-operative
Societies. In some of these, the cotton is sold on sample,
the seller has to produce and be personally responsible for
his sample which after the sale is sealed up and deposited
at the agency. The weighment takes place at the godowns
of the sellers who are bound to abide by the arbitration of
the Agricultural department in case of dis])ute.

Secret bidding is not harmful so long as the brokers go

round in groups for the accepted bid is declared in the pre-
sence of all and tire chances are that the prices would go up
as a result of competition but where the bidding is carried
on with a single broker the risk of collusion between the bro-
ker and the Arhliya is great. Besides this where as in Rohtak,
both the buyer and the seller have the option of cancelling
the transaction at any time and under any pretext, much in-
convenience is caused. In some markets the buyer alone
has the privilege of refusing an offer and this makes the
position of the seller difficult. This system on the whole is

^Report of the Indian Cotton Committee, p. 172.

96 AcHictiLTUKAL MARKETING

too complicated for the average cultivatoi- to follow and he

is compelled to place much reliance on the Arhtiya. Sales
under the auction system take a good deal of time and it is
difficult to manage them in big markets unless some system
of grading is developed and in this, as there is no secrecy,
experience in buying yields no advantage while in the excite-
ment of the bidding rash offers may be made which may
land the buyers in loss. In the secret system, the buyer
not knowing other bids hVs to offer his maximum to secure
the lot whereas in the auction system, bidding proceeds by
small steps and the sale may take place at a rate much lower
than what the buyer was prepared to offer as a maximum.
On the other hand the rates are likely to rise in the auction
system if there is a fairly steady demand, as with strong
demand auctions push up prices and in a weak market,
secret bidding is more favourable. Another great advantage
of the auction system is that a buyer can get guidance in
making offers, from those made by other buyers and he can
dispense with the services of a broker and save his charges.

Sale Methods in the Punjab Markets.

Markets. Methods.

Taranwala .. Under cover with Repeated Bid.

Gogra .. Under cover with Single Bid.
Saragoda .. Under cover with Single Bid.
Lyallpur .. Under cover with Single Bid.
Kotkapura .. Auction.
Amrilsar .. Under fover with Single Bid.
Batala .. Open Bid.

In the case of staple commodities sold through organised

produce exchanges the terms of sale are more .regularised
and well defined. The Bombay Cotton Trade Association,
the East India Cotton Association and the Bombay
Cotton Exchange control the major portion of the sales.
xA.!! contracts on "Colaba terms" are subject to 5i per cent
 SALES
97
discount and these include (a) Railway Delivery Terms
under which the seller endorses the railway receipt to the
buyer or his agent on rceiving 90 per cent of the value and
the balance after the deduction of the usual discount is
payable on inspection of the" cotton, (b) Office terms, under
which delivery is made at the godown of the seller or his
agent and the buyer is required to pay one half per cent
commission to the seller or bis broker, (c) Mill terms under
which delivery is made at the godown of the seller and in
addition to the usual commission a charge of eight annas
per bale is payable to the store-keeper of the buyer. In
transactions on office and mill terms, the buyer can take
samples from 5 per cent of the bales of the entire consign-
ment and these samples are sealed for verification later on
with the article delivered. In the case of ready contracts,
inspection of the cotton is usually made by the buyer before
payment but in the case of cotton meant for export,
the "home guarantee" is insisted upon so that the seller is
bound thereby to refund to the exporter any allowance fixed
by arbitration in Europe. For "Forward Contracts", every
transaction must be made out by the broker in duplicate, of
'which one is signed by the seller and made over to the
buyer and vice versa, both being countersigned by the
broker. In the contract the necessary details, viz., names of
the broker, the parties, the number of bales purchased, the
origin and definition of quality as laid down by the Ex-
change, the price settled, and the measurement per 100 bales
and the date and the place of delivery, have to be
mentioned.

In Jute Sales in the Calcutta market disputes are

settled by he arbitration of the Bengal Chamber of Com-
merce which, although primarily intended for members,
also extends these facilities to non-members on payment of
fees. Arbitration is held for disputes under (1) Quality of
gunnies, (2) General trade questions affecting Jute,
(3) Kutcha bales according to the European and non-
European standards, (4) Pukka bales, (5) Quality of cut-
tings. Names of arbitrators are recommended by their
firms and the actual board of arbitrators is formed by the
98 AGRICULTURAL MARKETING

Arbitration Sub-committee of the Chamber. When the

*
arbitrators are appointed tliey inspect the original con-
tracts and correspondence which may have passed between
the two parties. The seller is then given an opportunity
of going to the buyer's Mill or Press house where he can
select a number of parcels from the entire parcel on which
he places his seal and the buyer is also given similar facili-
ties. Both parties bring their samples to the examination
room of the Chamber and before the arbitrators examine
the Jute, each party is required to send a representative for
identifying the bales and a certificate that this has been
done, is signed by each of the parties. The award of the
arbitrators has the force of law.
In the case of exported Jute, the "Home Gviarantee" is
even now popular although in many quarters its abolition
has been demanded. The baler in some cases .voluntarily
makes an allowance called "Amicable Settlement" in cases
of dispute. The "Invoicing Back" clause by which the
buyer may refuse to accept the consignment at all in case
its quality differs so widely from the buyer's agreement as
to be useless, is a very effective safeguard but it is rarely
brought into use.
 CHAPTER VI.
MARKET FINANCE.

Agriculture being an industry of slow turn-over, the

grower requires iinancial assistance to bridge over the gap
between the sowing and harvesting of the crop. With his
small scale cultivation and tiny holdings his capital is too
semall and his income is not such as to leave large savings
The produce of his land does not always suffice for the
whole year and he is compelled to seek assistance for sub-
sistence as well as for commencing his agricultural opera-
tions in the following seasons, hence short period loans
figure so prominently in rural indebtedness in India. The
following figures have been taken at random from the results
of the village enquiries conducted under the direction of the
Central Provinces Banking Enquiry Committee. "Short-
period" loans here include loans for the purchase of seeds,
manure and other cultivation expenses as well as for the
cost of maintenance which becomes very urgent in the
months preceding the harvest.

District, Village. Peg of short period loan

• to total amount borrowed
during the year.

Amraoti Sirkhed 27
Amraoti Assegaon 39
Akola Poti 35
Buldana Malgani 20
Nagpur Mathani 36
Bhandra Adayal 22
Wardha Wadner 55
Balaghat Rajigaon 37
Jubbalpore Bargi 28
Saugor Surkhil 55

In the Bellary District of Madras this percentage was

about 41 p.c. and it was estimated lEat about 70 per
100 AGRICULTURAL MARKETING

cent of the ryots borrowed at the commencement of the

sowing season. "Practically the only borrowings made by
cultivators are those taken at or just before the com-
mencement of cultivation operations. Loans are not taken
subsequently, e.g., at harvest time. Certain dues which are
to be paid off by a certain date are usually paid out of the
sale proceeds of early pickings". The extent of indebtedness
varies in different areas. From the figures collected by the
investigators of the Indian Central Cotton Com-
mittee we find that in Berar 64 per cent of the cot-
ton growers had to Borrow, in North Gujrat 71, in Middle
Gujrat 82.4, in East Khandesh 78, West Khandesh 71, Sind
94, Madras 70 while in the Punjab only 51.4 per cent. This
dependence of the producer on borrowing has given the
money-lender in the village great predominance in the pri-
mary stage of marketing although in recent years with
better facilities for credit and competition among the
mahajans themselves, the grower finds himself in a stronger
position than before.

The importance of the Sowcar, as a source of marketing

finance varies, however, in diO'erent Provinces. Accordihg
to the Indian Central Cotton Committee, of the amount
borrowed by the cotton growers, the percentage advSnced
by Sowcars was 90 in the North Gujrat, 77 in Sind, 68 in
the Punjab, 65 in Middle Gujrat, 53.5 in East Khandesh and
27.3 in Madras. Co-operative Credit Societies were respon-
sible for 66 per cent of the loans in West Khandesh, 31 in
Berar, 18.4 in Middle Gujrat, 8.8 in the Punjab ^ p ^ 2.5 in
North Gujrat. In Madras Presidency the landlord*' contri-
buted 56.8 per cent of the loans, in the P u n j a b ^ "^ and in
Sind about 10 per cent. *' -

The following table illustrates the sources of loans in

a few of the Punjab Districts.
^General Report on Eight Investigations into the Finance
and Marketing of Cultivators' Cotton, 1925-28, p. 10.
 MARKET FINANCE 101

Percentage of loans obtained from different sources.

Sources. Lyallpur Dt. Ferozepore Dt. Attock Dt.

Cash. Kind. Cash. Kind. Cash. Kind.

Money-lender 28.8 .. 27.2 51.9 74.7 74.1
Co-op. Societies 15.0 .. 10.8 .. 7.2
Arhtia; 15.6 .. 21.5 ..
Landlord 10.2 .. 36.8 43.7 0.2 0.7
Relations 9.7 .. 2.0 4.4 1^.7 25.1
Others 20.7 .. 1.7 .. 4.2 0.1
The farmer secures financial assistance in various ways,
one of which is to borrow from the money-lender on hand-
note or other security often at a high rate of interest and
when the crop is ready he delivers the commodity to the
commission agent and obtains an advance sufHcient to repay
the loan or sells outright a portion of the produce and hold
the balance up for a rise in price. In Coimbatore, bigger
ryots deposit their crop of cotton and groundnut with pro-
prietors of ginning and decorticating factories and com-
mission agents who advance them upto 75 per cent of the
cu.rrent market price with which they repay their own loans.
These factories also advance to smaller ryots 50 to 70 per
cent of the value of the approximate yield of their fields
with a view to enable them to repay their Mahajan but the
stipulation usually is that the advance from the factory will
be repaid in kind and any balance left over at the end of the
season will be paid in cash.
In the United Provinces, loan transactions of this type
between the grower and his Mahajan are known ^s Kachha
Hisab loans. The money-lender opens the Lekha or Khata
(account) of the borrower (Assami) in his books ahd enters
on the right hand side every advance made to him and pay-
ments received are entered on the left side. In gr^in trans-
*Shah and Davar—Finance and Marketing of Cfiltivators'
Wheat in the Punjab, p. 42,
 J 02 AGRICULTURAL MARKETING

actions the rate of calculating the money value^Qi 4 chataks

(i seer) below or above the market as is suitable to the,
j,{ahajan. In these loans the Mahajan avoids paying in
cash what he can supply in kind and insists on repayment
in kind and this ,is done at harvest time but the rate is noL
settled at that time but is postponed till the annual Hisab
vvhich takes place in July when the Rabi crops have been
sold- The Kachha loans usually carry Sal savaya or 25 per
cent rate of interest per annum and for the calcvilation of
the interest the year is divided into 3 terms:—(1) middle
of July to middle of October, i.e. period from the sowing of
the Kharif to the sowing of the Rabi crop, (2) from October
to middle of March, (3) middle of March to July.^-'lp pre-
paring the accounts, the interest on the previous" year's
balance is first calculated at 25 per cent per annum, then
advances given out in the first term are added and 25 per
cent of the total is counted as interest. After this, advances
of the second term are added and interest at the rate of
j2* per cent is calculated. For the third term no interest
is charged as during this period very little advances are
made. Thus by the manipulalion of accounts the money-
lender succeeds in securing a larger share of the farmer's
produce than what is his due. "It is the unsecured Kachha
T-Iisab loans which are the greatest stumbling blocks in the
\vay of efficient marketing and on them is also paid highest
rate of usury."*

There is no doubt that agricultural finance determines

for the farmer, when and how he will have to dispose of his
produce. The connection between financing and marketing
•g very close in India as every intermediary in a- smaller or
orreater degree is also a financing agency, hence the advances
rfiven by the Bepari or Paikar to the grower to secure his
-op are very important. Financial assistance of this type
. either for having a prior hold on the crop or to enable
the grower to hold up the produce for a rise in prices.
•Organisation of Wheat Trade in N.W. region of U.P. by
Tiyugi Prosad, p. 23.
 MARKET FINANCE 103

In some cases the advance is taken at the lime of sow-

ing or before the harvest. In the arecanut trade of Malabar
the advance is given before the crop is ready. If the pro-
ducer borrows Rs. 25 from a middleman, he executes a bond
stipulating that 5 Tulams (18 3/4 seers—1 Tulam) of nuts
valued at Rs. 60 will be delivered to the trader in 6 months.
These hard terms are not ordinarily enforced and the
yi'ower is paid at market price but if he fails to make deli-
very on the stipulated date the producer is sued in the
Court on this bond. The more solvent growers obtain loans
at 12 to 24 per cent interest on the condition that they will
•have to repay it in kind at market prices but the system of
accountkeeping is such that there is always a difference in
the rates and the trader makes illegal profits. Nowhere is
the hold of the money-lender on the farmer greater than in
Sind. Here about 94 per cent of the cotton growers enquired
into borrowed at the time of the commencement of cultiva-
tion and 77 per cent of these loans was derived from the
money-lender. He is also the main source for the supply of
seed cotton.

Source of Seed Supply.

Sind. North Gujcrat,

Per cent. Per cent.
Sowcar 58 30.5
Ginning Factory .. 30 48.5
Bania 2 2.5
Landlord 1 3.5
Cultivator's own .. 4 11.5
seed.
Other sources 5 2.5

Out of the 721 cases investigated into in Sind, 680 were

in debt of whom 64 per cent had executed bonds containing
the stipulation of selling the raw cotton through or to the
Sowcar. It was found in some cases that the whole of the
crop was taken by the money-lender or the produce had to
i04 AGRICULTURAL MARKETING

be deposited with him soon after picking. "The net result

of all this is that, as soon as the crop is picked the cultivator
loses all control over it and there is nothing left with
him which he can hold up or on the security on which he
can obtain loans. It has been computed that 484 out of
586 persons who held up Kapas at this period (second
picking) did not receive payment; and of these 484 cases,
439 or 92 per cent are marked 'payment credited to debt
account', hi the final period also, when all the Kapas has
been picked and a good portion of it sold, one finds almost
the same tale. 603 out of 686 who sold their Kapas, i.e.,
90 per cent did not receive payment in full for the same;
in 513 out of these 603 cases or in 85 per cent cases the pay-
ment was again credited to debt."

In Bengal, the Mai'wari money-lender very often lends

to the ryot on the security of the growing crop on condition
of having a lien on one half of it. This "Burga system" is
analogous to the sharetenancy which is such a great feature
of landholding in Bengal, In many parts of that Presidency
the Dadan system or advances by the middleman to secure
the crop is in vogue particularly in the Jute or rice districts.
In North Bengal, under this system, the advance is given
on a simple bond, either with (1) the stipulation that the
borrower will be bound to sell jute at a stipulated rate or
(2) without any such express condition but it is always
implied. The advance also is given on a written contract
on condition of sale after harvest at market rates. In the
case of petty ryots harder conditions are sometimes imposed
viz., interest varying from 24 to 75 per cent is charged and
the stipulated rate is often kept 10 to 25 per cent lower than
the anticipated market rate. In the Central Provinces, a
similar practice is found called the "Laoni" system under
which the cultivator is given an advance on his standing
crop and he undertakes to sell at a stipulated rate which
i s l n u c h below the market "ate. This ensures high profits to
the creditor and secures him against any loss due to de-
fault. This system is however dying out and though
advances no doubt are given occasionally there is no legal
 MARKET FINANCE 105

obligation to sell to the creditor at a stated price. In the

case of many of these advances particularly in Jute, no
interest is charged directly but the creditor usually includes
interest in his proforma charges and makes his offer accord-
ingly. Thus the farmers have to pay indirectly "the
bankers' interest on the merchant's capital in ^accepting the
prices they receive from the Farias who in their term accept
the prices offered by the Beparis." A similar practice is
even now found in many parts of Bombay Presidency. This
is the "Jalap" system under which advance is given against
standing crops. The ryot makes an estimate of the outturn
from his field and sells the same at a rate from Rs. 30 to 90
per Khandi of cotton lower than the Bombay rate and the
middleman advances him 50 to 80 per cent of the value
of the raw cotton bought and he undertakes the risks of
imforeseen damage to the crop by untimely rain or frost,
thus it is some form of crop insurance for the farmer but
the prices offered are too low to be remunerative. Under
the "Koonjro" system of financing in the Hyderabad Dis-
trict of Sind, the money-lender who is also a- trader refuses
to make anymore advances when he finds that the loan has
grown to a figure of some size. He persuades the cultivator
to take him as a financing partner on condition that the ac-
cumulated loan would run during the year free of interest.
He makes'also fresh advances when required and contri-
butes towards a part of the expenses of cultivation, the
major portion of which, liowever, is borne by the farmer
himself. Out of the net produce, the money-lender takes
away one half for himself but the entire prodvice is to be
marketed through him and this gives him scope for making
undue profits by cheating in weighment, and by the con-
cealment of actual rates. The sale proceeds of the other
half of the produce are not, however, returned to the culti-
vator but are credited to his debt account, thus he receives
nothing at all for his labour on his land.

Various methods of giving short-period financial assist-

ance to the grower have been developed in the different
parts of the country. In the Tipperah and Noakhali Districts
of Bengal, money-lenders do not usually finance agricultural
106 AGRICULTURAL MAnKKTiNo

niarkeling but "at Ihc liinc of the chilli harvest the indigeii-
oius bankers give advances or open current account on the
system which is known as the "Dliarti Sud". Under this
the interest is payable on every Hat Day at the rate of 12i
per cent. Two Hats are held every week and thus it is a
temporary help to petty dealers to facilitate the movement
of produce and to the grower to hold up for the time to take
advantage of the early fluctuations in the market. In Assam
in the Gauripur area Aratdari business is carried on in the
orange trade and a receipt called " T u k a " is given to the sel-
lers which is an acknowledgement of debt. . This receipt cir-
culates freely in t h e j n a r k e t at a discount varying from 1 to i
per cent according to the condition of the money-market, and
it is cashed within one week or 10 days. In a similar fashion
in North Bihar, when sugarcane is delivered in cartloads in
sugar mills, it is weighed and the farmer is given a note of
weight, the counterfoil of which is kept with the mill. These
notes are presented at the end of the w^eek for encashment
and during the week they circulate freely as credit instru-
ments and are negotiable.

In addition to the village Mahajan, the village merchant

and the Bepari, the landlord is an important sovuxe of agri
cultural market finance. In Madras villages the percentage
of loans taken out from landlords vary from 16 to 25 while,
in the United Provinces it is easily above 25 parti^cularly in
the sugarcane areas. In some cases, the well-to-do farmers-
place funds in deposit with viilage money-lenders who
advance to the growers and where these money-lenders do
not combine trade with banking they induce the Ijorrowers
to market through those who have deposited with them.
In China the procedure followed in financing small farmers
who cultivate cotton in Hoppei "for well-to-do families to
lend money to cotton dealers, who divide the loans into
small sums and use them to make advances to the producers.
The rate charged hy Ihe original lender is 12 per cent; the
rate paid hy the farmer is anything from 3G to GO per cent."'^

*R. H. Tawney—Land and Labour in China, p. 61.

 MARKET FINANCE 107

The po])iiUir noliou that liccausc (he fanner has taken

luans Iroui Uic village Maliajan or advances I'/oni Uic Jicpari,
he is completely under iiis control and has lo accept any
prices offered by him 1s not borne out by facts everywhere.

In this connection the figures collected by Mr. J. M.

Lobo Prabhu m a y prove of some interest as illustrating the
wide diversity of local conditions making any generalisa-
tion hazardous.

Percentage of Cultivators Sold to creditors Sale to village

Selling within 2 month! of Mahajans
harvest. orI kachha hisab.

Meerut (Jalalabad) 66 50 21
Meerut (Hapur) TO- 55 25
Allahabad (Kasia) TS 40 10
Agra (Ukhasia) 70 35 15
Beneras (Badausi) 60 40 20
Moradabad (Rajo- 75 10 5
- pur.
Saharanpur 70 35 30
(Pathanpura)
Gurgaon 75 40 10
Ludhiana 70 • 30 18
Hosangabad 75 20 10
(Bamni).

The enquires of the Indian Central Cotton Committee

•also "conclusively show that cultivators can and as a matter
of fact, do hold the crops for considerable periods and
further, that when they do sell early, it is not because they
are financially pressed but because of their fear of a falling
market and the risk of loss by fire and other causes. The
only pressure to sell early was thai exercised by necessity
of paying Government assessment and in the Punjab
of the payment of the water rates by the due date''.
In Khandesh although one-half of the crop was
picked early only 11 per cent was sold then. While 60 per
108 AGRICULTURAL MARKETING

cent of the crop was marketed early in middle Gujrat, the

corresponding figures for Sind were 48, Punjab 20, and
Madras 12. The cultivators of Middle Gujrat are better off
than elsewhere and the high percentage of early sales is due
more to speculative tendencies than to compulsion. The
following figures illustrate the influence of borrowing on
early sales: —

Area Peg of cultivators Peg of early Peg of crop Sold

indebted at sowing pickings to early to that
total outturn picked

Khandesh 78 64 15.4
Sind 94 71 84
Madras 70 68 15

The freedom of sale of the indebted fanner is no doubt

much restricted, but that is mainly due to his low economic
condition which stands in the way of his keeping back his
crops for a rise in the prices. Although one of the usual
conditions underlying the loan is sale through the creditor
and often at the stipulated price, this condition is rarely
enforced were the marketing facilities are available to the
ryot. In the Nandyal taluk of the Kurnool District only 29
out of 519 cotton growers who had to borrow gave a verbal
undertaking to sell to the lender. In areas where the com-
petition between the middlmen is keen or in periods of
rising prices, the position is entirely reversed and they are
anxious to lend or give advances to the growers to secure
their crops, usually without interest and often without even
any verbal obligation to sell. In other words in such cases
the boot is on the other leg." The economic survey of vil-
lage Gijhi in the Rohtak District of the Punjab where 53
per cent of the inhabitants have one acre holdings and a
large percentage of them have ordinarily to borrow, "a cul-
tivator in debt who sells to his creditor usually gets as good
a price as a cultivator who is not in debt."

This is also supported by the Bihar and Orissa Banking

Enquiry Committee. "Some cultivators deeply in debt are,
at the risk of failing to obtain further credit when they need
 MARKET FINANCE 109

it, obliged to sell to the creditor, but even then the price is
nearly always the market price of the day." (p. 62).

In undeveloped areas or regions having no adequate

means of communication the grower must be at a dis-
advantage in selling to the village Mahajan but this is so,
not merely because he is a creditor. "Even remoteness may
be coimteracted by cohesion amongst growers or by the pre-
sence of an influential landlord."* In many cases the sol-
vent cultivators combine in keeping up the prices and the
poorer and indebted ryots take advantage of this. In a vil-
lage near the Salt Range, for example, a powerful Zaminder
insisted upon selling his Bajra at the rate bf 12 seers per
rupee when the market rate was 15 seers and the other
farmers were quick to foUow the example when it was
circulated. Besides this the indebted ryots have very little
security except the crop and they effectually use this econo-
mic weakness to secure proper prices for their produce as
otherwise the creditor stands to lose everything. Thus the
hardship of the cultivator and his great dependence on the
midhlemen is, much exaggerated, and it depends to a very
large extent on the economic organisation to which he
belongs, hence any reform in this direction should be to
improve by means of Co-operative organisations his credit
resources and to secure marketing facilities to him. Not
only this, but through improved methods of financing the
introduction of better agricultural methods and better vari-
ties of seeds may be achieved with success as was attempted
by Messrs. A. K. Tennent and Company in the Rangpur
District of Bengal when they with the assistance of the
Department of Agriculture advanced money to growers
<\'ithout interest on condition that they would grow the
recommended variety of tobacco gnd sell the entire produce
at a fixed rate. The selection of growers, and supervision
over the cultivation of tobacco and the curing of leaves
were superintended by the Agricultural officers and in the
contract better prices were fixed for the higher grades of
leaves.

*Report of the Punjab Banking Enquiry Committee.

110 AGRICULTURAL MARKETING

Thai Uic weakness of the producer and his inability lo

inaikel his produce directly in Mandis is somewhat over esti-
mated is clear when we consider that in the Punjab, the ave-
rage i)ercentage of the growers coming to Mandis is 50 at
Lyallpur, 70 at Okara, 90 at Kotkapura, 75 at Ferozpur and
50 at Toba Tek Sing. At the Lyallpur market during the cot-
ton season, the percentage of cultivator's carls arriving -with
their produce amounts on an average to 26. Cultivators
living within a radius of 10 miles of Lyallpur marketed 46
per cent of their produce in their own carts.

Some estimate- of the extent of the finance required for

the marketing of the agricultural produce at some stage or
other may be had from the figures of the marketable crops of
two provinces of I n d i a : —

Gross Value of Marketable Agricultural Produce.

Punjab. Bengal.
In crores of Rupees. In crores of Rupees.

1926 51.5 1920 62.9

1924 74.1
1927 45.7 1926 66.7
1928 102.0
1928 51.0 1930 52.0
1932 32.7

In some important cotton areas of the Bombay Presi-

dency like the Bombay Karnatak there are 11 cotton markets
which handle approximately per annum, 2,86,000 bales of
400 IBs. each having an approximate value of Rs. 500 lakhs.
In the Berar cotton markets the annual financial require-
ment is well over Rs. I l l lakhs and this amount has to be
provided through a long chain of middlemen to the ultimate
grower with a view to facilitate the movement of crops.
The Bihar and Orissa Banking Enquiry have estimated that
the value of the trade Ihal stops at the primary or secon-
dary market without leaving the area of production, is
approximately Rs. 125 crores out of which the 2500 primary
niarkcls clatiu Rs. 75 crorcs and the 500 secondary niarkels
(lie remainder while nierchandisc vahicd at Rs. 25 crorcs
goes out of the zone of production.

In moving Itic crop from tiie village to the nearest

market, the Bepari or Faria in some cases employs his own
capital and in others he borrows either from the ordinary
money-lenders or Aratdsy-s, Goladars or commission agents.
In the wheat trade in tlip United Provinces, where the
Beparis nsually have little capital, they liave a running
account with the Adatj'a for short periods varying from 2 to
3 weeks on which interest at the rate of 12 to 18 per cent
is charged if the Bepari fails to bring grain within a month
of advance or at the end of the season when accounts are
closed. In Chattisgarh in the Central Provinces advances
are given for each trip or " k h e p " and interest is calculated
at * anna per rupee per month or 37J per cent per annum.
In Assam, sotvcnl cviitivators occasionaUy finance the
Beparis or other villagers engaged in tliis work and in some
cases they borrow from the urban money-lenders at 18 to 24
per cent to re-lend at higher rates. In Bombay the itinerant
buyers of cotton and tobacco are financed by urban dealers
and commission agents and high rates of interest which
they have often to pay, varying from 18 to 24 in tlie case of
tobacco, often induce them to offer low rates to growers and
to take recourse to mifair means. As usually the village
sales are made on a cash basis, the Beparis reqviire a large
amount of fluid resources to effect the moving of crops. In
the United Provinces, tlie ultimate burden of providing
marketing finance falls on the Pakka Arhatiya as soon as
the crops are harvested. Thus in the primary stage, at
present, organised banking gives no assistance directly in
moving the crops, and the cost of services at this stage, due
to chaotic stage of marketing is conseciuently high.

In the primary stage also the high charge on account

of interest makes a big hole in the profit of the cultivator.
The rale of interest varies from G to 75 per cent in Sind to
9 3/8 per cent in middle Gujrat, where about 6(5 per cent of
the loan were given out at that rate. Tlie Co-operative
Il2 A G R I C U L T U H A L MAUKtTlNG

Societies have no doubt brought about a great reduction in

the rates everywhere. It is however remarkable that in
Sind where the Co-operative rates are quite low, 10J to 11,
as compared with the money-lender's rates varying from
18 3/4 to 75, the percentage loans taken from Co-operative
Societies is only 7 as against 31 in Berar due to the fact that
"Ihese societies, advance very inadequate amounts and
besides this, their rules are so strict, requiring the return of
the loan on particular days on the pain of the forfeiture of
the livestock and other moveable property—that in order to
be able to return these loans, the cultivators have sometimes
go to the Sonar or Bania to get the wherewithal to pay the
society."* The real rate of interest which the money-lender
receives is however much higher than the nominal rate as he
realises besides interest on the amount lent, discount, and
other charges on the sale, makes undue gains in the weigh-
ment and in the suppression of actual rates and in failing to
credit to the debtor's accoimt the full amount. No matter
when the crop is sold, the amoimt is rarely credited till
April next and the interest on the amount goes on accruing.
In Sind, in addition to all these, he gets the Sowcari Lapo.
"The Sowcar's Lapo is usually reckoned as so much per nar
or hurla in the lift irrigated areas. The usual rate is one
maund of Bajri grain or equivalent amount of seed cotton,
plus 1 "Boro" of Bajra earheads, plus 10 to 20 bundles of
grass."

The Aratdar, Dalalidar or commission agent is at the

apex of Ihe intra-district marketing organisation and his
functions include, the assembling of produce at big centres,
financing of the marketing process, and storage of the pro-
duce for a rise in prices and preparation and transport of
the produce to the consuming or exporting points. These
middlemen start mainly with their own capital or deposits
by their friends and relations on which the interest at the
Mandi rate (varying from 9 per cent at Gazipur and 11 per

* Report of an Investigation into the Financing and Mar-

keting of Cultivators' Cotton in Sind, p. 18.
 M A H K E T PlNANCti 113

cent at Hapur) is paid. * In other cases ttiey get loans from

the joint stock banks, Shroffs or bigger Arhtis, also on
raihvay receipts and Hundis.
The Banks grant accomodation (1) on the pledge of
produce stored in the godowns of the Bank or of the mer-
chant but under the control of the Bank, the produce in
every case being insured. In the former case, the borrower
is liable for depreciation of stock or fall in value and he
may be called upon to make good the deficit. The maximum
amount which is advanced in case of groundnut or cotton
in south Madras is 80 per cent and the rate of interest varies
from 6 to 8 per cent. In case of grain stored in the mer-
chants' godowns in the Mandis of the United Provinces the
Joint Stock Banks lend with proper precautions. At
Ghazipur for example when a Khatti is filled, a statement
giving the details of the quantity and cost called Parcha is
sent to the Bank. On the basis of this the Bank advances
65 to 75 per cent of the face value of the Khatti and a stone
with the name of the Bank inscribed on it is fixed on the
Khatti signifying its possession. With fluctuations in .the
value of the grain mere cover is demanded. In the Punjab
the commission agents are financed by big Mahajans and
they borrow from the Banks on the security of grain
godowns with a storage capacity of about 1,000 maunds.
The borrower has to hand over the key of the godown to
the Bank and he obtains an advance of 75 to 80 per cent of
the value at 7* per cent interest.* In the tobacco trade in
the Guntur area, the merchants get little assistance from
the banks and have to borrow mostly from Marwaris who
taking advantage of any financial stringency in the local
market demand even 50 per cent for a week's loan. The
delivery of possession of the godown to the Bank is often
cons'dered derogatory as it results in a lowering of credit
of the merchant in the market, lience he very often does not
avail of this assistance.

The Aratdar arranges with his Shroff or Bank to allow

him the required accommodation in the form of a demand
*Darling—Wisdom & Waste in the Punjab, p. 126.
114 AGIUCULTUUAL MAUKETINO

pro-note or a running account or a Muddati ITundi. The

Bank may demand a second signature on the docnment and
in the cases of Muddati Hundis the ShrofT malcing the
advance may endorse it to a Banli for discounting. In
groundnut and cotton trade in Coimbatore tlie commission
agents are given acommodation on the security of pro-notes
while ginning and decorticating factories accept deposits of
the produce of the farmers and give advances on them upto
75 per cent and in their turn obtain financial assistance
from the Bank on this security. The Banks usually obtain
also the signature of the cultivator or sub-dealer in their
registers for their stocks deposited with them and lend at 12
to 15 per cent rate of interest. The Banks thus give great
assistance by discounting Hundis based on genuine trade
transactions and give advance on pro-notes on personal
credit lo approved traders.

In the case of movement of produce to distant markets

by railway or steamer the merchant draws on the purchaser
for funds. The sale price may be absolute or dependent on
the quality agreeing with the sample. In the former case
he may draw upto full value but in the latter case it is usual
to draw for 90 per cent only. Funds may be drawn by
Darshani Hundis with the Railway Receipt or without it
and these are discounted by Banks. In Madras Presidency
there is a large coastwise seaborne trade in paddy. The
small merchants after shipping the goods draw a Hundi or
Bill of Exchange on the consignee, which after being
accepted is discounted with local banks. It was pointed
out before the Bengal Banking Enquiry Committee that the
European firms engaged in buying and baling of Jute can
draw the full value of the goods against a railway receipt
or bill of lading from any branch of the Imx^erial Bank
whereas the Indian merchant does not enjoy this privilisge
and he is not given advance against bills of lading issued by
the Indian steamship companies. This denial of banking
facilities is a great hindrance as he is left to his own re-
sources and he has to remit funds through the Imperial
Bank or the Post Office which involves much loss of lime.
 MARKET FINANCE 115

For the financial assistance rendered by llie dilTercnt

grades of middlemen the remuneration realised by them
appear to be excessive in view of the great risks they have
to undertake and the absence of any organisation in the
marketing business. The usual rate of interest varies
from 9 to 12 per cent in Assam and 15 per cent in the
Central Provinces. In Madras the Imperial Bank has to a
large extent displaced the indigenous banks up on a big
scale the business of discounting Hundis and granting loans
on produce. In the Punjab where the commission agent
has to supplement his own capital with loans the rates in
the case of small traders are 9 to 12 per cent and in the case
of big traders 6 to 9 per cent. The Amritsar Grain and Sugar
Association gives advances varying from 5J to 7i per cent
and up to 80 per cent of the commodity.

In moving the produce to the port^, the bigger merchants

of the town markets after buying the goods with their own
funds sometimes despatch it to port for sale direct to ex-
porters or through Aratdars and they may be paid by
Hundis or may receive acommodation fom local bankers,
e.g., Multani bankers in Madras Presidency borrowed on
their personal credit and it is covered by a Hundi which is
sent to the port for collection on the sale of goods at the
port. These merchants also obtain assistance from the
Imperial Bank by the arrangement on the security of their
own funds. The exporting firm on shipping the commodity
gets advance from foreign Exchange Banks on the strength
of the shipping documents, or if its credit is sound without
these or on "clean" bills.

In the export of the wheat or cotton, many exporting

firms have their own organisation for the collection of the
produce and moving it from (he local markets to the port.
They have Head offices at the ports with warehouses for the
handling and the shipping of the grain and many of them
have net-works of branches in the different Mandis, each of
which is managed by a local agent who is responsible for
the purchase, handling, storage and transport of the produce.
IIG Ar.RICULTURAL MARKETING

eg., wheat. The privilege of acting as brokers of the ex-

porting firm for a district is usually given out bycontract
to a large broker wlio employs a large number of brokers or
Dalals to assist the agent of the branches in his purchases.
The wheat exporting firms make cash purchase by paying
ready cash on the spot The second method is known as the
Karachi Pass by which the Agent enters into an agreement
with a local merchant for the delivery of wheat at Karachi
within a stipulated period. The responsibility of assembling
and transporting the grain is with the merchant who, on
making over the railway bill of lading to the Agent, receives
90 per cent of the price and the balance is paid after the
exporter has examined and w-eighed the consignment at the
port. In the third method, the Agency Pass, the important
difference is that the local Agent checks the weight and
decides about the quality and thus it is more popular with
the traders as the transaction is complete on the spot. The
actual supply of funds is done by local bankers called
Shroffs, who act as agents for the exporters and draw bills
on them for subsequent payment.
This class of Shroffs have played a very important part
in the history of Mughal India as money-lenders and
bankers, financiers to the Governments and as the apex of
the credit system of the country and their influence on shap-
ping the course of political history of the time was no less
great. With the coming of the English and the develop-
ment of the western system of banking they have declined
considerably but have maintained their existence by carrying
on trade on their own account and the financing of the trade
in addition to the normal business of money-lending. They
form the only connecting links between indigenous banking
and the Indian money market and they draw Hundis them-
selves or endorses the Hundis of other bankers and traders
and re-discounts them with the town bankers or the Joint
Stock Banks. The financial assistance which the Calcutta
and Bombay Banks- and indigenous bankers give to the
importing and exporting firms, and commission agents ftre
passed on to the Shroffs who also lend their surplus funds
in the market when necessary. They utilise the services
 MARKET FrNANCE 117

of llie Imperial Bank in making rcmiliances to places parti-

cularly wliere the facilities of remittance through post or
Darshani Hundi are not available, but where a Hundi ex-
change exists, the Shroffs prefer it to the Imperial Bank
facilities. In rediscounting of bills and Hundis, the Shroff
can derive much assistance from the Imperial Bank as he
alone can satisfy the condition of two signatures.

The large exporters like the Ralli Brothers and the

Japanese firms by their own organisation try to eliminate
the chain of middlemen and supply the short period
finance required for the moving of the produce them-
selves. In South India some exporting firms provide tem-
porary financial acommodation to Dalals and middlemen
under what is locally known as "Unfixed Contract or Rate"
system. Under this, the wholesale merchant delivers the
commodity to the agent of this firm, price is not settled then
and the dealer is given temporary assistance on the security
of the goods. No interest is charged and the dealer has to
settle his accounts with the firm within 45 days of the first
advance.

Boyle has well remarked that "credit for agricultural

marketing has been and still is, largely a question of credit
for the .dealer." With the forging of new links to the chain
of the distributing services, new methods of the manufac-
ture and supply of credit have been developed in other
countries an account of which serves to indicate the extent
of our deficiencies. In the United States of America the
cotton dealer gets finanical aid on his promissary note,
warehouse receipt, compress receipt, bill of lading, banker's
acceptance and trade acceptances. The Banker's acceptance
is a draft drawn on and accepted by a bank and it carries
the lowest rate of interest. When a bank affiliated to the
Federal Reserve system endorses it, if can be rediscounted
in any of the 12 Reserve Banks. "The purpose of the
Banker's acceptance is to finance imports and exports, the
domestic shipment of goods, the storage of readily market-
able staple accompanied by a warehouse receipt. They
piay Have a maturity from 3 to 6 months when based on
118 AGRICULTURAL MAKKETFNG

l>ropcr dociii.iicnts. In the case of cotton the documents

would be (a) the warehouse receipt, (b) grade certificate
and (c) Insurance receipt." The trade acceptance, on the
other hand is a bill drawn on a buyer of cotton and accepted
by him for payment within a period of 9 months.

Until all the units in our marketing system are streng-

thened it is of course not possible to expect to secure all
these facilities in finance, but a move in that direction has
been foreshadowed by the great emphasis laid by the Ban}^-
ing Committees on the creation of Licensed Warehouses and
the regulation of markets in general. Dr. P. J. Thomas in
his illuminating minute of dissent, has pointed out that
that "this system of financing marketing operations must
be replaced by short term credits which will keep money
more mobile, bring down the rate of interest and enable the
owner of the produce to market at the most auspicious time
and the highest available prices. This is only possible by
the creation and discounting of negotiable paper at every
stage of the transaction."* One method of achieving this,
is by developing "a rediscounting. system with a growing
bill market" as has been achieved in the United States of
America by the passing of the Federal Reserve Act of 1914
which has knit together under one organisation 30,000
independent Commercial Banks of the coutry. This system
facilitates the manufacture of short term credit by the pur-
chase in the open market of the banker's accepances
maturing within six months which are drawn by growers or
by co-operative organisation of producers of non-perishable

staple agricultural products. The Agricultural Marketing

Act of 1929 has provided for the creation of a one-half
billion dollar Revolving Fund from the Treasury to give
loans to qualified Co-operative Marketing organisations and
other farmers for short periods sa as enable them to hold
&iid control seasonal and short period surpluses of produce
with a view to avoid an unnecessary glut in the market. The
new Farm Credit Administration set up under the Agricul-

*Madras Banking Enquiry Committee Report, p. 279,

 MAIUVET PlNANCli 119

tural Adjusliaent Act of 1933 has furllier centralised the

dealing of short-term credit. It is to be expected that in
India with the organisation of Licensed Warehouses, Co-
operative Marketing and the creation of the Reserve Bank
of India, marketing finance will be better organised, and
made cheaper than what is now, for as Dr. Thomas has
pointed out, "a proper co-operation of credit supply with
marketing is the Sine qua non for such improvement."
 CHAPTER VII
WEIGHTS AND MEASURES.

The problem of marketing in India has become all the

more complicated owing to the bewildering diversity of the
weights and measures used in the different parts of the
country. The" variations are not only regional but on a
commodity basis as well and are perhaps survivals of the
early days of the rule of the East India Company in Bengal
when in the same locality there was a great diversity in the
medium of the currency used for Ihc purchase of different
commodities.

The standard seer of 80 tolas is no doubt in use in

towns, railway stations and the important markets but in
the village markets the diversity is very great. In the Dis-
trict of Birbhvun in Bengal, in rural areas there are three
kinds of weights : —

(1) Kacha seer weighing 58 10/16 to 60 tolas.

(2) Batkari with varying values: —

58 tolas in Bolpur Thana used in the rice trade.
72 tolas in Ilambazar in the Gur trade.
80 tolas in Sakulipur in Oilcakes.

(3) Pai weighing 110 tolas in Rajuagar for the trade

n pulses and weighing 75 tolas in Sakulipur for various
;ommodities. In the Purnea District of Bihar although
he standard seer of 80 tolas is in general use yet for the
veigliing of gram, tobacco and jute seers having different
veights are used in different localities, e.g., in Araria it is
54 tolas,: Dharampur 68, Kishanganj 88, and Kadwa 90.
n the weighing of mustard oil in Kishanganj a seer of 132
olas is used. In the Ranchi District two different kinds of
veights are used in the Panch Parganas, viz., Solahi seer
iqual to 16 Gorakhpuri pices and the Athaisi kachi Ser
 W E I G H T S AND MEASURES 121

equal in weight to 28 copper pices. In the Gaya District

the grain is measured in Paseris equal to five standard seers
of 80 tolas each but tlic Pascri actually varies from 6 to Ih
seers while the range of variation of the Seer is from 42
tolas in Nawadah subdivision, 48 in Tikarl and Rajauli,
56 in Pakribarawan to 84 in Atri.
In Bihar the local weights are based on Gondas or sets,
of the old Gorakhpuri pice which "are lumps of copper cut
from a copper bar without any definite shape or size. No
two of them arc equal in weight, shape or size."
An investigation made by Mr. B. N. Sarkar into the
frequency of different systems of weights in Bihar shows
that in out of 1426 markets enquired into 497 use 48—55
tola seers, 202 use 56—63 tola seers, 313 use the standard
seer of 80 tolas and the variation of tolas in the seer is
from 32 to 105. Thus "the local weights vary rovuid about
50 tolas a seer or about 100 tolas a seer except where the
standard weight has been pushed in from above. I can offer
no reason for this choice of the people of a seer of 50 tolas
or its multiple except one casually offered by an old villager.
A seer of about 50 tolas or 10 chattaks of ripe or other grains
is considered to be a full meal for an adult agricultural
worker or a peasant proprietor. A seer of this therefore
helps one to distribute grains to labourers and a housewife
to take out rice for cooking for the members of the family.
This may be one of the most important factors in keeping
the Katcha weight going."*

In tlic weighment of cotton in the Bombay Presidency

the unit is the Khandi of 784 lbs. of lint but in Khandesh
it varies from 160 to 250 lbs. and in the southern part of
the presidency the unit is a Nag of 336 lbs. One
maund of cotton is equivalent to 72 seers at Nardana,
50 seers at Sherpur, 40 at Navapur in West Khan-
desh, 80 at Pachora, 72 at Dondaichi, 48 at Jalgaon, 25* at
Shendurni, and 2 l i seers at Bodwad in east Khandesh; 16 to
19 seers in the Yeotmal District, 15 seers in the Amraoti
*B. N. Sarkar—Paper on Weights and Measures of
Capacity in Bihar.
i'22 AGRICULTURAL MARKETING

District and 20 seers at Asalgaon (Buldana District; m

Berar.

In llic Madras Presidency tlic unit is a Kliandi of

500 lbs. but in the area where the "Westerns" cotton is
grown tlie unit is a Nag of 312 lbs. In the Central Provinces
the measures e.g., "Mani", "Kuro" & 'Khandi' have a different
significance in different areas with great variations in
weight. The Khandi of uncleaned cotton varies from 28
maunds to 20 maunds-

In various parts of the country baskets or pots are used

for measuring grain and tlierc is a great variation in tlie
capacity of these measures. In Western Burma rice is
measured in baskets, the capacity of which varies from Dis-
trict to District "according to the number of condensed
milk tins, the contents of things they will hold". In Assam
Valley paddy, mustard and jute are measured in "Doon"
basinets. "A Doon is a wicker-basket of which the size
varies somewhat but the standard size contains 372 seers
of paddy." In the Ranchi District of Bihar grain is seldom
weighed but is measured in Pailas, tlie size of which varies
in different localities, but three varieties arc well-known,
"Chhapnahi" paila (e(iual in weight to 56 copper ])ices),
Baragandi Paila (48) and Sawai paila. In Talagrnj (Pun-
jab) weighing is done by means of a choah (a measure made
of iron or wood containing 3 seers of wheat).

The evils caused by this diversity are further aggravated

by the exploitation of the producer-seller by tlie middleman
and Ihe deliberate use of incorrect weights v.'hich is partly
acquisced in and partly undetected. The lack of bargain-
ing power of the cultivator to a large extent is responsible for
the adoption of these unfair methods. In Assam sometimes
the Marwari monej'-lcnders make advances just before the
harvest on condition that the borrowers would pay them
one Doon of paddy over and above the number of Doons
which would be due at current rates after the harvest. The
money-lender's Doon is usually bigger in size than the
standard doon and the borrowers know it. In some areas
 W E I G H T S AND MKASUKES 123

there is a common practice of using different measures for

purchases and sales and it is always to the advantage of the
buyer. The Assam Banking Enquiry Committee have
mentioned that "the leading trader near Baruk-Barua told
us that he bought with a nine-kathiya doon and sold retail
with a eight-liathiya one". "In Poona the merchant's
buying unit for Gur is 250 lbs. whereas his selling unit is
240 lbs."*

Even where Correct weights arc used in many places a

market custom has developed by which extra payments or
deductions have been recognised and this adds to the profits
of the middlemen. In Bihar, the buyer of tobacco is entitled
to take a bundle for every maund weighed. A more serious
evil is the use of short weights and the lack of any machi-
nery to check it effectively. The enquiry into the weights
used in Mandis of the Punjab held in 1928 by the Punjab
Board of Economic Enquiry have revealed that only 50.8
per cent of the stamped and 12 per cent of the imstamped
weights were correct. New weights sold in the bazar are
usually incorrect. "These bazar weights usually made in
Agra, are of cast iron and it appears factories manufactur-
ing them do- not pay much attention to the quality of the
material used with the result that weight from the same
mould vary considerably with every smelting". It was
further noticed that there was a tendency for weights of 5
to 40 seers to be overweight and for the smaller ones to be
underweight. Various devices are adopted to increase the
traders' profits even when standard and stamped weights
arc used. A shopkeeper "had inserted lead into the hollows
which are generally to be found in the lower surface. Ho
admitted that he used the heavy weight when he was pur-
chasing commodities like Gur, wheat, cotton from the culti-
vator's womenfolk or if he were weighing produce in ex-
change for which his cvistomers wished to purchase other
goods from him."** Mr. M. L. Darling has pointed that in
the Punjab "cheating is facilitated by the substitution of an

* Report of the Bombay Banking Enquiry Committee, p. 109.

'>'* Economic Survey of Tehong Village, p. 174.
124 AGRICXJLTURAL MARKETING

iron topa or measure for the wooden vessel always employed

in the past. The bottom of an iron topa can easily be pushed
in or out and when pressed inwards, its contents Aveighed
one chhatak less than before". In course of the enquiry
into the marKeting of cultivator's cotton in Sind a special
inspection of the weights was made. "It was found that in
most cases the Sowcar Banias when purchasing cotton from
the cultivators did not use the correct iron weights at all
(although they used them when they themselves sold) but
made up approximate weights by putting in a bag pieces of
stones and bricks. Thus they contrived to get from the
cultivators between 90 and 96 lbs. for a mavmd whereas the
correct standard of weight is 86.4 lbs". The use of stone
weights of irregular sizes is also common in villages and in
a majority of cases these are short in weight. A Bania
using these weights is looked upon with suspicion and this
has given rise to a common saying in the Punjab : —

"Bina parhaya Bania, aur pathar ka bat,

Kubad Brahman, te parhoa J'at".

(An uneducated Bania, and stone weights are as bad

as an uneducated Brahman and a literate Jat).
Weighment is usually carried on in hand scales, al-
though in the larger markets Beam Scales are also used.
The trader prefers the hand scale as it helps him to shift
dirt and to detect large scale adulteration, while it gives
him unlimited opportunities for cheating' in weighment. In
the Montgomery District of the Punjab it was noticed on
enquiry that ovit of 139 hand-scales checked, only 16 were
fovmd correct whether loaded or imloaded. Mr. B. N. Sarkar
mentions that "the Baniyas always keep one side of the scale
heavier than the other and use this difference to their
advantage while buying or selling. For example before
weighment starts the cultivator heaps the corn in front of
the man. The Bepari then corrects the balance by putting
some pieces of stones on the lighter pan. Then just before
beginning to weigh, he puts his "Muretha" (head gear) over
the weights on the scale pan and bends down as if to pray
 W E I G H T S AND MEASURES 125

to Mahadeo for success in business and thus cleverly

manages to put some more stones on the pan, these stones
having concealed all the time." Another common method
is to use a stiff cord for the central string which the weigh-
man holds in his hand and to manipulate the scales by the
pressure passed through the cord. Mr. Sarkar further
points out that "a kind of balance known as Kanadandi is
purposely made and sold by the makers only to trusted
Banias. In this balance the central hole in the wooden bar
is made a little away from the mid-point so that one side
from the centre is a little farther than the other, though it
does not appear so on casual observation."

In some parts of Orissa, a peculiar type of hand-scale is

used which has only one pan and the weights are suspended
from Ihe beam and quite correct results are obtained. The
Royal Commission on Agriculture have recommended the
use of platform scales and this is being adopted in the
bigger markets.

Among the disadvantages arising out of this medley of

weights the most important is the handicap under which
the cultivator suffers in ascertaining correct market rates.
In Ihe village the prices are quoted in terms of some units
of weight while the rates in the terminal or central markets
are quoted in terms of the standard maunds or seers, thus
it becomes difficult for the illiterate grower to follow the
fluctuations in the prices of the bigger markets.

From the brief survey given above it will appear that

no advance tov^'ards orderly marketing is possible without
a standardisation of weights and measures in India. The
Government took up this matter as early as in 1870 and the
decimal system was accepted as the basis and the Indian
seer was considered as the equivalent to the kilogramme. The
maund of 40 seers of 80 tola seer was by executive notifica-
tion adopted as the standard, but nothing further appears
to have been done to enforce it.

The Silberrard Coirimittee in 1915 recommended the

adoption of a uniform system of weights for India based on
126 AGRICULTURAL MARKETING

the 180 grain tola. The Government of India have accepted

the principles underlying the report but have not attempted
to enforce a uniform standard for India and have left it to
the Provincial Governments to lay down standards suited
to their local requirmcnts. The Royal Commission on Agri-
culture have practically endorsed this action of the Govern-
ment. "We fully realise the obstacles of an all India legisla-
tion presented by the local trade custom and of local tradi-
tion which is probably more powerful in this than in almost
any other respect. The only hope of advance appears to us
to lie in action within the limits of each province." (p. 397).
Custom no doubt plays a large part in resisting the adop-
tion of the new standard but the continuance of payments
of wages to agricultural labourers and village artisans to a
large extent contributes to this also. In Bihar the usual
rate of wages' for landless agricultural labourers is three
seers of grain per day which converted into standard seer
would amount to l3 seers. Any reduction of this customary
three seers would be looked upon with suspicion. Mr.
Sarkar cites the instance of Gangpur State where "even
though the standard measure introduced by the state has
entirely replaced all other measures from Ihe markets, the
'Bhuti' or servant's wages are still paid in grain, Payments-
in kind are made to blacksmiths, barbers, etc. and also in
case of certain endowments".

The' Indian railways, have laid down an uniform

standard all over India and this has to a large extent given
a healthy stimulus to the adoption of an uniform standard by
the trade. There is no doubt that local conditions stand in
the way of improvement but it is ultimately a question of
competition and the, bargaining power of the cultivator.
Where he is weak and the demand is not strong no amount
of legislation can save him from the wills and trickery of
an avaricious trader as his very weakness makes him a will-
ing dupe, but where conditions are better, he will not suffer
any trader to take any vmdue advantage and with some legal
protection he can be assured of getting correct weights. The
Assam Banking Enquiry Committee have quoted the
evidence of a trader which may be cited here to illustrate
 W E I G H T S AND MEASURES 127

the difference caused by the existence of competition.

"Growers bring tlieir jute after weighment and their weigli-
mcnt is generally correct. We talie two seers in excess for
every maund so far as cultivators of the Bishnath side are
concerned, for jute growers of Tezpur side we do not talie
anything in excess". In Giji village (Rohtak Dt.) the culti-
vators who wish to protect themselves insist upon the use
of their own weights in their dealing with shopkeepers.
Thus the improvement in the bargaining power of the
grower will give us the real solution of this problem. The
lead given by the Government and the railways is slowly
])crmealing and already in the urban market the standard
SO tola seer has come to rule, and it is doubtful how far the
pace downwards can be stimulated by an all Inflia legisla-
tion. In Bihar the standard weight of 80 tola seer has made
considerable progress in Chota Nagpur as Avell as in town
markets in other provinces. Out of 322 markets examined
in the District of Ranchi, Singbhum, Hazaribagh, Sonthal
Parganas and Purnea as the 80 tola weight was found to be
in use in 276 markets. Dr. Sengupta has remarked that "if
the country has survived the shock apprehended by the
oppositions to the Sarda Marriage Act, there is no doubt
that the rural public will only welcome such a beneficient
measure'.'* The very experience we have had
of the success of the Sarda Act in checking chil
marriage or of the Usurious Loans Act in combating
I he evil of usury does not enthuse us at all in suggesting
general legislation in this case. In various parts of the
country the Municipalities' Market Committees and other
local bodies havfe for a long time possessed wide powers for
prescribing and enforcing rules about weights and measures,
but so far these efforts do not appear to produce any great
results. All such attempts have failed at the point of
devising an efiicient and cheap system of inspection. In the
Punjab out of 1407 scales tested in 5 Districts about 69 per
cent was found to be incorrect and 29 per cent of the
weights were not correct as well. "Inaccurate weights
appear to be so general that it is difficult to deal with the

^Report of the Bengal Jute Enquiry Committee, 190.

128 AGRICULTUKAL MAHKETINC

evil." As many as 65 local bodies in lluit province have

framed rules for the regulation of weights and measures
but it has not been possible to arrange for their proper
inspection or to give effect to them on any big scale. In
Bihar, the Municipal Act has empowered the Municipalities
to prescribe the standard weights and measures and to
pro^?ide for the inspection of the same. Only 28 Municipali-
ties out of 50 have taken advantage of these powers.

In contract to this a description of the energetic steps

taken by the military aulhorities at Dharamsala canton-
ment (Kangra District) may be given. "The Bazar Com-
mittee consists of a Subedar Major, a Subedar, a Jamadar
and the Bazar Chaudharies, who check the weights and
scales of all shopkeepers. Incorrect weights are put right
for a small fee by a blacksmith nailing on them pice or
pies and the shopkeeper has to show the corrected weights
to the Chaudhari before using them. Every shopkeeper has
to deposit Rs. 100 with the Cantonment authorities, and this
sum is liable to conilscation for fraudulent weighing or
breach of other rules."*
The Punjab Banking Enquiry Committee have laid
their fingers on the real cause of failure. "A serious difll-
culty is that a set of standard weights at the Mint costs
Rs. 534-1-0 which most committees regard as prohibitive."
If therefore every market has to be provided with one set of
correct weights the total cost would be too high even for
the Government to bear and in addition to this an Inspec-
torate possessing adequate training in this work, will have"
to be maintained. In case of such commodities as jute or
cotton the transactions of which in rural areas are over after
harvesting season, these inspectors' will have very lilUc
work after the season is over. The desideratum between a
policy of non-interference and standardisation by an all-
India legislation lies therefore in the prevention of fraud
and cheating with the aid of the existing criminal laws, the
enactment of legislation for special areas where it may be
^Condition of Weights and Measures in the Punjab—
Punjab Board of Economic Enquiry 1936, ii. 25.
 WEIGHTS AND MEASURES 129

possible to enforce it, anS educating public opinion. Tnc

Central Provinces have led in this direction by the Weights
and Measures of Capacities Act (11 of 1928) which lays
down a scale of standard weights and measures, and autho-
rises the Government to enforce standardisation by notify-
ing areas for the purposes of the Act. Bombay has also
followed with the Cotton Gins and Pressing Factories Act
which provides that the Local Government may make rules
regarding the weights and scales to be used in Gins and
Presses and arrange for their proper inspection.

The Bombay Government have also made a more compre-

hensive attempt to tackle this problem. In 1932 the Bombay
Weights and Measures Act was passed by which the stan-
dard weights and measures have been divided into 3 classes
(a) primary standard to be kept with the Government, (b) as
it would not be possible to use the primary standard for
testing weights and measures in actual use, a secondary
standard has been devised. These weights would be made at
the Mint and kept in the custody of the collectors. District,
Local Boards and Municipalities, (c) The working standards
would be made by any agency approved by the Govern-
ment at a low cost and these would be available for check-
ing work in village markets as well. The Government have
been empowered to extend the Act to any part of the Presi-
dency and it has been provided that in the notified area
the Government or the local bodies would appoint Inspectors
of weights for verification and checking of weights and
scales and for this purpose they have been empowered to
charge fees. The fraudulent use of weight scales, possession
of false weights, and forging or counterfeiting a stamp used
for the purpose of stamping a weight have been made penal
offences.

With an increase in the number of regulated markets in

)mportant rural centres, the use of standard weights and
measures would gradually increase. Meantime an intensive
effort should be made by the Government and the trading
interest to expose and check cases of fraud and trickery.
130 AGRICULTURAL MARKEJINC

The expensiveness of the standard weights has en-

couraged the private manufactui-e of low priced weights in
various parts of the country and as these pass as stamped
weights, tlie confusion lias been further aggravated. In
the United Provinces the main centres where weights are
manufactured are Agra and Aligarh and the price of a set
of weights of 8 pieces is below one rupee. It is said that in
making the weights sand is mixed with the molten iron
before casting "so that weights from the same mould would
deviate at every smelting according to the amount of sand
added". Weights made at Phagwara in the Kapurlhala
state have a wide circulation in the Punjab. These weights
bear the Moon and Star stamp, the heavier weights being
rectangular in shape. In Dera Ghazi Khan metallic weights
are made for denominations up to 4 seers while heavier
weights are usually of stone. The investigation carried out
by the Punjab Board of Economic Inquiry shows that 48.8
per cent of the stamped weights is incorrect, out of which
41 per cent is below the standard weight. Inaccuracy of
the stamped weights is as high as 58.8 per cent in villages
as compared to 46.1 hi iNIandis. The 5 seer denomination
is the unit of weighment in all grain markets but 58 per cent
of these weights was found to be incorrect of which 43 per
cent was underweight.

It has been pointed out by Mr. Sarkar that the 80 tola

seer weight is not quite suitable as under this system the
cultivator finds it difflcult to calculate prices as it docs not
fit in with the existing currency system. A new standard
in conformity Avith the local requirements is therefore
required. The adoption of a 50 tola seer and 64 seer maund
may prove more acceptable as it would be easy to calculate
the price of one seer in terms of the pice and the maund
containing 3200 tolas (64 x 50) would be of the same weight
as the railway maund (40 x 80), thus (he customary village
standard would be brought in a line with an All-India
standard.

Under the Government of India Act of 1935 the

question of standards has become a Federal- subject and
 MARKET FINANCE 131

advantage of this has been taken by the Associated Cham-

bers of Commerce who on the motion of Professor W.
Roberts passed a resokilion in December 1936 urging the
"Government of India to introduce legislation with tlie
object of fixing uniform standards of weights and
measures tliroughout India. In the discussion w'hich fol-
lowed however the 80 tolas seer found favour and it was
suggested that the Government of India should by legisla-
tion lay down an All-India standard to be later on adopted
by Provincial Governments according to local needs starting
with the main towns and selected rural areas."

The Bombay Act came into force on 1st August 193r>.

The merchants at first were unwilling to meet the initial
expense of obtaining verified and stamped weights and
weighing instruments or to pay the recurring cost of verifi-
cation and stamping which amounts from 3 annas to 9 annas
per unit and is payable once in two years, but now they
"are free with their appreciation of the advantages which
have resulted from it". Thus sweeping reforms or harsh
legislative enactments are not needed, once the lead is
given by the Government organised commerce will not
hesitate to adopt it now that its utility is gradually being
realised. We may, in the words of Sir Edward Benthall,
hope that "where Akbar has failed Lord Linlithgow would
succeed".
 CHAPTER Vm.

STORAGE.

In every country the middlemen who hold up a part of

the produce just after the harvest for sale at a later date
are looked upon vpith distrust and suspicion as profiteers,
but the service which they render are as important for the
producer as for the consumer. Secretary Wallace has well-
remarked that, "the business of accumulating and storing
perishable products in times of flush production, preserving
them safely, and distributing them in time of scarcity is
necessarily a part of production and equal in importance
and dignity. "By holding back a part of the surplus at
harvest time the middlemen prevent a sharp fall in prices
of commodities so that the producers share in the benefit
and by letting out produce from the store in seasons when
the prices are normally likely to rise sharply, they check
the rise and bring about some stability in market prices
which benefits the consumier immensely." Thus a well
organised system of storage is a distinct gain-to the pro-
ducer and the consumer.

In India, however no such system exists and the storage

work that is done, is mainly performed in the self-interest
of the producer or middleman and although the resultant
gain is shared by all the units of the marketing organisa-
tion, the proportion in which the gain is divided differs
widely according to the capacity of the units. This explains
the fact that the fluctuations in the post harvest prices pf
many agricultural commodities in India are so great.

Table showing average wholesale prices of some staple

crops in south Bihar per maund,
 STORAOE 133

Common rice. Wheat.

Nov.-- F e b . :Mar.—May.
Rs. As. P. Rs. As. P. Rs. As. p . Rs. As. P.
1920 6 8 0 5 0 0 6 10 0 5 0 0
1921 6 3 0 5 12 0 6 10 0 6 0 0
1922 4 4 0 4 6 0 9 8 0 6 3 0
1923 5 0 0 4 5 0 5 0 0 4 8 0
1924 5 11 0 5 8 0 5 0 0 4 6 0
1925 4 11 0 4 7 0 6 11 0 5 10 0
1926 6 11 0 6 2 0 6 6 0 5 2 0
1927 7 4 0 6 4 0 5 11 0 5 0 0
1928 6 11 0 6 2 0 5 11 0 5 5 0
1929 6 2 0 4 14 0 5 1 0 5 2 0
This marked fall is not so noticeable in the case of
commodities entering more largely into the foreign trade,
e.g., Linseed, Jute, etc. as the following table will indicate.

Wholesale price of Linseed in South Bihar per maund.

Year. Highest price. Lowest price,

Rs. As. P. Rs. As. P.

1920 12 0 0 11 0 0
1921 9 0 0 8 0 0
1922 10 0 0 9 8 0
1923 10 8 0 10 0 0
1924 9 0 0 8 6 0
1925 9 8 0 9 1 0
1926 8 0 0 7 9 0
1927 7 0 0 6 6 0
1928 7 7 0 0 9 0

Storage is performed at different stages, in the

village by the grower, in the small markets, in the bigger
markets from where the exporters make their purchases
and also in the terminal markets. The amount of storage
work depends on the keeping capacity of the commodity
itself, the economic position of the producer and the facili-
134 AGRICULTURAL MARKETING

lies for storage. Wheat is difficult to keep for a long time

as weevils multiply rapidly by the high air temperatures of
summer months if the grain is not perfectly dry and it is
further damaged by the humidity during the monsoon
months. Tobacco does not keep well and it deteriorates
after one 5'ear. No banker would advance on Tobacco
more than 30 per cent of the value as the tobacco usually
develops mildew after a period and the risk of damage is
great. In the case of Jute, it is not possible for the grower
to provide fire-proof store-houses hence he finds it safer to
sell it up after liarvest and avoid the risk of destruction by
fire, mice and white-ants. Although in many cases, the
grower is compelled to sell up after the harvest to pay up
his mahajan and meet the numerous demands on his purse,
wherever possible he sells the less renumerative crops for
this purpose retaining the more valuable ones for obtaining
better prices. In the Punjab, the grower sells Toria imme-
diately after harvest to pay land revenue and holds up the
cotton for a longer period. The spring instalment of land
revenue is paid out of the sale of Toria and Gur and occa-
sionally by the sale of wheat as well.

In the villages, wheat is stored in kothas or rooms, the

floor of which has been previously covered with sand. In
some Punjab villages it is also kept packed in large gunny
bags called-Thekas, each containing 50 to 120 maunds of
grain. The Thekas are kept in the middle of the room and
some sand is usually mixed with the grain with a view to
increase its keeping quality. In the U.P. the grower keeps
his grain in earthen pots, bins or receptacles made of mat-
ting, mud and wicker work and in some villages in large
earthen cylinders inside their rooms.
In the Attock District the usual method of storing
wheat in the villages is in earthen bins called Sakaries. In
the Ferozepore District wheat is stored in (1) Gunny bags
(20 per cent of the storage is done in these), (2) the corner
of the bed room (40 p.c), (3) Kolhi (12) which is a combi-
nation of four earthen vessels with separate doors, (4) Bharoli
(12 p.c.). "A Bharoli is a cylindrical bin with concave sides ;
 STOKAGfi: 135

llie top is narrow and generally covered by an earthen pol

and tlierc is a small ontlet near the bottom which is kept
closed by an earthen or cloth plug", (5) Parchhatti (3 p.c.)
which is an earthen vessel supported on wooden brackets
fixed to the wall, (6) Chauras (2 p.c.). "It is a square buill
earthen vessel, well plastered with mud and cow dung both
inside and out of it. The grain is poured through a hole on
the top and taken out through a small outlet near the bot-
tom. It is placed on supports one or two inches high in a
corner of the room, but not touching the wall on any side
as this keeps the grain cool and also makes it less liable to
attacks by insects and rats".
In small town markets the grain is kept in kothas made
of bricks having a capacity of 150 to 300 maunds.
Inside these kothas wheat is stored both in bulk or in large
sized gunny bags called Theks. A great advantage of the
kotha is the comparative immunity it has from fire, although
much damage is caused by the damp, w-eevils and rats. "A
thin layer of grain alongside the floor or walls is often
damaged by the mould on account of dampness. Weevils
infest the crevices of the walls and roofs of these kothas and
multiply very soon iji the new grain". One method of
checking the weevils is to whitewash the walls at frequent
intervals but this is done only once a year at Diwali and
the damage caused to the grain may be estimated at about
24 per cent per annum.

In bigger towns, storage is done in Khattis, which are

scjuarc or oblongsliaped pits sunk into the lloor with the base
wider than the mouth. They are lined with straw or chalf
and the grain is stored in bulk and is covered at the top by
a covering of straw, earth and thatch or by a stone. The
storage capacity varies from 250 to 400 maunds and the
monthly rent is from Rs. 5 to 10. The following table gives
an idea about the cost of storing wheat In the Pimjab :—•
Market. Rent. Cost of cleaning.
t
Lyallpur Rs. 2 to 3 per kotha Us. 0 0 3 per bag.
per month.
 1^6 AGIUCULTURAL MAUKUTINO

Market. Rent. Cost ot clearuing.

Okaru Rs. 1 to 2 per 100 Rs. 0 0 3 per bag.
bags per month.
Amritsar Rs. 7-8 per kotha As. 0 8 0 per Kotlia*
per month.
At big grain markets Hkc Hapur and Ghaziabad, Khaltis
having a storage capacity of 400 to 600 maunds are com-
mon. They are made in big enclosures with walls, called
Ahatas, or in pavements in front of the shop of the Arhtia.
In the United Provinces, at Muzaffarnagar, one of tlie most
important wheat markets of the U.P. the usual method of
storage is in underground pits or Khattis. The water-level
is about 9 feet from the surface and the damage due to
dampness ordinarily is not inconsiderable while in 1933 heavy
damage was caused by heavy rainfall. "The estimated
damage to the merchants was in the neighbourhood of about
four lakhs of rupees. The very existence of the wheat mar-
ket in Muzaffarnagar was threatened as a result of this new
danger, for large stocks of wheat had to be destroyed and
wherever poor people used the damaged wheat, they invited
death either by diarrhoea or cholera." Recently a new
experiment has been begun there which if successful is
likely to revolutionise our methods of grain storage. At
the suggestion of Mr. N. C. Mehta, I.C.S. a large number of
storage chambers made of reinforced concrete have been
built at the cost of the Muzaffarnagar Grain Chamber Ltd.
Each chamber has a capacity of 100 cubic feet and can hold
625 maunds of wheat. The great merit of these chambers
is that they are rat and insect proof and they keep the grain
absolutely dry. In the Central Provinces, hi important
wheat markets like Kareligunj, grain is stored in pits on
which the Bank advances 80 per cent of the value stored.
The bags of grain are brought to the mouth of pit and the
grain is then unloaded, the bags having been counted and
weighed before this. The pit is then closed up and plastered
with mud and a number given by the financing Bank is
affixed to it. The Bank also maintains a staff of its own to
keep guard over these pits.
*Agriculture and Livestock in India, Vol. VIII, p. 267.
 STORAGE 137

In these Khattis or pits, damage due to weevils is

negligible but much grain is not only decomposed due to
damp but the entire stock catches such a bad smell due to
the decomposition of a portion of grain that "Khatti wheat
always sells in the market at a discount of one anna per
maund." During spells of heavy rain, there is the further risk
of the sub-soil water level rising and flooding the Khatti from
below. The damage caused in Khatti storage has been
estimated at about 5 per cent per annum and the discount
at which the K'hatti grain sells in the market raises the
loss of 61; per cent. Another disadvantage of the Khatti
is that the emptying of a Khatti is a very laborious task as
two men have to be employed to draw up the baskets and
one man has to go inside the Khatti to fill the basket up.

This form of storage enables the middleman to obtain

financial assistance from Jointstock Banks. When a
Khatti is filled in an important market, a parcha or note
giving the details of quantity and value is sent to the Bank
which after the necessary scrutiny may advance URIO 65 to
75 per cent of the face value of the Khatti and as a token
of possession the Bank may place a stone on the Khatti with
its name inscribed on it. The usual rate of interest varies
from 6 to '8 per cent.
Thus imder the system of storage in vogue at present,
the small or even mediumsized grower has no facilities for
holding up his produce and the middleman can alone do it
but the cost of storage to him amounts to about 12 per cent
per annum including the loss due to damage and the Bank
interest which is rather high. If the margin between the
maximum and the harvest prices is not large enough or if
the commodity is liable to great short period fluctuation in
price, storage will not prove remunerative till the cost of
storage is lowered. Mr. Darling in his note on "Punjab
marketing" has stated that according to the estimate of Mr.
Roberts, Managing Director of the British Cotton Growers
Association "with a harvest price of Rs. 4 per maund it
would not pay to hold wheat over the monsoon unless price
rose to Rs. 4-6-0 per maund. From a study of wholesale
138 AGRICULTURAL MARKETLN'G

price of cotton and wheat between 1924 and 1930 we find

that only in two years out of seven would it have paid the
dealers to have held it up." The following index number of
wholesale prices of harvest and maximum prices of com-
mon rice in South Bihar and Linseed in North Bihar also
support the contention that the margin is not always
remunerative: —

Common rice. Linseed.

Harvest.Maximum. Harvest. Maximum.

1920 104 122 116 116
1921 104 105 88 131
1922 80 84 86 104
1923 77 94 102 104
1924 93 96 86 102
1925 79 95 104 104
1926 107 112 103 88
1927 117 116 85 86
1928 101 103 86 88
1929 89 90 8't 102

Taking the figures of rice in the Calcutta market we

find that between 1930 and 1933 the middleman must have
made good profit in 1931 when the margin was as high as
18 per cent while in the other three years it varied between
2 to 3 per cent. Storage in the case of commodities which
have very rapid fhicluation in the price, for example cotton
becomes almost a sort of gamble. The following table gives
the percentage of the variation in the price of Berar cotton
(oomcas) between 1923 and 1926.

Month. 1923. 1924. 1925. 1926.

Jan. 11.6 13.8 6.1 9.2
Feb. ll.B 13.2 8.0 0.0
Mar. 16.2 11.4 0.0 9.1
Apr. 11.4 6.3 4.1 15.4
 STORAGE 139

Afay. 22.2 11.9 7.6 22.5

June. 7.2 5.0 17.2 10.2
^July. 10.1 5.6 10.2 9.4
Aug, 7.0 3.8 13.1 15.1
Sep. 11.2 12.0 7.3 8.2
Oct. 5.4 7.1 . 16.2 0.0
Nov. 24.2 6.3 18.4 29.0
Dec. 19.4 11.2 1.8 22.1

These figures indicate not only the extent of the varia-

tions in the price level within the month but point to a
periodicity in the fluctuations, as in certain months, e.g.,
^[arcll to May, i.e., when the cotton sowings are being
carried on and during November and December when the
cotton is being picked from the fields, the fluctuations are
the greatest. There is no doubt that the prices in the foreign
market to a considerable extent influence the fluctuation in
summer but whith a well regulated system of storage much
of this variation could have been avoided. Holding up by
the grower has been discouraged by the C.P. and Berar
Banking Enquiry Committee who "doubt very much the
advisability of such action under existing conditions as far
as the Cotton zone afleast is concerned." They cite an
instance of an organised attempt which was made to bale
and store cotton for better prices in the Manjrod tract of
the Burhanpur Tahsil of Nimar but this venture proved a
great failure and a large number of farmers suffered in
consequence.
In commodities, the prices of which are influenced by
world factors, it is mere speculation for the unorganised
small farmer to attempt to hold up his produce until and
unless he can by some means keep himself in touch with
the movements in the world market. With the middleman
the position is different. He is more wideawake and in
addition to the support he gets from banks, he distributes
widely his risks over a number of commodities and thus to
some extent can withstand a sudden reverse. In the case of
140 AGRICULTURAL MARKETING

wheat in 1928-29 the prospect of a failure of the crop pushed

up prices in the northern portion of the Central Provinces
and growers held up the produce in the expectation of
better prices but in the meanwhile the heavy importation of
cheap Australian wheat at Bombay depressed the market
considerably and prices fell even below the normal price of
previous yars. In north Bihar the same fate befell those
tobacco growers who held up their produce in 1930 in the
expectation of a sudden rise in prices caused in prexdous
two years by the partial failure of the crop both in Bengal
and Madras.

The middle man, on the other hand, can usefully

promote the stability of prices by storing up the produce
provided it is possible for him to lower the cost of
storage by a reduction in the damage to the produce by an
improvement in the system of storage and by a lowering of
the Bank interest rate and an extension of the financial
assistance which he ordinarily obtains now.

Some idea of the amount of storage capacity of our

principal markets may be made from the figures collected
by Shah and Davar in the Punjab: —

l^erozepore Cantonment 400,000 maunds.

Moga 3,95,000
Fazilka 500,000
Uyallpur 400,000
Chak Jhumra 250,000
Hassan Abdal 32,000

The problem of a safe method of storage becomes all

thej more important in the case of such perishable com-
modities as fruits and vegetables. Cold storage facilities
for fruits have just been introduced in some of the principal
city markets of India, while various experiments have been
carried on to reduce the wastage in the storage of such
vegetables of wide demand as potatoes. Bombay has an
advantage over northern India in that she has two potato
ci'ops in the year' so that the necessity of storage for more
 STORAGE 141

than 2 or 3 months does not arise whereas in Northern

India, potato lias to be kept from 6 to 8 months. The indi-
genous method of storage in Bombay of keeping potatoes
in sand causes a wastage of about 15 to 20 per cent and the
cost is about Rs. 4-8-0 for every 1000 lbs. of potatoes, stored
but he wastage is proportionately greater in Northern India,
being about 50 per cent. The researches of Mr. N. D. Vyas
have resulted in the reduction of wastage to 28 per cent by
weight by keeping the potatoes on sand mixed with cinders
or charcoal.*

The handling and storage of grain in elevators has

itevolutionised the marketing of wheat in the West and in
North America and schemes for constructing a network of
elevators in the Punjab have been put forward from time to
time. It has been proposed that there should be concrete
Elevators in suitable centres in the interior to which the
growers will bring their wheat in bulk or in bags and there
it would be automatically cleaned and weighed and put in
bins. On payment of the Elevator charges the grower
would be given the receipt for the grain placed in the bins
and in case of his selling the wheat, the purchaser would
be entitled to delivery on producing he receipt. In other
cases, the grower would be able to raise loans or advances
on the basis of these Elevator certificates. The terminal
elevators should be located at large consuming centres or at
the ports and they should be equipped with appliances for
receiving grain from carts or railway wagons in bulk or
bags and for discharging from the elevator back to the rail-
way wagons for transport to ports. The success of the
elevator system will depend to a large extent on Govern-
ment support and railway co-operation. Acquisition of land
at important centres, supervision over elevators and
guarantee by Government of the Elevator reciepts, the provi-
sion of bulk transit wagons and siding facilities by the rail-
way would to a large extent promote the development of
this system. There is no doubt that much of the waste

*Cf. Storage of Potatoes by N. D. Vays (Agri. Journal of

India, Vol, XXV, p. 408),
142 AGRICULTURAL MARKETING

committed in the 'indigenous system of storage would be

avoided in Elevator storage. The grower would not be
handicapped for the lack of funds as the elevator receipts
would make good security and as the grain will be trans-
ported in bins on the railways, it does not run the risk of
damage due to weather conditions. It would be possible to
promote the grading of the grain into a few recognised
grades. The elevator would be able to regulate the market-
ing of grain by handling first of all wheat meant for export
in summer, and to encourage storage during the monsoon
months by lowering the elevator charges and later on push
on marketing by raising the rates gradually. Success of
this system demands that there must be a steady supply of
grain to the elevators all the year round and the exports
should be gradually growing. In the war period, the export
rose to 1 million tons but between 1918 and 1926 fell to
327,000 tons and further to 197,000 tons in 1930-31 although
the acreage gradually expanded owing to the extension of
irrigational facilities. Then again the exporting houses are
not in favour of this system as under the old system they
are assured of cheap acommodation in the storage yards
and of cheap labour for working the grain and the new
system would entail more cost as they would have to main-
tain an inspection service for the grading and certifying of
wheat. One experimental grain elevator was started at
Lyallpur in 1913 and it was thrown open for commercial
service in 1920. "It has found some use in grain storage
and rendered service in cleaning grain and raising its value,
but though a few small shipments already made from it
have earned a premium in the British market, the dis-
organised state of the export trade in recent years has thus
far prevented adequate demonstration of its capabilities".*

Another method of improving the condition of ware-

houses and licensing them by the Government is to make
the warehouse reciepts freely negotiable. The U.S.A. enacted
in 1916 the U.S. Warehouse Act with the object of encourag-
*India as as Producer and Exporter of wheat (Stanford
UniversUy) P, 361,
 SroRAGfe 14IJ

ing the proper storage of agricultural produce, of

introducing sound business practices and of making the
warehouse reciepts acceptable to bankers as security for
loans. Under this Act Public Warehouses which store
agricultural produce can be licensed and bonded provided
they have in charge men of good reputation, having some
assets. The warehouseman must furnish an acceptable
bond of an amount fixed by the Government, mainly
depending on the size of the warehouse. The warehouse
must have facilities for correct weighment. The warehouse
has to pay an Inspection fee in addition to a license fee and
in return the Government inspects the warehouse at least
four limes a year. On depositing his produce in the w a r e -
house, the grower gets a receipt in which are mentioned the
description of the commodity, its weight and grade and this
receipt may be used as collateral security against loans
issued by Banks.

This act as amended in 1923 and 1925 has extended its

scope to a considerable extent and in addition to cotton,
grain, tobacco and wool, such commodities as dry beans,
peanuts, potatoes and dry fruits are also accepted. The
storage of grain has increased from 2 million bushels in
1921 to 28 million bushels in 1925 and of cotton from
440.000 bales to 24 million bales during the same period.
"The Act is proving a boon to co-operative marketing asso-
ciations, by promoting the inspection, grading and standar-
disation of their products. The warehouse under this Act
also furnishes protection against loss and damage from
weather and from rodents. It also furnishes insurance at
the lowest commercial rates"* In Egypt, under the recent
cotton marketing system the Government undertakes to gin
cotton and sell the lint as well as to provide facilities for
the storage of cotton against which advances upto a reason-
able extent are also given.

In India, as we have seen, both the grower and the

middlemen are handicapped in the work of storage by the
*Boyle—Marketing of Agricultural Products, p. 141.
1-1-l AGRICULTURAT- MARKETING

laclv of funds. The grower can oblain loans from the

money-lender only on very high rates of interest and in the
case of some commodities like Jute and cotton, it is not
possible for him to arrange for its safe custody in his own
house. The Jointstock Banks, particularly in the Punjab,
lend on the produce stocked by middlemen in godowns
and in some places the landlord or the Bank itself has buill
warehouses to facilitate transactions. In every case the
financial position of the merchant is carefully enquired into
and his maximum credit limit is fixed. The produce is
weighed and stored in the presence of the Bank staff is
subject to periodical inspection. The rate of interest
charged varied in the case of wheat from 7 to 7* per cent
and in the case of cotton, it is one per cent above the Bank
rale subject to a minimum of 6 per cent. There is no doubt
that this high rate of interest acts as a brake on the expan-
sion of storage work sustained by Bank advances. Thus the
idea of licensed warehouses is not at all novel in India. The
grower is accustomed to take advances from the Aratdar
and the Ai-atdar from the Bank and all that is wanted is
proper regulation of the work with a view to purge the
system of all-its abuses, ensure a fair deal to all parties and
above all, to break up the monopoly of the Banks in the
business by making the warehouse receipts freely negotiable.
In some commodities like Jute, storage in this line will do
much good both to the producer as well as to the buyers.
The Bengal Jute Enquiry Cominittcc pointed out that
"fluctuation in the price of jute even in the course of the
same season, is so remarkable and the potentiality of a rise
in price, through restriction of saleable supply of the fibre
by retaining a part thereof in warehouses, is so likely that
jute may be regarded as just the sort of commidity that will
bear the cost involved." These Avarehouses may be started
by co-operative organisations or by private enterprise as
well. The funds required for the construction of the ware-
houses may be advanced by the Government, the landlord
or the Co-operative societies. In the management the
assistance of the Aratdars or of those qualified graders who
are now working in the agency offices of leading jute firms,
 STORAGE 145

may be obtained. Much of the success of these warehouses

will depend on reducing the overhead charges to as low a
level as possible. In the case of wheat, till standardisation
of the grade is perfect, the only possible alternative will be
to pool the produce and offer to the grower the average price
of the season instead of the highest. This may be a serious
obstacle in the early stages but patient propaganda and the
assurance of a fair price will in the end prove to be ample
encouragement to the producers. With an improvement in
the grading- of the commodity the prices are likely to rise
and the grower would derive more profits therefrom and in
addition to this, get the assurance of correct weighment and
a reduction in the handling and other incidental market
charges. The warehouse should avoid the common practice
now prevalent of the Aratdar's trading on his own account
besides being the commision agent for others. The ware-
housemen should not also take part in tKe grading of the
commodity stored by him and in course of time there may
develop a class of licensed measurers and graders. The
creation of a new type of security in the warehouse warrants
would greatly facilitate the use of Trade Bills although this
procedure may at times prove somewhat inconvenient as in
the ordinary course of business the bill would be discounted
several times and if the original holder desires to sell his
goods before the liquidation of the Bill itself it may be diffi-
cult for him to secure the warrant itself or he may have to
meet the bill himself before maturity before he can sell the
goods. Whatever be the actual limitations, there is no
doubt that the borrowing capacity of the producer or mer-
chant would be considerably increased by the use of the
warehouse warrant as a security for loans, overdrafts or
cash credits.

It has been suggested that the railways should not only

give adequate assistance to the warehouses but own them
in as many cases as possible. The proposal certainly looks
attractive on paper but there are certain practical difficulties.
From the estimate supplied by the Railway Board to the
Central Banking Enquiry Committee we find that the
146 AGHICULTURAL MARKETING

storage charge per maund per day will not bo high, being
0.3 pie for Jute at Dinajpur on the E.B.Ry., 0.2 pie for grain
at Okara on the N.W.Ry. and 0.2 for cotton at Akola on the
G.I.P. Railway, on the supposition that the trade at these
stations is fairly heavy and well distributed throughout the
year. In the case of smaller centres the overhead charge
will be pi-oportionally very high. The business quarters in
many towns are not always close to the station and the
approaclies to the station may not be such as to. develop
market centres there. Thus the management of warehouses by
railways is not likely to prove a success everywhere. On
the other hand the railways may be expected to give faci-
lities to private or Co-operative warehouses by giving leases
of railway land or giving monetary assistance in the cons-
truction of warehouses in the vicinity of the railway goods
sheds on suitable terms and also give them the "Assisted
Siding" facilities and assist them in every possible way in
the delivery and despatch of their consignments.
 CHAPTER IX.
ADULTERATION AND GRADING.

The agricultural produce of India has earned a bad

reputation in the foreign market owing to the presence of
impurities in it and its admixture, although as in the case
of wheat, it must be said that the ill repute was considerably
exaggerated. In the early stages of the wheat export trade,
a large proportion of impurities was noticed for which a
"refraction" allowance at 5 per cent was fixed. Later on in
1888 when the monthly shipments were subjected to a more
intensive analysis, it led to the somewhat surprising dis-
covery that (he refraction of these samples was less than the
stipulation of the contracts and that the adultera-
tion of Indian wheat perhaps had not been carried far
enough."
There is no doubt that many of our commodities, e.g.,
wheat, rice, cotton, groundnuts, etc. at some stage or other
is damped or mixed up with other grains or with inferior
varieties of the same commodity. It is a striking fact that
the cases of damping and admixture become very common
when the prices show a tendency to rise due to a short crop,
so that the grower tries to ensure a good value for his con-
signment. It has been found that although here and there,
cases to the contrary may be noticed, the grower is not
responsible on a large scale for the deliberate admixture or
damping of the commodity and wherever he does, he is
encouraged to do so by market practices. In the case of
cotton, the admixture is partly due to the cultivator grow-
ing and selling a mixture of different varieties of cotton by
the seed getting mixed in the ginneries and partly because
the cotton of the locality is a natural mixture. In 1909 an
inferior variety of cotton called Pulichai was introduced
into the Tinnevelly District of Madras and as its yield was
about the same as that of the superior Karungami cotton
and it yielded a higher ginning percentage it came to be
148 AGRICULTURAL MARKETING

mixed with it. In course of six years, the Pulichai acreage

expanded so fast as to threaten the reputation of the Tinne-
velly itself and drastic action became necessary. The
Departrpent of Agriculture sought the co-operation of the
trade in 1917 and the buyers refused to buy any Pulichai
cotton. Leaflets were widely distributed before the sowing
season pointing out the danger to Tinnevelly cotton and
vigorous village to village propaganda was carried on by the
Agricultural and Revenue officers. As a result of all these
efforts the acreage fell only by 30 per cent, then the buying
and ginning firms entered into a formal legal agreement
allowing the periodical inspection of their yards and
accounts by a selected officer of the Agriculture Depart-
ment who was empowered to impose penalities if it was
found that the contracting parties had paid for any Pulichai
cotton.
That the defective organisation of our markets to some
extent promotes adulteration is illustrated by the following
extract from the evidence given by Chaudhuri Mukhtar
Singh before the Royal Commission on Agriculture.—"As
far as adulteration goes, the farmer is not at all responsible
for it. I have seen the people in the market before they
export commodities to other places putting in sand, earth,
and evei'y other article that they can easily use for increas-
ing the weight of the produce. They do it because even an
article without sand, has to pay Karda charges and even
where these charges are not levied, articles containing sand,
are sold for a much higher value than they would have
fetched if they had not contained any such adulterants."
In cotton marketing we have seen that the merchant usually
tries to increase the rate of deductions on account of the
difference in quality when half the produce of the cart has
been weighed. When it was found that the wheat exported
from India contained impurities at a much lower propor-
tion than the 5 per cent laid down by the London Trade
Association and the demand for its reduction was opposed
vehemently, "it was said that the presence of dirt in Indian
wheat was encouraged by certain large Millers who possessed
elaborate cleaning machinery and who thereby gained the
 ADULTERATION AND GRADING 140

advantage over their competitors in that they were able to

handle wheat which the latter could not touch and thus
secured the sale of Indian wheat to themselves at unduly
depreciated prices".* The damping of cotton is usually done
by the middlemen. In the case of sales in the village, it is
defended as necessary as "the Kapas comes in so very hot
that if anyone puts one's hands into it, they would be
blistered." The grower picks early in the morning when
the plant is soaked with dew and when he brings it to the
merchant, the latter wlaters the ground, then puts the cot-
ton on the wet ground and covers it with a thick piece of
gunny bag so as to allow the cotton to absorb the moisture
gradually. In many places, damping is encouraged not only
with a view to cause little harm to the pressing machine,
but due to a mistaken notion that moderate damping makes
it look glossy and incijeases the length of the staple. It is
not realised that the cotton loses its whiteness and acquires
a stain and above all the seed loses its power of germination.
In the N. W. Province damping has to be done owing to the
peculiar method of transport in use there. Unginned cotton
is carried to .markets on the back of buffaloes packed in
string bags and it is necessary to damp the cotton so that
more can be pressed ilito the bags. The greater offendors
are however the Ginnijig Factories. It was admitted by
the Commission Agents of Okara (Punjab) before the Bank-
ing Enquiry Committed that "a good portion of the short-
staple cotton is mixed with long-staple American cotton but
they asserted that the exporter insisted upon this being
done and any factory liefusing to do it would be ruined."

^' The damping of Ginned cotton is so common that Sir

B. Dadabhoy, the leading cotton merchant of Nagpur
remarked before a Goternment Committee—"I do not see
how you can stop it; it is the business of the trade."
Various methods of watering are practised, in different
areas. Sometimes the cotton is not directly watered, but
old gunny bags are placed over it and water poured on bags.
*India as a Producer & Exporter of Wheat (Stanford
University, p. 384),
150 AGRICULTURAL MARKETING

Hosepipes are sometimes used to water the cotton directly.

"The watering is carried on largely at night and I was told
by another press manager that when there was a normal
water supply fountains rose everywhere at Amaraoti after
sunset." Another method is to take recourse to "false pack-
ing" by putting portions of one wet bale into the middle of
a dry bale at the time of packing so that the fraud cannot
be detected till the bale is opened in the Spinning Mill.

Messrs. Kilachand Devchan'd & Co., Volkart Brothers

and Ralli Brothers in a joint letter to the Bombay Mill-
owners' Association in March 1935 pointed out that the
practice of watering raw cotton at the time of pressing was
increasing every day." Indian cotton has ceased to be an
investment and w-atering has become one of the causes of
depreciating its price. The little profit expected to be
gained in weight vanishes if the cotton is not soon disposed
of after its arrival in the selling market and in addition its
colour and class are spoiled and this affects its selling price.
Due to this deterioration, its reputation is spoiled in the
world market. If you look to the working of the season
1927-28 you will realise ITiat the trade suffered to the extent
of one crore of rupees owing to this malpractice of watering
when veady Oomva cotton was sold at Rs. 45 per candy below
the contract rate."* H

The practice of damping ground nuts in the Madras

Presidency is very common due to the belief that it makes
decortication easy. Heaps of Groundnuts are wetted in the
factories by pouring buckets of water. Even if the damp
seed does not break in the process of decortication, it re-
tains traces of damping and develops certain fatty acids,
thus low^ering the value considerably.

It was noticed that during 1918 and 1922

in some areas^ e.g., Hubli, cotton in large quan-
tities vised to be imported form Bokhara because

•Report of the Bombay Millowners' Association 1934

p. 224
 ADULTHKATION AND GHAUING 161

it %vas similar in appearance to the local collon and it was

mixed up and sold as real "Kimipla". Short-stapled
Khandcsh cotton used to imported for admixture with Broach
cotton. The Cotton Transport Act empowers the Govern-
ment to combat this evil by notifying any tract as a protect-
ed area and prohibiting the import, save under license, of
raw cotton, ginned cotton, coUoseed into that area by rail,
road, river or sea. This has prevented the grosser forms of
abuse by restricting the supply of inferior varieties. This
Act has now been extended to the important cotton areas
of the Bombay and Madras Presidencies, Central Provinces
and some Indian States like Baroda, Indore, Hyderabad and
Sangli. Its extension to the Punjab, where in the same
area two distinct varieties like the indigenous short-stapled
and the long-stapled American are grown, is beset with
difiQculties.

Although the International-Federation of Master Cotton

Spinners' Association drew the attention of the Government
as early as in May 1912 to the evils of the damping of cotton
by the ginning factories and pressed for legislative action
the first move in this direction was made with the passing
of the Cotton Transport Act of 1923 and the Cotton Ginning
and Pressing Factories Act of 1925. The Indian Cotton
Committee had recommended the licensing of gins and
presses but the Indian Central Cotton Commiltee was not
in favour of an All-India system of licensing but would
leave it to Ihe Provinces. They pressed that the licensing
clause should be included in the Cotton Ginning and Press-
ing Factories Act and the Provincial Governments should
be authorised to enforce it. This problem is becoming more
serious day by day and the demand for licensing in all the
Provinces is becoming more and more urgent. Protection
has become all the more necessary with the introduction of
the new medium cotton Verum in the Central Provinces
and the development of a big long staple area in Sukkur
(Sind). — • _ - - • - • :,

*Pearse—Indian Cotton, p. 68.

io2 AGRICOLTURAL MARKETING

The following statement will indicate the extent of the

mixture of the two varieties in the same plots.
Percentage of Deshi Cotton in American Cotton Fields
in 1925.
Containing 5 per cent of Deshi—68.8 per .cent of total
acerage.
6—10 per cent . . 13.6
11—15 per cent . . 7.5
16—25 per cent . . 5.1
26—35 per cent . . 2.6
36—50 per cent . . 2.4
With a view to discourage this admixture the Indian
Central Cotton Committee has supplied specimen bales of
pure cotton grown in the Pmijab to be kept for inspection
and comparission both by buyers and sellers at the cotton
exchanges maintained by the Liverpool, Manchester and
East Indian Cotton Associations. Besides this the Cotton
Ginning and Pressing Factories Act of 1923, which provides
for marking of all bales of cotton ginned and pressed with
a pressmark and a serial number so as to enable the
Government to trace them to the factory of origin, is being
vigorously enforced to check these mal-practices. There is
no doubt that if these two acts are systematically carried
into force, the abuse would be combated and drastic legisla-
lion of the type passed in Egypt in
1936 would not be required. Under this law
in Egypt, it is penal to .mix different varie-
ties and in case of detection Government would seize it and
get it ginned and sold, deduct all costs from the sale price
out of the balance of which only 75 per cent will be paid, to
the owner. Better marketing organisation in India also will
no doubt contribute largely to the prevention of this abuse.
The lead given by the Bombay Government has been taken
up by other provinces and States. The Hyderabad Cotton Cul-
tivation and Transport Act of 1929 has prescribed restric-
tions regarding the cultivation and transport of cotton as
well as its import with a view "to maintain the
quality and reputation of cotton grown in certain areas in
 ADULTERATION AND GRADING 153

H. E. H. the Nizam's Dominions. "The Madras Cotton Con-

trol Act of 1932 is even more drastic. It was enacted mainly
to combat the Pulichai cotton menace and it prohibits tlie
cultivation and possession of certain kinds of cotton, the
mixing of such cotton with other kind of cotton and the
trade in such kind of cotton." Officers have been empower-
ed to enter upon any land in a notifled area in which he
knows or suspects that any proscribed cotton is being culti-
vated and may uproot or cause to be uprooted such cotton
or may enter upon any land or building where such pros-
cribed cotton is being mixed."

There is very little grading in the marketing of agricul-

tural produce in India. The ryot does not grade his goods,
not because he does not know the benefit derived from
grading but because he is not paid sufficiently for the
trouble involved. There are no markets in which a good
grade is in demand. The producer of a graded article
is always at a loss when he sends it to the market, hence
naturally grading is avoided. When the marketing system
is well organised it would be possible to ensure the grower
proper prices for the differant grades of produce and grad-
ing would develop. Grading secures to the grower various
advantages and it enables him to hold back
the inferior class of goods for local sale and
despatch only the higher grades exactly to those markets
where they are i-equired and thus make a considerable re-
duction in the cost of distribution. Further by proper
grading considerable economy in space may be made at the
time of storage. Besides this, it brings about a lowering in
the storage charges owing to the definiteness of the know-
ledge which the warehouseman possesses about the article
stored with him. In the actual work of marketing, the
necessity for personal inspection of each consignment,
which accounts for the low prices tobacco exporters of
Guntur get in the London market is to a large extent avoided
and the unseemly wrangles and arbitrations caused by
claims for allowances due to variations from the samples
of exported goods become a thing of the past.
 154 AGRICULTURAL MARKEtiNdi

In he marketing of rice there is a rough and ready

gradation into fine, medium and coarse all though there is
no uniformity in specimens of these three grades from
different places. In wheat, before the War, five distinct
grades were to be found, .g.. Choice White Delhi, Choice
White Karachi, Red Karachi, Choice White Bombay and
No. 2 Club Calcutta but the three important postwar grades
are the choice white Karachi, Choice White Delhi and Red
Karachi. These standards are actually based on the view
of the grain traders of England expressed through the
London Corn Trade Association. The Calcutta exports are
graded according to the proportion of Buxar wheat they
contain as the Bombay wheat is graded on the basis of the
Pissi wheat of the Nerbudda Vally. Choice white Delhi
wheat contains a high percentage of well-filled white grains
of the Muzaffarnagar variety, while the Choice White Karachi
contains about 80 per cent of white grains and 20 per cent
red.

In Malabar in the marketing of cocoanuts grading is

done on the basis of the size of the nuts.* A standard bag
such as is used for the husked nuts will hold from 110 to
400 nuts according to size. Each of the grades of nuts is
known by the number of nuts per bag."* Copra is market-
ed in five grades—(1) Edible white, which in its turn is
subdivided on the basis of the diameter of the cut kernel
into POO. Mungi, Lavingi, Special, Elachi and Dala. (2) Vit-
tumenioe office pass which gets the highest price among mill-
ing grades. (3) Thirurashi or selection from the bad
varieties. (4) Rashi (bad) and (5) Kazhippu or rejected.

In the marketing of fruits and vegetables in India a

rough classification of the article is made before it is packed,
but the object of this is not "to pack the fruit uniformly
but to mix the different qualities in individual containers".
It is usual to remove fruits which appear to be unfit for the
market owing to their size, damage or malformation and
then to pack the container with the fruits of inferior quality
^Report of Cocoamit Enquiry in India—J. S. Patel, p. 26.
 Al)UI.TERATION AND GRADING 155

at the bottom, medium quality iii the middle and a few

layers of the best variety at the top. In this case grading
leads to what is known as "topping".
Different regions in India have different grades in cot-
ton, e.g., in the U.P. the well-known grades are Deshi
including Bengals, and the longer stapled Deccani, the sub-
grades bearing numbers from 5/2 to 7. In Central Provinces
among the commercial grades are the Gaorani, Roseum and
Zoria with sub-grades of superfine, fine, fully good and
good. Principal varieties of Indian cotton may be classi-
fied from the commercial point of view in to (1) Broach or
Surtee Broach, white and silky, grown in Broach or Surat,
(2) Kumpta and Dharwar, yellowish in colour, grown in
Southern part of the Bombay Presidency, (3) Westerns,
white and silky grown in North Bombay, Hyderabad State
and Madras Presidency, (4) Oomras, longstapled, grown over
a wide tract in Khandesh, Berar, Central provinces, (6) Ben-
gals, white with yellow tinge grown in the U.P., Assam and
Central India. It is a short stapled variety, (7) Cocanada,
strong, white, grown in Madras, (8) Tinnevelly American
grown in Madras also having a very long staple while the
pure Tinnevelly is very white in colour, (9) Lyallpur Ameri-
can, grown in the Canal Colonics has a very white colour.
In the case of many of these grades the area of origin plays
often an important part in regulating the price and the
demand irrespective of the quality of the articles.
(Of Jute, it has been well-said that "the
present form and methods of grading and
marketing are in a hopeless muddle. The grower
does not know these and the grading is done by
the buyer and exporting agencies who have branches in the
outlying stations. The grading is neither uniform nor
scientific".* The actual grading is performed by the
sorters or Jachnadars who are employed on a fixed remunera-
tion and as they have no scientific training they carry on
their work on a rough and ready knowledge of the fibre.
The principles, if any, on which the grading is based, are
*Cf, Evidence before Bengal Jute Committee, Vol. II, p. 24.
156 AGRICULTURAL MARKETING

carefully kept as a trade secret and the cultivator derives

little benefit from the grading as he very often is paid at a
flat rate. "A cultivator who produces a special or extra
special may find his produce priced as rejections or no. 6
simply because his jute is probably a bit muddy or lustre less
through some defect or fault in retting though the fibre
would be really of a higher grade."

The number of grades varies from locality to locality.

In some there may be as many as 9 grades, e.g. Extra
special, special, no. 1 to 6, Domar 1-4; Serajganj no. 1—5
etc. The Jute standards vary according to whether the raw
jute is intended for export or for manufacture in the mills
in India. The well established standards of quality for ex-
ported Jute are 'Firsts', 'Lighting', &Hearts', 'Daisee' and
'Tossa'. These standards rarely change and the sale is made
subject to a guarantee of average quality. Loose Jute
standards are to a large extent determined by the require-
ments of the Calcutta mills, hence they are not so unvari-
able or well defined as the export standards. With a reduc-
tion in production in mills, the demand for better grades
falls off and if the supply of the same does not simultane-
ously decline the standards are likely to be disturbed as the
grower being anxious to sell off his jute very often delivers
his better quality of Jute for lower grades. In some cases the
Mills to take advantage' of this competition withold
the purchase of a particular grade thus forcing the seller
to offer the same grade of Jute at lower garde prices. As a
result of these variations a grade known as L.R., which was
inferior even to rejections, became for a time the top grade
in the loose jute market. In 1925-26 in addition to the usual
grades, e.g., no. 1, no. 2; no. 3; no. 4 and T.R.; a lower grade
called B. T. R. or Bad Terrible Rejection came into opera-
tion as a result of which the standards had to be revised
in the next season. As a result of the persistent agitation
carried on by the Bengal Jute Bales Association against this
frequent change in the standards, the Indian Jute Mills
Association in June 1929 issued a circular "according to
which the marks for all future seasons, whatever the quality
 ADULTERATION AND GUADINO 157

of Ihe season, were to be I's. 2's. 3's and 4's and Rejections
were to be the lowest mark." But this Circular was not fol-
lowed and in 1929 a new grade called "Low Rejections" was
introduced followed by a lower one called '"X.L.R." in 1930
and major portion of the business was carried on under
these two grades. The proposal of the Bengal Jute Balers
Association to . substitute sale on the Warp and Weft
Guarantee in place of sale on "the standard of the m a r k "
also met with no encouragement in the Mills, thus the
position remains as unsatisfactory as ever.

The demand for government intervention in the fixation

of standards was first made by the Indian Chambers of Com-
merce in 1928 and it has been kept up since then by different
sections of the trade. The Central Banking Enquiry Com-
mittee were impressed by the imperative necessity for an
early solution of this problem and recommended that "the
local Government concerned should take prompt steps for
the fixation of proper standards of Jute." The Bengal
National Chamber of Commerce representing an important
section of the mercantile community also lent great support
to this demand for standardisation by an Act of the Legis-
lature as "these changes give the suppliers almost a surprise
and they invariably entail a loss on them by requiring them
to deliver a better quality than had been originally contract-
ed for. The loss incidental to such arbitrary changes has
its natural repurcussions on the whole jute trade and it is
sought to be shifted backward over to the minor inter-
mediate vendors till at last it reaches the cultivators."

Legislation for the fixation of standards was

undertaken first in the U. S. A. and a
brief resume of the history of U. S. Cotton
standards Act will indicate the scope and limitations of
legislation of this type. The attention of the cotton ex-
changes of the U.S.A. was first drawn in 1874 to the need
for the adoption of a standard for cotton and after
long discussions, a standard classification was adopted
which, however, was not followed by any cotton exchange
except New York, When the mercantile community failed
158 AGRICULTURAL MARKETING

lo achieve this unanimity, in 1908 the Government stepped

in and instructed the Department of Agriculture "to estab-
lish an official standard for the nine grades of white
American cotton". The standards laid down by the De-
partment were purely of a permissive nature and the adop-
tion of it was voluntary. It was never accepted by the trade
and it served only to complicate the situation by adding
one more to the commercial standards which were current
then. In 1914 as a result of the joint efforts of the Liver-
pool and American Cotton Exchanges an international stand-
ard was retained and the U. S. A. Government was pressed
to adopt at a time when that Government itself had made
it obligatory under the Cotton Futures Act of 1914 on the
Cotton Futures Exchanges in he United States "to apply the
official cotton standards in all transactions on and after 18
February 1915." The Liverpool proposals could not, there-
fore, be entertained and with a view to establish better
understanding and persuade the European Exchanges to
accept the U.S.A. standard, the Government sent a delegar
tion to Europe. The net result of these conferences was to
convince the European Exchanges, particularly Liverpool,
that Ihe U.S.A. standard was broad enough to replace the
separate Liverpool standards for Upland, Gulf, and Texas
Cotton. As a result of the study of European markets, the
official standard ^yas revised in 1916 but no attempt was
made to secure its general adoption in the U. S. A. In view of
the changed methods of cotton production necessitated by
the Boll—Weevil pest, a further revision of the standards
became necessary and in 1923 the Cotton Standards Act
became law. It compels "every merchant, shipper, buyer,
trader in the U. S. in every transaction, quotations for cot-
ton for shipment, publication of prices, and in classifica-
tion of all cotton in inter-state and foreign commerce to
use the official cotton standards of the U.S. only, provided
the quality of the cotton involved is of, or within the range
of, the official cotton standards of the United States." As
the law was of a drastic nature it invalidated at once all bills
of lading, warehouse certificates, shipping certificates etc.
which did not confirm to it and the repurcussions of these
 AoULTERA'ilON AND GlJAOlNG 159

on the foreign trade in cotton were very far reaching and

immediate. With a view to ease the situation and remove
the hardships, the American Agricultural Commissioner
visited all the important cotton markets of Europe and
convened an International Cotton Conference at Washing-
ton in June 1923. As a result of this a working compromise
was arrived at by which the European Exchanges agreed to
adopt the U.S. Official Standard with necessary modifica-
tions and the U.S. Government recognised the authority of
these Exchanges in arbitration proceedings. Thus "inspite
of comprehensive and rigorous legislation, it took no less
than ten years for the U.S. Department of Agriculture to get
the standards for American Cotton universally adopted and
then only after making considerable concessions to foreign
interests." Therefore legislation is not the sole panacea of
our troubles connected with the standardisation '^f loose
Jute hi Bengal. Where the supply is greater than the
demand, the law by basing the standards on minima can
hardly prevent the seller from offering better Jute as lower
grades. On the other hand, legislation is certainly necessary
to prevent any alteration in the names of standards which
have been established so as to introduce more stability and
uniformity and the Jute Mills, whose interests are no doubt
bound up with the promotion of better trade, could be per-
suaded to accept the standard in course of lime. It may be
mentioned in this connection that the grading was unknown
till recent years in the marketing of cotton in Brazil. The
State by a Decree in July 1933 gave official recognition to
some widely accepted grades of cotton and directed that
all sales should be carried on, on the basis of the certificates
granted by the grading officer appointed by the Department
of Textile Plants or by the local grading Committee. This
reform has put an effective check on admixture and has
encouraged the farmers to improve the quality of their
cotton. In India a great advance has been made towards the
solution of the problem of standard so far as the cotton
industry is concerned due to the efforts of the Central
Cotton Committee. In 1934 the Standards Sub-Committee of
this Committee were engaged in preparing standards for
160 AGRICULTURAL MARKETING

Bengal, Sind, Punjab-American and Sind-American cotton

after consultation with the representatives of the East India
Cotton Association and Karachi Cotton Association. The East
India Cotton Committee preserve one set of the passed
standards in hermetically sealed boxes every year for refer-
ance in cases of dispute.

In England the Agricultural Produce (Grading and

Marketing) Act of 1931 enables the Minister of Agriculture
and Fisheries to make regulations prescribing grade desig-
nations to indicate the quality of any articles of agricultural
produce and to define the quality indicated by every grade
designation. The Agricultural Marketing Act of 1931 also
enacts that any Board may be empowered to determine the
kind, variety or grade of the regulated product which may
be sold. In both these cases, the grades are determined
after frequent consultations with the producers so as to
make them acceptable by the market. The element of com-
pulsion is absent." Once regulations have been passed the
adoption of grade designations is entirely a voluntary mat-
ter. They can be used without special authority and the
liability involved in their use is a civil one only. If, however,
an article soldunder a grade designation does not accord
with the statutory designation as contained in the regulations
the purchaser can claim damages for breach of warranty.
In no case, however, is the seller liable to criminal proceed-
ings".* Before any scheme of grading is adopted, a detailed
enquiry into the existing methods of marketing and grading
of the produce is held with a view to the drawing up of
tentative grade designations affecting the size and quality
of the produce. These proposals are demonstrated at Agri-
cultural Shows and the views of farmers ax'e ascertained
after which the proposed National Mark Scheme is submit-
ted to the National Farmers' Union or to a Conference of
producers and processors. The next stage is to put up this
before a Trade Advisory Committee appointed by the

^Memorandum on the Standardisation of Agricultural

Produce in the United Kingdom, Ministry of Agriculture
D37426—1—200 page 1.
 ADULTERATION AND GRADING 161

Ministry and when it is approved and sanctioned by the

INlinistry it is published in the Government Gazette and the
statutory rules are printed in the form of leaflets. Inspec-
tors visit packing houses and inspect packed produce at the
factory as well as in the distribution centres with a view to
ascertain whether the grade designations and the appro-
priate requirements regarding quality have been complied
with and in cases where the product does not come up to
the standard the grade designation m a r k is cancelled.
In India, however, a definite move has been made in this
direction. In Februai-y 1937 the Act for the Grading and
Marking of Agricultural Produce received legislative apro-
oval. It provides for the recovery of expenses of grading
and marking from the interests concerned. In course of the
discussion it was pointed out that confiscation would not

the extent that was necessary for the purpose of evidence that
Ihe goods against which action had been taken were in fact
marked in such a way as to infringe the provisions of the
Bill".
 CHAPTER X.
TRANSPORTATION

In course of his memorable minute to the Court of

Directors, Lord Dalliousie wrote in 1853 tlius—"Great tracts
are teeming with produce they cannot dispose of. Others
are scantily bearing what they would carry in abundance
if only it could be conveyed where it is needed. Every in-
crease of facilities for trade has been attended with an
increased demand for articles of European produce in the
most distant markets of India. Ships from every part of
the world crowd our ports in search of produce which we
have, or could produce in the interior, but which at present
we cannot profitably fetch to them." That the vision of
this great administrator has proved true is evidenced by
the vast network of railways and roads which we possess
to-day. India had in 1933-34 a total mileage of 46,910 open
raihvay lines with a capital investment of Rs. 8,84,00,00,000
and more expansion is urgently required to open up the
interior of the country more fully. In contrast to this,
it was said of India of a century back that "there never
was a country with people so intelligent and rich in which
roads were so few and travel so difficult". The conditions
of transport prevailing then were such that the cotton of
Nagpur and Amraoti was brought a distance of 500 miles
for sale to Mirzapore on the back of oxen carrying 160 Ib.s
each, the period taken in the journey varying from 10 to 11
weeks. The cost per ton amounted to £18 and "if it rained
in the journey the carrier often perished under the burden
of the saturated cotton in the soft and unmetalled track."
The direct results of the expansion of roads and railways in
the second half of the 19th Century are reflected in the follosv-
ing figures illustrating the great development of foreign trade
in India. Transportation creates place utilities and is as
prodvictive as the services rendered by the cultivator or
the storage work performed by the warehousemen. With
 TRANSPORTATION 163

the gradual improvement of the means of communication

the area of the market both in the country and out of it
lias expanded considerably as reflected by the uniformity
in the level of prices even in distant marliets as contrasted
with the fact that 100 years ago during a famine when coarse
grain sold at Agra at 5i seers per rupee, the prevailing rate
in Goondvvara was 40 seers. In the marketing of fruits
both dry and fresh and vegetables big urban consuming cen-
tres like Bombay and Calcutta derive their supplies from
distant i^rovinces of India and Afghanistan. Bombay gets
her supplies of fruits from] all over the Presidency while
mangoes are supplied to Calcutta from Lucknow, Bihar and
the Godavari Delta. Sylhet oranges have as wide a market
in Cawnpore and Delhi, as Kashmir fruits have in Bengal
or Simla potatoes and Bihar mangoes in Burma. The gra-
dual expansion of the market is indicated by the fact that
in 1926 the average number of miles one ton of goods to be
carried was 237 and this rose to 244.5 miles in 1933.

Transportation involves usually three processes—(a) a

short haul on village roads from the village to the railway
station or the Mandi (b) a long haul on the railway
or steamer from that place to the consuming or exporting
centres (c) a short haul at the terminal point to the port
or factory or the distributing centres. Then in cases of ex-
ported commodities, a longer haul is required in steamers
to the country of destination.

Although the road system in India is impro\ang rapid-

ly, the basic deficiency even now lies in communications in
the villages or connecting the villages with the district roads.
In Berar, the village roads are about 33 feet in width and
are full of ruts m;aking it difficult for the cotton carts to
])roceed to tlie markets as lin many areas there is prac-
tically no supervision over these village roads or tracks.
Occupiers of adjoining fields encroach upon or cut them
with their irrigation channels with the result that they arc
frequently below the level of the neighbouring fields
and serve as water courses during the rains. In Khandesh,
"the blapk cotton soil ^l tjie end of the rains is a mass of
164 AGRICULTURAL MARKETING

cattle footprints, nearly one foot deep and in a very few

weeks it gets as hard as iron and nothing can be done with
it. Diwan Bahadur K. R. Godbole, President of the Poona
District Local Board pointed out to the Indian Roads Deve-
lopment Commitlee that 50 per cent, of the villages of that
district had no other roads except cart tracks. "Some of
the villages have got rocky tracks over which country carts
have to ply and they break their axles. In some cases the carl
tracks go through deep ruts where you find that if there is
a cart coming from the other side, the incoming cart has to
be lifted up before a passage could be made for the other
cart. In some cases the ruts are 10 feet deep and being
locked like that for six or seven hours, very often the load
in one cart has to be moved and the body of the cart lifted
and a way made for the other cart." Some idea of the road
conditions in the Punjab may be formed from the following
description given by Mr. W. R. Wilson of Dera Ghazi Khan,—
"wheeled traffic can ply in winter from 5 miles north of
the headquarters to the southern limit of the District but
in summer when the canals are running and hill torrent
spates are broad communications are badly interrupted. I
have had an involuntary bath in over 2 feet of running water
on the main road as early as the beginning of May and if the
canal embankmlents breach, as they sometimes do, the easterru
part of the District becomes a swamp." In the United Provin-
ces the heavy traffic in summer when the winter harvest is
marketed causes ruts in the soft alluvial soil of the village
tracks which become muddy and waterlogged after the mon-
soon becoming impassable at places and imposing a great
strain on the draught-cattle on the'se roads. In some areas
like the Arambagh Subdivision of Hooghly district of Bengal
there as a great difference between the local market price and
that at the nearest railway station, the ryots store up the
whole of their produce in grannaries to sell the same at
whatever prices are offered during the rains when the floods
come in and boats of merchants penetrate into the interior.
In the case of perishables like potatoes or Gur the ryots lose
8 annas to 12 annas per maund as it is not possible to hold
 TRANSPORTATrON 165

up these commodities for any length of time. In the Hoshan-

gabad District of the Central Provinces, there is a fairly ex-
tensive network of fair weather roads but during the monsoon
the conditions are changed. "The heavy alluvial soil be-
comes a morass, impassable to wheeled vehicles and for four
months communications with the market are practically sus-
pended." As a result of this the ryots are compelled to
sell lip their grain in .^pril and May at whatever price may
be ruling. In the Karnatak tract, very often there are
heavy showers just after the last picking of the crop is over
and as a result of this, the traffic is held up for a fortnight
or more, and the grower who wants to dispose of his pro-
duce during this period is very much handicapped and he is
not in position to take advantage of better prices.

The upkeep of these roads is usually the function of the

village Panchayats although in some provinces the District
Boards also look after a certain percentage of the more im-
portant village roads. These Panchayats are empowered to
raise funds by local cesses, which is not usually done and
in many cases the proceeds of these cesses are cither insuffi-
cient for meeting local requirments or are not wisely spent.
In the Central Provinces the old Baluta system by which
the Mahars were instructed with the work of repairs, has
been abolished. There is no doubt that till our village Pan-
chayets realise their own responsibilities not only some
driving force from above but also financial assistance would
be required. The experiment initiated by the Punjab Board
of Communications in 1928 of giving liberal grants to Dis-
trict Boards which took up an intensive programme of the
improvement of these village roads has produced good
results.

The roads connecting important villages or smaller

markets with bigger markets are much better although in
some regions owing to the paucity of bridges the roads can
not be used during the monsoon months. In some of the
older canal colonies of the Punjab roads were made last
hence in many areas marketing is hampered by lack of
means of communications hut in later colonies the roads
166 ACiHICULTURAL MARKETING

have preceeded agricultural expansion with the result that

the market area has widened and transport has considerably
developed. In transport of goods the motor truck has not
yet proved a formidable rival of the railway but with an im-
provement in the road system the competition will no doubt
grow steadily. Motor transport is effective where the
road distance between two points is shorter than the rail-
way route e.g., between Conjeeverara and Madras, the distance
by the road is 34 njiles and by railway 57, and between Kodai-
kanal Road and Virudlmagar the difference is about 10 miles.
Motor tranjsport is largely being used in the transport not
only of fruits and vegetables, but also of grain 'and oil-
seeds. It is not confined to traffic over short distances as
large quantities "of fruits are carried from Rawalpindi to
Delhi, a distance of 477 miles, from Landikotal to Peshawar
(125 miles), Amritsar to Lyallpur (123 miles) while in Ben-
gal country tobacco and vegetables are transported from
Katwa to Calcutta (107 miles). There is a large motor traffic
carrying grain between Asangaon and Bombay, Ghoti and
Nasik, and of groundnut between Kapadvang and Nadiad.
Motor transport ensures quick and door to door service and
saves the cost of transport to and from the railway station.
The rough handling to which verj' often vegetables are sub-
jected in railways is avoided in motor transport and this
accounts for the increasing use of motor vehicles in the trans-
port of these commodities.

Road conditions in India differ widely in the different

provinces. In some parts the constructon of roads to serve
all purpses is comparatively inexpensive, whereas in others
like Bengal and Assam where the coimtry becomes impass-
able during the rains, road making is difficult as the cost of
bridges is prohibitive. In Orissa due to ever recurring
floods, embankments have to be constructed and the roads
are usually made on these embankments which are liable
to be washed away during floods. In the Punjab in many
parts of the Gangetic plain roadmaking is rather expensive
due to the lack of suitable road metal, while in Sind, sand
is a great obstruction to road making and of all the pro-
 'I'lUNSPORTAtlON 167

viiices of India, Sind has the smallest percentage of metalled

roads. The total mileage of roads in India is 201,000 miles
of which iil percent is melalled and 69 percent unmelalled.
Compared to the United States of America, per 100,000 popu-
lation India has 23 miles of surfaced roads as against 383
miles of U.S.A. and the corresponding figures for unsurfaccd
roads are 55 and 2167 miles. With the same territory as
New Zealand and 10 times her population the C. P. has one
seventh of her surfaced road mileage. The main deficiencies
of Indian roads are that in many important centres there
are unbridged river crossings which during winter can be
crossed on pontoons involving great delay. The majority
of the roads are 9 feet wide, which, though quite suitable
for bullock carts, are not so for motor traffic which require
a minimum width of 12 feet. The system of financing the
construction of a large proportion of roads through District
Boards has resulted in great gaps in the road system making
inter district movement almost impossible in many
areas. Many of these roads are not properly drained
and have a weak surface. It is extremely difficult to main-
tain waterbound roads where the rainfall exceeds 50 inches
per year. This wide diversity of natural conditions as well
as methods of roads finance account for the great inequali-
ties in the road mileage in the different Provinces as the
following tables will show.

ALL KINDS OF ROADS

Per 100 sq. miles of cultivated area Per 100,000 population

Madra^Ji ,. 36.0 67.0
Bombay Presidency 33.7 105.1
Sind .. 86.0 399.8
Bengal .. 43.7 41.6
U. P. .. 66.1 78.0
Punjab J .. 46.0 .. .. 110.1
168 AGKICULtUftAL M A K K E T I N G

ALL KINDS OF ROADS

Per 100 sq. miles of cultivated area. Per 100,00 population

Burma .. 36.3 .. 91.6
Bihar & Orrisa 61.4 . . 85.8
Central Provinces 19.5 .. 60.7
Assam .. 62.3 . . 122.0

That the condition of the roads has improved is shown

by the gradual increase in the percentage of metalled roads
between 1917 and 1927. The increase was 25 per cent, in
Bombay, 31 in Bengal, 9.9 in the U. P., 15 in Punjab, 30 in
Burma, 44 in Bihar & Orissa and 36 in C. P. Tlie actual
p;<Sv(^ent>age of metalled roads to the total mileage in 1927
was—;

Madras . > .. 87.0

Bombay Presidency .. 47.4
Sind .. 0.8
Bengal •. •* .. 17.5
U. P. .• .. .. 21.8
Punjab •. •' .. 12.7
Burma •> .. 26.4
Bihar & Oi'issa .. 12^8
Central Provinces .. 6.0
Assam •• •• .. 6.0

The Indian Road Development Committee was very much

impressed by the need of better communications for market- ,
ing agricultural produce and pointed out that "good commu-
nications in any area will often bring new crops within tlie
range of profitable cultivation." The Royal Commission on
Agriculture too laid great emphasis on the direct influence
which good communications exercise on the time factor and
incidentally on prices as well. They have further remarked
that "defective communications between the point of pro-
duction and the local market hinder the movement of goods
and make prim^ary marketing costly, the additional charge
ordinarily falling upon the shoulders of the cultivator."
 TRANSPORTATION 169

Among the means of transport used on the Kutcha or

unraatalled x-oads, the most important in Northern India is the
bullcok cart which does about 70 per cent of the carrying
work. The price of a cart is from Rs. 50 to 80 and one lasts
for 8 to 10 years. The average load of tjhe cart on Kutcha
roads is about 16 maunds and on metalled roads 25 maunds
while the speed varies from l i mile's to 2 miles per hour.
There is ample scope for increasing the carrying capacity
of these bullock carts and thereby lowering the cost of trans-
port. The introduction, of carts equipped with pneumatic
tj'res is likely to revolutionise transport in rural areas. W.
Sayer has made successful experiments with such a cart but
the cost is beyond the reach of an average cultivator. W. S.
Read has taken a step in the right direction by suggesting
methods for adapting countrycarts lo pneumatic tyre equip-
ment. The effect of the improvement made may be esti-
mated thus:—
Ordinary country cart New cart
Weight Unladen .. 942 lbs. .. 830 lbs.
Floor area .. 28.8 sq. ft. .. 36.5 sq. ft.
Maximum load 1,312 lbs. .. 2,952 lbs.

Time taken with similar load for covering 10 miles on

Pucca Road 4 hr. 5 minutes 2 hr. 58 minutes

Kutcha Road 4 hr. 56 minutes 3 hr. 40 minutes*
The series of experiments carried by the Provincial
Departments of Agriculture in 1934-35 on the use of carts
with pneumatic rubber tyre equipment have proved that the
draught of the rubber tyre equipper cart is less than that
of the ordinary carts and with the saving in time, the daily
outtui'n of work can be increased.
Next comes asses and mules, "who, on these bad roads
serve as the best means for transport for the small quan-
tities of grain of small cultivators." The carrying capacity

^Agriculture and Livestock in India VVI p. 636.

 170 AoRlCULTUftAL MAKKETING

of an ass is l i maunds and that of a mule 24 maunds. In

the United Provinces Thelas, TheUs and Sikrams are in
great use on metalled roads. The Thela is a four wheeled
cart drawn by a pair of bullocks capable of taking a load
of 40* maunds and a Theli is a smaller one—buUack cart.
The Thela is prepared for short hauls upto a distance of
25 miles to the railway station. The Sikram is a four
wheeled Camel Cart with a high wooden enclosure, premi-
nently suited" for the ti-asport of fruits and vegetables. In
Southern India, the two bullock Bandy is the widely used form
of transport. In the Punjab, particularly in the sandy Thai
area Camel is 'the principal means of transport as his cost
of upkeep is very low. There is a proverb—"The Camel
earns gold but eats Jal (a cheap grain).

It has been aptly i:)ointed out by Rao Bahadur P. C.

Palil that "the Indian farmer has to spend proportionately
more on transport. The communication from the farm to
the village and from the village to the market is poor. It
not only costs more but increases the depreciation charges
of the carls and bullocks.* The cost of transport is higher
on immeiaUed than on metalled roads and depends on a
number of factors including the condition of the road,
season and the commodity carried. In the Punjab the
carting charges on Cotton is 30 to 38 per cent, higher than
on wheat.

In an enquiry made into the cost of transiJortation of

Cotton in the Punjab by Messrs. Ajaib Singh and P. Bhullar,
it was found that round about Lyallpur the average load
per cart on metalled roads was 28 mds. 39 seers and on un-
metalled roads 24 mds. 7 seers and the average distance
covered by a cart was 16.1 miles. Tlie rate of freight in-
creases with the distance, season of the year, and nature
of the road and is influenced to a large extent by the total
time which the cartman has to devote on the consignment
between loading in the village and unloading it in the market
•^Evidence before Royal Commision on Agriculture. Vol. II
Part I p. 510.
 TRANSPORTATION 171

after the sale is complete and not on the running time alone.
The following table would give some idea of the cost.

1. Madras Presidency (Madura).

Distance ' Charges Commodity Condition

Rs. Ans. P. of road
10 miles 0 4 0 per cent Paddy Metalled
6 miles 2 0 0 for 6 bags Cotton do
Bellary 0 miles 2 4 0 for 6 bags Cotton do
Punjab 27 miles 0 7 0 per md. Wheat bad
20 miles 0 4 0 per md. Cotton Metalled
12 miles 0 2 0 per md. Wheat Unmetalled
U. P. 20 miles 3 0 0 for 20 md. Wheat Metalled
Wasawar 20 miles 0 1 3 per. md. Wheat do
KohatDt. 18 miles 0 1 6 per md. do do
HazaraDt. miles 0 2 0 per md. do do
(Delhi) 0 2 6 per md. do do '

In the United Provinces, the saving in the charges over

a metalled road as compared with a bad unmetalled road
appears to be Idss than 20 per cent, and in the Madras Pre-
sidency the saving under this head varies from 20 per cent.
in the District of Tanjore, North Arcot and West Godavari
to 30 per cent in the Kistna District and 50 per cent in Tri-
chinopoly.

Another feature of our road system is the lack of even

distribution. While in many provinces important areas are
vet undeveloped- there is in most parts of the country great
duplication of the means of communication with railways and
roads running parallel to one another. The following tables
will bring out these deficiencies in our road system; —
172 ACRICULTURAt, MARKETING

Number of villages with a population of 1000 and over

not on the public road.
MADRAS PRESIDENCY DISTRICTS
North Arcot ,. . . 309
Kistna 185
West Godavari 213
Guntur 417
Coimbatore 230

DISTRICTS OF U. P.

Cawnpore .. .. . . 60
Moradabad .. .. . . 8 2
Gorakhpore .. .. .. 263
In Bengal, the "area more than 10 miles from any rail-
way amounts to 40 percent of the total area with a density
of population of 100 and over and the area having a dis-
tance of more than 10 miles from either a railway or inland
Steamer route is 21 per cent of the total."*
In many parts of the N. W. F. Province produce is trans-
ported to the big markets like Hoti from long distances by
a chain of agencies the most important of which is the don-
key driver who is given very often big arr^ounts as advances
for the collection and transport of the produce from the out-
lying areas. Cotton is often transported in string bags made
from palm leaves on 'the back of buffaloes. In Bengal
waterways being more important than roads or railways the
major portion of the work of the primary assemblage of
Jute and Paddy is done by country boats.
Railway transport is an important factor in the marketing
organisation and for .the export as well as the internal trade
of India. The amount of actual transport done varies ac-
cording to the harvest, market demand and marketable
surplus. The quantity moved by the railway, as the follow-
ing table will show, gradually rose up to 1928 but declined
when the depression set in.

*Report on the Present State of Road & Railway Competition

by Mitchell Si Kirkners (1933) p. 5,
 TRANSPORTATION 173

Amount of Agricultural produce transported in Railways

(In Million Tons)

Produce 1925 1928 1932

Wheat .. 1.62 1.85 1.46

Grain & Pulse 2.99 4.93 3.61
Oilseed .. 3.49 2.79 2.04
Raw Jute .. 0.89 1.18 0.81
Tobacco .. 0.7 0.32 0.28
The services rendered by the railway to marketing may
be measured by the facilities it offers to the movement of
goods and the charges it levies on the goods. There is no
denying the fact that in recent years, the railway systems
all over India have made the movement of goods more speedy
and have reduced considerably the risk of damage in hand-
ling or transit. The vaccum brakes which have been fitted
in goods trains have enhanced safety in train operations and
accelerated their speed, in the case of main line goods trains
from 9.08 miles per hour in 1923 to 11.5 in 1932. The
gradual reduction in recent years in the amount of compensa-
tion which the railways had to pay for the damage to goods
has been brought about by improvements in the design and
construction of the wagons, proper locking of loaded wagons,
greater care in handling and the increaesd efficiency of the
Watch and Ward Department.

Claims for Goods lost or damaged in Class I railways*

1926 .. Rs. 15,21,939
1928 .. Rs. 10,93,139
1930 .. Rs. 7,65,672
1932 .. Rs. 3,66,448
Waggon shortage is a great hindrance to orderly
marketing particularly during busy seasons. Mr. G. Shirhati
pointed out to the Royal Commission on Agriculture that
"it has been observed many times that hundreds of dokras
lie in open place in the station compound for want of

*Report of the Indian Railway Board for 1932.

.174 AGRICULTURAL MARKETING

waggons for days together, at the mercy of rain and subject

to theft." • *In recent years however much improvement in
this direction has been effected by the organisation of the
Waggon Pool under which the Director of Waggon Inter-
change receives daily reports from all railways regarding the
stage of traffic and has the power to readjust supply of wag-
gons to meet the demand. By the strengthening of tracks and
bridges the carrying capacity has been increased for example,
in the E. I. Railway from 19 to 22 tons. The doubling of
tracks and adoption of new routes have secured a great re-
duction in the train mileage on the Grand Chord Section of
the E. I. Ry. by 50 miles on each train journey and it is
possible there to run now 10 additional goods trains. The
transport of jute, however, has not been facilitated to any
appreciable extent due to its peculiar and complicated nature.
The requirements for waggons for transporting jute from the
hinterland to the ports of Calcutta or Chittagong very widely
from day to day according to the state of market and the
continual day to day business which, is carried on to anti-
cipate the possible trends of the market so that the railway
is put to great difficulties in estimating the actual needs of
the day and supplying waggons accordingly. It very often
happens that by the time the consignment arrives at the
de^stination, the market has dropped a few points and the
consignee wants to wait a few days in the hope of a rise and
the waggons are not emptied.

Much, however, yet remains to be done. Although over

many railway systems express goods trains are being run, the
innovation is yet limited in its scope. The bigger stations no
doubt are provided with covered goods sheds with well cons-
tructed approaches so as to enable the bullock carts to come
close to the goods sheds or platforms and reduce the cost
and labour of handling of the goods, but in the smaller
stations covered sheds are rare, and dokras of cotton,
baskets of fruits and vegetables, bags of flour or rice are not
unoften seen heaped up on the open platform at times only
imperfectly covered with a wornout tarpaulin.
* Royal Commislsion Agri., Evidence Vol. II Part II P. 293,
 TRANSPORTATION 175

The marketing of fruits is strictly limited by the facili-

ties which the railway offers in India. With proper facilities
fruits may be carried over long distances, but the conditions
in India are not conductive to it as the fruit has to be trans-
i)orted to long distances through hot and humid regions and
the difficulliy of arranging the packages in the vans due to
their \ack oi vimfoi'mity. l\\ addition to this, the diversity
of gauges makes it necessary to tranship goods at different
places causing delay and damage to the consignments. The
use of refriegerator or'insulated vans would to a very large
extent expand the area of the market from the point of \"iew
of both time and space. The railways took up the question
of refriegerator vans as early as 1908 but the proposal did not
materialised. Enquiries made al Peshawar in 1912 revealed
that the scope for the use of these vans was limited as only
30 tons of fruits were available per day for three months
in the year out of which refriegeration would pay in only one
month. In 1916 the efforts of the G. I. P. Railway to run
insulated vans failed but after many efforts the N. W. Ry.
have been able to make the Ice-cooled Insulated vans popular
and the G. I. P. and E. I. Ry. also arranging for sufficient
ventilation in their fruit vans. Improvements in this direction
will revolutionise the fruit growing industry. Poona Dis-
trict, for example, has almost a monopoly in figs for which
there is a wide demand in India. Figs no doubt are sent
even now to distant markets like Bellary and Madras.
"In the absence of any facilities for refriegeration, this fruit
has to be picked somewhat unripe, lest it should spoil before
reaching its destination. But the prematurely picked fruit
does not ripen properly; and therefore does not fetch as good
a price as the fruit of proper maturity would yield"*

In the transportation of fruits from Bihar to Calcutta,

however goods trains are preferred to passenger trains due
to a difference of Rel to Rs. 3 per basket in the freight of fruits
sent by goods and passenger trains and also because at the
smaller stations the stoppage of passenger trains is very
short. Before 1932 the E. I. Railway used to run two special

"^Gadgil & Gadgil—Survey of Fruit in Poona P. 116.

11^6 AGRICULTURAL MARKETING

parcel trains solely for mangoes from Dinapore to Howrah and

most of the fruits used to be despatclied by tliese but with
tlie discontinuance of these trains owing to the faster goods
trains the saving in time by express parcel trains is not
so great as to make up for the difference in freights. The
E. I. Ry. provide two refriegerated compartments from
Howrah to Delhi twice a weeli. These are merely insulted
with zinc and about one ton of ice is put into these vans
before leaving the starting point and the railway adminis-
tration imposes a surcharge of 25 percent over parcel rates
on goods transported by these cars. These vans facilitate
the movements of fruits from the Punjab and the N. W. F.
Province but they are not of much use for Bihar fruits, as
except a few most of the important fruit despatching stations
are either on the B. N. W. Rly which has no such facilities
or on the Loop line of the E. I. Ry. over which these refri-
gerated vans do not run. Fruits from the Madras Presidency
to Calcutta are usually despatched by goods trains, the desti-
nation principally being Shalimar and not Howrah while
fruits from the eastern districts of North Bihar are despatch-
ed via Katihar to Sealdah so as reduce the distance between
the terminal station and the distributing centres in Calcutta.
Fruits of a delicate nature, e.g., lichies, grapes are invariably
sent by passenger trains so as to maintain their freshness
as far as possible.

Rao Bahadur P. C. Patil has pointed out that railway

transport costs about 50 per cent, more in India on wheat
than in U. S. A. The comparative cost in Rupees to move
one ton of wheat 200 miles in the U. S. A. is Rs. 7,5 while
it is Rs. 10.3 on the M. S. M. Railway and Rs. 11 on the
G. I. P. Railway. Railway rates exercise a great influence
in determining the direction of the trade and there is no
doubt that they were originally devised in India with a view
to facilitate the movement of raw materials from the interior
to the ports, and later on when industries began to spring
up in various areas, this tendency operated against the in-
dustrialisation of the country and complaints against this
discremination became more and more bitter. There is no
 TRANSPORTATION 177

doubt that this dissatisfaction is to some extent justified

l)ut this is due mainly to tlie lower cost of haulage over long
distances than over short, making the rates appear as teles-
copic and also in some cases to the efforts of the railway
to keep the traffic as far as possible to its own lines in compe-
tion with other railways or with water transport, by means of
the block rate which is "a high rate imposed by the origi-
nating line upon traffic with a view to having for itself as
long^a lead as possible and preventing it from passing off
to a rival or foreign route."

As an illustration of this, the fixation of rates on the

B. N. Railway with a view to divert the grain traffic of Nagpur
towards the Calcutta port instead of Bombay which is nearer
may be cited. "Apparently the traders prefer the former
(Bombay Nagpur route) and by that route grain would
go under fair competitive conditions but the Bengal Nag-
pur, intending to carry it to its own port, Calcutta, so mani-
pulates its rates that the trader has the alternative of either
sending his goods to Calcutta or paying high mileage rates
to Bombay. It imposes block rates on grain to Bombay,
which consist of the maximum rate plus a terminal charge
of eight pies per maund; while for the identical service on
its own route inspite of two terminal services, no terminal
charge is levied and the rate is according to ordinary
schedule,* The policy has however not succeeded due to
the fact that the lower steamer freights at Bombay neutralise
the difference in the rates and diverts much of the grain
traffic to Bombay. The effect of competition on the fixation
of railway rates is clearly seen in the case of the E. B. Ry. In
1928 the freight rate on the E. B. Ry. route from Rangpur
to Calcutta was 0.60 pie per md. per mile for drummed jute
and the rate for the same class of jute from Naraingunj to
Calcutta on the rail-cum-steamer route via Khulna was only
0.50 pies.

In the case of sugar, rates were originaly determined

with a view to facilitate the distribution from port towns
*N. B. Mehta,—Indian Railway', Rates & Regulations, p. 135
1^8 AGRlCULtURAL MARl{£tli<G

to various inland consuming centres. With the development

of a sugar factory industry in Bihar and the U.'P., a thorough
overhauling of the rates is not only called for but a radical
change in the basic principles of rate fixation is also required.
With a view to compete effectively with imported sugar, the
Indian commodity must be made available at a lower price at
the ports and the railways should not give by their rate
fixation any undue preference to any centre of production
over others in access to a particular market. At present the
sugar factories of North Bihar are under a serious
disadvantage in comparison to the South Bihar factories in
despatching sugar to the Punjab market as the freight from
the South Bihar stations on the E. I. Ry. to Saharanpore is
13 annas per mauna wiiiie the corresponding rate from the
North Bihar stations of the B. N. W. Ry. are Rs. 1-2-6.* Then
again the railways by their system of charging flat rates for
sugarcane ai-e encouraging the factories to go afar for their
supplies instead of intensive development of the cane area in
the immediate neighbourhood. On the B. N. W. Railway
there is such a flat rate for canes upto 28 miles and after that
a graduated scale operates in proportion to distance covered
with the i-esult that the factories getting their supplies from
a shorter distance, say 5 to 10 miles have alsoto pay the rate
for 25 miles.

Another feature of the railway rates is that the rate

is higher for small quantities than for large, so that they
discourage the despatch of small consignments and favour
the big traders at the cost of the petty ones. Waggon load
rates can suit only the merchants but not the growers, thus
direct marketing by the latter is not encouraged. The
fijeights have no relation to the variation in the prices of
commodities and they are particularly oppressive when due
to the general depression there has been an all round drop
in the prices of agricultural produce.

*Report of the Indian Sugar Mills Association page 181.

 TRANSPORTATION 179

In the case of cotton, freights were increased in 1918,

1919 and 1922 and these rates are continuing even
now though the prices have fallen a good deal. Broach
cotton was sold in 1922 at Rs. 487 per Candy and the price
fell to Rs. 132 in August 1931, i.e., by 73 per cent, but cotton
freight rates for Bombay for stations in the Bombay
area as compared with 1913—14 have increased
from Khamgaon by 38 iper cent, Khandura by 44, Dhulia
by 72 per cent. Amraoti by 80 per cent, and Broach by 179
per cent. Freight rates have also risen in the case of Punjab
American cotton which is exported through Karachi, the in-
crease being by 76 per cent from Tando Adam, by 108 from
Multan, by 146 from Sargoda and by 207 from Ambala. How
a judicious reduction in the rates gives a great impetus to
marketing is illustrated by the case of Punjab wheat in May
1931. In April of that year the Karachi Chamber of Com-
merce represented to the Railway Board that the surplus
stock of the previous year amounted to one million tons
which with the current year's surplus would be doubled.
The price of new Indian wheat was 5s. to 7s. per quarter
over export parity which was equal to 13 annas per maund
and the only means of pushing on the exports was a reduc-
tion in the railway freight to tlie port by 50 per cent. The
Railway Board reduced the freight from the N. W. Ry.
Stations to Karachi for 4 months on the basis of a telescopic
schedule and this had the desired effect on the marketing.

The Royal Commission on Agriculture have remarked

that "freight! rates are ordinarily the heaviest single addition
to the prime cost of produce exported by rail from the area
of production. In a competitive market, they amount to a
heavy charge on the gross price ultimately paid for the pro-
duce, and to the cultivator who is selling his commodity at
a distance, they amount to a substantial portion of the price
he realises at the place of sale." This is well exemplified in
the case of the marketing of fruits as the following figures
from the Borft)ay Market will show,
180 AGRICULTURAL MARKETING

Peg of Railway freight to total cost.

Place of Origin Fruit Freight
Poona Guava 30.7
Poona Orange 12.7
Nagpur Mosambi 27,6
Ahmedabad Mosambi 18.2
Nagar Grapes 12.2
Nasik Papaya 18.3
Poona Papaya 22.8

The figures of railway charges given by Gadgil a.'so show

that in the marketing of fruits in the Poona District, they
amount on an average to 27 per cent of the total cost.
In the jute trade of Bengal, the share of the steamer in
the carrying work is fast increasing. Between 1913 and
1933 the share of the steamer has risen by 15
per cent while the railway and boats have fallen
by 6 and 7 per cent, respectively. The steamer freight
rate is settled from tim;e to time by agreement between the
Indian Jute Mills Association and the steamer companies
combine on the basis of an undertaking that the Mills would
make exclusive use of the companies' steamers for
their entire carrying work. The present agreement
adopted in July 1934 provides one rate for the busy
season and the grant of a rebate to shippers, "on condition
that they would make exclusive use of the services of the
associated Steamer Companies for the entire despatches of
their jute during the busy season, whither consigned to Mills
o!r not, on penalty of forfeiting the claim to the rebate in
case of any deleq^uency"* While these terms practically
mean the concentration of the whole of the carrying work in
the hands of the agreement Companies, their freight policy in
the past has been most unresponsive to the cause of prices
making the freight "a regular deadweight on the trade." While
between 1916 and 1924 they effected increases in the freight
rates on the plea of higher costs and high prices of jute
the rate fixed in 1926 remained practically at the same level

*J, N. Sen-Gupta—Economics of Jute page 84.

 TRANSPORTATION 181

up to 1934 allthough the price of raw jute declined from

Rs. 12 to Rs. 3-10.
Instances of anomalies of railway rates wlhich have
a serious effect on marketing can easily be multiplied. Cal-
cutta is important as a port for the export of oilseeds as
well as a centre for the mustard oil manufacture. In recent
years the U. P. Mills have proved a serious rival to Calcutta
due to the impetus given to them by the railway rates. The
rates on mustard seed from the E. I. Ry. stations of U. P.
e.g., Cawnpore, Agra, and Etawah to Howrah have risen as
follows:
Station Distance Rates in 1914 Present
Rates @ C/M Schedule
Rs. A. P. Rs. A. P.
Cawnpore 631 Miles 0 5 3 0 3 11
Agra 788 0 6 7 0 10 2
Etawah 718 0 6 0 0 9 7
Hathras Killa 810 0 6 9 0 10 4
Transport charges in 1914 represented only 6 per cent
of the value of goods and under present circumstances they
are as high as 16 per cent. On the other hand, mustard oil
from the U. P. towns to Howrah enjoys special rates in wagon
loads, with the result that the Calcutta Mills have been hit
hard* The difference between the price which the cultivator
gets for his cotton at Amraoti in Rerar and the price obtained
at Liverpool (C. I. F.) is about Rs. 60 per candy and of this
about 33 per cent, is taken up by railway freight from Am-
raoti to Bombay.
Another factor which has an important bearing on the
moving of produce iSi the discrimination between the Owner's
Risk and Railway Risk rates for goods traffic introduced on
many lines. There is no doubt that under the Railway Risk
*Report of the Bengal National Chamber of Commerce 1933
p. 360.
**Report of the Bombay Chamber of Commerce for 1930
page 160,
182 AGRICULTURAL MARKETING

Note, the consignment is insured against damage or loss as

the responsibility is entirely borne by the railway itself and
the handling is consequently more careful. On the other
hand in a competitive market the traders have to reduce the
cost of transport as low as possible and despatch goods at
the lo^vest rates available, which are usually the rates for
goods at owner's risk. Thus the difference between the
two is very important and where, as for example, in the
case of Ghee the difference is as great as 100 per cent, the
merchants are cmpelled to send at Owner's Risk, the
alternative of Railway Risk being almost non-existent. In
this case, the railway practically puts pressure on the
merchants to accept liability for loss or damage to con-
signments caused by their negligence. The injustice of this
policy is bitterly realised by the fruit dealers in whose case,
"all the special waggon load rates as well as even half parcel
rates on consignments are all Owners' Risk rates. Even the
largest consignments obtain no concessions, if they are to be
sent at Railway risk; and the small consignments would have
to pay a full parcel rate, instead of the half parcel rale, if
they are not sent at Owners' Risk". In the case of some of the
main agricultural commodities where the difference varies
from 10 to 40 per cent the trader is very often unable to
take advantage of the railway risk rates owing to the pres-
sure of competition. In some cases the Railway-lays down
special terms for different kinds of goods or do not provide
for railway risk rates at all, e.g., in the G. I. P. Railway the
rate for rice from Jhansi to Bombay is meant only for the
Owner's Risk and this rate is qualified by the remark that
"no other rates will apply". On the same railway, over cer-
tain sections the rate for sugar at railway risk irrespective of
the condition of wagon load is lower than that on country
sugar for a shorter distance at waggonloads on Owner's
risks.*
The onus of proof is thrown on the consignor by Railway
Risk Note A but where the goods has moved over several
railways it is impossible to prove wilful neglect. The Bom-
bay Chamber of Commerce have pointed out that "many
*GadgiI,—Marketing of Fruits page 122,
 TRANSPORTATION 1S3

Railways have demanded Risk Notes for particular reasons

sucli as insufficient covering in the case of Raw Cotton and
then under cover of the Risk Note they have repudiated claims
for damages arising from causes which would have damaged
the consignment in many case, e. g., no covering to cotton
bales however sound would protect them against oil, water
or coal dust"* In November 1934 the B. N. W. Railway issued
instructions that sugar should be accepted only on
Risk Note A on the ground that the contents are "inherently
liable to sweat and become moist in transit."** This
attitude has practically penalised the entire sugar trade
while the best way open to the railway, viz., improvement
in the conditions of transportation was not thought of. It
is desirable therefore that in the interests of trade provision
should be made in the risknote in which the onus would lie
with the railway to prove that the damage to goods con-
signed was not due to misconduct but due to negligence on
the part of the railway employees.

Then again terminal charges are added on to the freight

rates and influence very much the cost of marketing. In
addition to the "'terminals" in the case of goods in bulk,
levies are made as "Crane Charges" and "loading and un-
loading charges." These charges are based on the amount
of handling required at the destination and may be varied
or exempted altogether provided no undue preference is
shown thereby, although exemptions are sometimes given on
some commodities to divert the traffic to some centre, e.g.,
no terminals are charged on grains, pulses and common
seeds booked from Achalganj, Dalmau, Lalganj, Jamnapur,
Unchahar, Atrampur etc., to Cawnpore, or on all traffic
booked on the B. N. Railway to or from Shalimar from all
stations on the Howrah-Jubbulpur, via Gondia section, Nag-
pur and via Nagpur, etc. Where the cost of handling alone
determines the terminal rates, the charge is no doubt jus-
tified but wliere high terminals are used mrely to block a

*Report of the Bombay Chamber of Commerce 1933 p. 188.

**Reporl of the Committee of Indian Sugar Mills Association
1934 p. 35. •
184 AGRicULtUHAi/- MARKETING

competitive route whereas the same rate is not charged for

similar type of traffic for same distances when the traffic is
not booked to or from a rival railway or port, there is enough
ground for interference by the Government.

All these discrepancies about rates can now, ihowever,

be referred to the Railway Rates Advisory Committee which
should the given fuller powers not only to adjudicate and
make recommendations when grievances are referred to
them but to take the initiative and investigate themselves
keeping in view^ all the implications of a forward rate policy.
This committee is authorised to enquire and report to the
Government of India on the following subjects:—(1) Com-
plaints of tindue preference under section 42(2)" of the In-
dian Railway Act of 1890; (2) Complaints that rates are un-
reasonable in themselves; (3) Dispute regarding the im-
posing of terminals; (4) The reasonableness of any condi-
tions to the packing of articles specially liable to damage
in transit. The committee has aihply disclosed the defects
of the Indian railway rate system and has served to em-
phasise the need of a body somewhat more than an Advisory
Committee. India requires a Judicial Tribunal on the lines
of the Rates Tribunal in Great Britain to which aggrieved
parties may refer their grievances, not for mere enquiry but
for actual decision and redress.
 CHAPTER XI
FUTURE TRADING
In the present complicated organisation of marketing
future trading or the making of a contract to buy or sell
some commodity with the delivery taking place in the future,
has a definite place. It has been aptly pointed out by the
Committee on Trading in Futures appointed by the Inter-
national Chamber of Commerce that, "a properly organised
futures market can and in many trades does minimise this
inevitable trading risk by providing machinery for the trans-
fer and spread of the risk among a body of professional risk
bearers or speculators. The genuine trader is thus able to
a large degree to ensure to himself a normal trading profit
and to insure himself against exceptional vmforeseen losses."
So long as the trading risks exist future trading by providing
facilities for continuous buying and selling and for informa-
tion about the amount of consumption, production and ex-
port prevents wide fluctuations in prices and promotes sta-
bility of trade and industry. The success of such a market
depends largely on three factors, viz., (a) a continuously
liquid market where there is perfect freedom for the execu-
tion of contracts, (b) the size of the market should be large
enough to permit of the purchase and sale of large quantities
at a time without disturbing the price level appreciably, (c)
a market which owing to the proper representation of all
the interests concerned makes it possible for the prices to
react to the normal changes of demand and supply. It is
true that in India, in the case of some of our urincipal com-
mercial staples all these market conditions are not every- i
where present, hence in many cases speculation degenerates '
into mere gambling, bringing future trading itself into dis- '
repute. Hoffman has remarked that "the farmer has gene-
rally opposed the practice of future trading (particularly if
prices ai-e low or declining), the intermediate merchandising
groups have usually favoured the practice and the consumer

*Hoffman—Future Trading upon Organised Commodity

Markets p. 5.
 180 AoUtCULTUKAL MARKETING

has taken lilUe active interest except to complain occasional-

ly when prices were high."* This complaint becomes all
the more justifiable and the need for a well developed future
market all the more great wihen we consider the irregular
system of future transactions in the grain trade.

In the grain trade in the United Provinces there is an

indigenous system of future trading which is carried on by
Pukka Arhatiyas. Each market specialises in the specula-
tion of its own special products, e.g., wheat in the Meerut
District, wheat, cotton and barley in Plathras, cotton and
gram in Agra. In each market there is a code of conven-
tions which governs these transactions but which in many
cases do not result in fair play to all the interests concei'ned
specially wihere one section exercises a pi'edominant in-
fluence over others. The Chambers of Commerce of these
places are trying to revise these rules.and to bring about
some sort of regulation of future trading. In the Hapur
and Ghaziabad markets, the Chambers of Commerce allow
dealing in every kind of grain but members are not permitted
to deal wilh non-members except as commission agents.
Every transaction flias to be put on record by both the buy-
ing and selling members or if one or both the parties are
non-members, by its member-Arhti and the other party or
by their member Arhti and the broker, whose intervention
is inevitable. The broker is usually licensed by Die Cham-
ber and he records the deal in a quadruplicate note book
printed by the Chamber and all the parties to the dc,al sign
the entry in the note book whicli is later on counter-signed
by the secretary of tlie Chamber. Copies of the form are
given out to the jiarties concerned and one of it is kept on
record in the Chamber. These Chambers arrange for arbi-
tralion in cases of disputes. Two arbitrators arc selected
by the parties from amongst the members of the Chamber
and if they differ, the President of the Chamber nominates
a third member as umjure whose award is fn>al. The Asso-
ciation at Jullundur appoints committees of arbitrators to
settle disputes. The"charges levied by the Punjab Chambers
are quite moderate.
 FUTURE TRADING 187

Commission Brokeage Charity Total

Ainrilsar 0—2—0 0—8—9 0—0—9 Rs. 0—11—6
JuIlundLir Trading
Co. Ltd. 0—5—0 0—5—0 0—1—0 Rs. 0^11—0
They also lay down the qualities of grain which would
he accepted for "futures" contracts. Amritsar does not
accept weevilled wheat but Lyallpur accepts it in June July
upto i per cent, subject to a discount of Re. 1 per cent. At
Jullundur, "both red and white wheats are tendered but in
case of a mixture of the two, one must not be less than 70
per cent, of the whole."*

The unit of every forward contract (Badni Sauda) at

Hapur is 25 tons (68 mds.) or multiples of that and both the
buyer and seller have to make deposits with the Chamber as
cover and pay a commission of one anna to it for every
Sauda of 25 tons. At Ghaziabad the cover is lower but the
Chamber's commission rate is four annas. The maximum limit
for transactions varies from 1500 tons at Hapur to 60 deals of
000 maunds each at Ghaziabad, but as there is no bar to one
dealer's carrying on transactions in another firm's name, this
maximum does not exercise any effective check to over spe-
culation. At Amritsar, the largest futures market in the
Punjab the unit of transaction is 500 maunds while in
Jullundur it varies betw^een 100 to 250 maunds. The mini-
mum which a dealer has to deposit as margin money at
Amritsar is Rs. 100 per contract, at Jullundur, Rs. 50 but at
Lyallpur it is eight annas per maund of wheat.

Most of these transactions are settled in terms of differ-

ence and the amount of cover has to be maintained by
making extra payments or refunds according to the fluctua-
tion in the prices. This amount is settled weekly if the
difference in the price is small, e.g., below 4 annas, but if it
exceeds 4 annas, it must be made good within 24 hours.
The cover is refunded when the transaction is finally closed,
*I. Mahendru—Some Factors Affecting the Price of Wheat in
the Punjab (1937) p. 50,
188 AGRICULTURAL MARKETING

"but if the parly making some profit has no faith in the

credit of the defaulting one, the former may secure its pro-
fit from the "cover" amount of the latter by applying to
the Chamber up to the noon of the fourth day after the
settlement of the transactions when the parties become first
entitled to withdraw their deposits. This practice of deal-
ing in differences no doubt saves the parties from the
trouble of actual handling and delivery of the produce and
thus increases the volume of business but it has a tendency
to lead on to excessive trading as large transactions can be
carried on if the merchant has enough capital to be able to
pay only the possible adverse difference.

Forward contracts commence about 4 months before the

•months in respect of which they are entered into, e.g., in
I Hapur they are dealt on the second Badi of the months of
Jaith, Savan, Mangsir and Maha and at Ghaziabad the
months are Jaith, Bhadeo, Mangsir and Maha and contracts
for these months have to Be entered from the twelfth Sudi
of Poos, Baisakh, Savan and Kartik. It is not required
for Badni Saudas that they should be completed only in the
month for which they are entered into or that the entire
contract sould be settled as the parties concerned may have
transferred their respective liabilities to others before the
date of maturity, "thus the sellers and purchasers change,
distributing among themselves the risks of speculation, the
brokers and member arhtis all the while earning their
brokerage and commission."*

Where the transaction has to be settled only by the deli-

very of the goods, the seller has the right of delivering on any
date within the 25fh of thg' month when it is due or the
buyer may require delivery between the 16th and 27th of
the month. In case the seller fails to make delivery in
time, the buyer may buy in the market an equal amount on

*In the Punjab, "the final date of delivery of wheat in

each market is the last date of the Bikrami calendar month."
—I, D. Mahendru—"Some Factors affecting Prfce of Wheat,"
 FUTURE TRADING 180

the sellers' account and any loss incurred on the transac-

tion has to be made good by the defaulting seller. The
delivery is made through Khattis or in the case of goods
from other markets through Kothas. The delivery of a
khatli is made by the transfer of the Langot or a memoran-
dum giving full details of the Khatti, and where the grain
in the Khatti exceeds the contracted quantity the extra
amount is charged on the market rate of the day. Where
non-members are parties. Khattis are transferred unopened
and this keeps the door open to fraud. The member—arhti-
takes delivery on behalf of a non-member but does not make
any entry about the quantity in the Khatti and when he
sells it on his behalf he delivers a Khatti weighing about 100
maunds more or less than the Khatti he actually received
according as prices have varied during this period and on
delivery he enters the weight of the Khatti in the account of
the client thus making for himself illicit profits. Where
the difference is not paid or the delivery is taken within the
presci'ibed period, the Chamber has to complete the transac-
tion by selling the goods at the settlement rate (Mitti Bhao)
fixed by the Managing Committee on the last day of the
month, Keen speculation goes on in fixing this rate and many
dealers try to manipulate this rate to their favour.

Bull and bear operations known as Kharid ki Saude

and Bech ki Saude are very common. Where the prospect
is of a rise in prices in the near future, the speculator goes
on buying futures and if his forecast proves true he pro-
ceeds to take deliverj^ and sell at higher prices, thus making
a decent profit. These speculators or bulls are called Teji-
wala and their Kharid ki Saude transactions result in pushing
the prices up. On the other hand if he is of opinion that
prices are likely to fall he sells up the futures and if the
prices go down he will buy af the lower price and deliver
what he has contracted to sell at the higher price. Tliese
Bears or Mandiwalas try their best push prices down. By
the creation of an artificial demand or supply in the market
these transactions serve the purpose of moderating the pre-
cipitate rise or fall in prices. Thus the course of trade is
made smooth and free from jerks, but as jri these markets.
100 AGRICULTURAL MARKETING

expert speculators are few and the forecasts are often not
l)asecl on sufflcient data, the results of speculations are not
always happy to the parties themselves or to the market as
a whole.

Where the speculator has no confidence in his forecasts

and does not want to undertake the risk of loss beyond a
certain limit, he takes recourse to "Options" or Saudas of
Tcji, Manda or Manrana by which his liability is limited to
the amount of premium paid for securing the Sauda while
the chance of profit is without limit. These Options are
not officially recognised by the Chamber and transactions
are carried on brokers' Arhties. In the Teji Sauda or Call
Option the speculator anticipating that prices will rise within
a short period secures through anArhti an Option to buy
within the stipulated period by the payment of a premium
which depends on the length of the period, and tone of the
market. If prices rise higher than the level anticipated by
him, he exercises his option to buy and sells at the higher
rate, but if prices do not come up to his expectations or
actually fall, he will not exercise his option and lose the
premium. Nazrana is the double option to buy and sell and
this is taken recourse to when the market is uncertain and
no definite forecast can be made.

Unregulated speculation in these markets has produced

beneful results in many cases by increasing the number and
magnifying the range of the fluctuations in local prices. This
becomes all the more evident when the leading dealers of
the locality attempt to tamper the market by making large
sales and purchases, unwarranted by future conditions.
"In order to trap other Arhtias, the leading Artias,often
make fool of others. Because of their purchasing an ex-
ceedingly large stock of wheat they put other Artias into
difficulties. They go on storing wheat in every Mandi. On
the other hand, most of the Artias go on contracting Satta
bargains and w^hen the delivery time comes they are unable
to supply the buyers and thus have to suffer a heavy loss.
 FuTUUK TRADING 191

So llicy depend upon big Arhtiyas who are the sole owners
it{ the slock and who begin to release it on higher rates".*

In the Jute trade, future transactions are carried on in

(1) a few Exchanges called Baras which have the semblance
of organisations run on approved principles but which ulti-
jnately degenerate into gambling centres There are separate
Jiaras for loose Jute and Hessian (2) in well organised bodies
like the East Indian Jute Association. In the former, the
formal written contracts are made out although the transac-
tions are noted in the books of the parties concerned.
Delivery of goods rarely takes place and on every Saturday
the Bhutan or rate is settled on the basis of which differences
are paid on the following Monday. The unsatisfactory
nature of the transactions which are noticed in these ex-
changes malies tlie case strong for a well organised institu-
tion which will secure for the trade in general the benefits of
future trading. There is a volume of opinion which is
against the organisation of a future market as Jute was a
monopoly of Bengal and such a "market was not only un-
necessary but was harmful to the interests of trade as an
encoviragement to overtrading and violent fluctuations xmder
speculative influence." The Calcutta Baled Jute Shippers'
Associations had even pointed out that "over a long period
of years the only really healthy period which could be called
to mind, as enabling the Baling community to conduct a
normal simultaneous export business at a profit, had been
the interval which had elapsed between the suspension of the
old futka market and the opening of the new futures market
under the auspices of the East India Jute Association."
When it is considered that Jute is liable ordinarily to wide
Ihictuations in price and with a view to prevent this, it is
nccessarj' to secure a continovisly liquid market where large
scale business can be carried -without much disturbance to
prices, the hollowness of the objection will become patent.
The monopoly character of Jute is being assailed in various
directions by the development of substitutes. The petty

*(A. Hamid—Wheat'Prices in India: Agriculture & livestock

v l l l p. 268.
192 AGUICULTURAL MAKKE'IING

grower of Jule is so disorganised and ignorant of market con-

ditions tliat he is compelled very often to sell at very low
prices, thus he derives very little advantage from the Bengal
monopoly. On the other hand the existence of a well
organised future market would supply him with useful in-
formation about the trend of world prices besides making
the market steady for him. Among the organised markets
the East Indian Jule Association is the most important.
Though the Association provides for delivei-y in its written
contracts, as a matter of fact the actual delivery is barely
one per cent of the transactions. It is claimed that this
Association enables speculators to create an artificial demand
and oilers better prices to the cultivator ultimately and also
that it provides hedging facilities to the trade, particularly
the sale of futures against the purchase of loose Jute in the
actual market or their holding of pukka bales. There is no
doubt that some amount of hedging purchases are made in
the Association by the Shippers but the fact, that the rate
for future delivery in the Association is higher than the ra((
in the Calcutta Baled Jute. Association due to the uncer
tain period for which the seller has to hold the Association
Jute as against a definite period laid down in the contract of
the Baled Jute Association, goes a long way towards making
the facilities unreal. These Fatka or speculative operations
benefit only a section of the growers when prices rise as only
those who are compelled to sell get some advantage while
others who hold up in the expectation of a further rise do
not. In the same way when the Fatka prices fall and this fall
is reflected in the ready price also the growlers who being
apprehensive of a further fall, hasten to sell up, suffer
losses. Thus as Dr. J. C. Sinha has pointed out that "if it
is correct lo say that the raiyats as a body get the advantage
ol fatka prices, it is equally correct that as a body they suffer
when the prices fall".* The only remedy therefore is to
develop the future market organisations on sound lines so
as lo contribute to tlie maximum benefit of all parties.
With a view^ to secure this object, a Committee was appointed
by a Conference of all the Jute interests in Calcutta in Feb-

*Report of the Bengal Jute Enquiry Committee p. 59.

 FUTURE TRADING 193

riiary 1933. This Committee was of opinion that if the East

Indian Jute Association was shorn of some of its patent
defects and reconstructed on the lines recommended the
desired end would be secured. One great desideratum of
such a market should be that it must ensure to all sections
in the trade a voice is the management so as to ensure fair
dealing for all. With that object in view the Governing
Body, it was recommended, should have representatives of
Balers, Shippers, Loose Jute Dealers, Mills and Brokers.
There should be an independent Tribunal of Arbitration for
dealing with paper arbitrations while disputes about quality
should be settled by arbitrators chosen by each party. The
terms of the East India contract should be improved so as
to enable the Shippers largely to use them as hedges in the
market and it should provide for the periodical settlement of
margins and the settlement of differences. These reforms
would certainly place the contract on a firmer foundation, as
it would be representaive of all interests, and all sales and
purchases would be carried on under written and stamped
contracts and the dealers would be given the right of obtaining
delivery of the produce within a reasonable period. Another
much needed reform is to make the loose jute instead of
the pukka as the unit of transaction, as with the latter it is
not possible the growers directly to participate in the benefits
of this market but this reform must wait a proper stan-
dardisation of the grades of loose Jutes. Even in the case of
Baled Jute the unit of transactions fixed by organisations like
the East India Jute Association is as high as 250 bales which
restricts the scope of its operation to the bigger ryots only,
With a view to enable the smaller ryots also to share in the
benefits of futures market organisations the Calcutta Jute Ex-
change was started in September 1936 with 50 bales as the
unit of transactions. It is hoped that "the level of this unit
will keep all and sundry speculators away from the market,
and at the same time as it is not fixed too Kigh it would meet
the needs of small dealers."

In Cotton, the East India Cotton Association was era-

powered by Act XIV of 1922 as the sole authority for con-
trolling all forward dealings. This Association has intro-
194 AGRICULTUKAL MARKETING

ducecl many reforms in the terminal market at,Bombay. By

the provision of "On" Allowances upto two above the basic
grade, the production of cleaner and better cotton has been
stimulated. Yet the Act of 1922 was not stringent enough to
prevent the development of rival Associations or to check
the conclusion of contracts which contravene the byelaws of
the Association. The Association is divided into six elec-
toral panels consisting of Millowners, Exporters, Importers,
Commission Agents, Jethavalas and Brokers. Each panel
elected a Representative Committee of fifteen members of the
panel and these Committees formed the General Body of
the Asssociation. Each Committee further elected two Direc-
tors, one European & one Indian. This Constitution gave
greater importance to sectional interests and promoted a
compartmental outlook. The Cotton Contracts Act Com-
mittee of 1930 recommended that the Board of Directors
should recognise only two sections, viz the buyers and the
sellers, hence the millowners and the exporters should be
grouped into the buyer's section while the others would form
the sellers group. In the Board also the grower's interest
should be looked after by two Directors nominated by the
Government. Uader the Bombay Cotton Contracts Act of
1932 the Government has been given the right of recognising
and witholding recognition of the Association and of super-
vising the working of its Board of Directors.

In Liverpool there is no useful Hedge contract for Indian

Cotton, and as the major portion of cotton trade in
Europe is even now conducted on the basis of American
prices either on call or fixed, exporters of Indian cotton arc
very much handicapped in comparision to the exporters of
American cotton. One section of traders are of opinion that
jthe Bombay Hedge contract should be based on the Liverpool
contract under which any quality of American cotton, if it
is of fair staple or better, may be tendered provided it is not
lower in grade or value than Low Middling. The great merit
of the Liverpool Contract is that as it is wide enough, corner-
ing is not easy and the possibility of undue depression is also
avoided as spot rates very often stand at a premium over
contract rates.
 FUTURE TRADING 195

Bombay hedge contracts are of various types. The East

India Cotton Association recognises five permissible con-
tracts; (1) Fully good M.G. Bengal Contract including cotton
of the U. P., Punjab, Sind and Rajputana. (2) Fully good
M. G. Broach Contract including cotton of the following des-
criptions—Broach, saw-ginned Dharwar, Punjab American,
Surat Navsari, Rajpipla, Dholleras, Kalagin, Cutch and Kadi
Viramgaum. (3) Fine M. G. Oomra Contract including cot-
ton from the C. P., Berar, (4) Fully good M. G. Oomra Con-
tract including cotton from the C. P., Berar, Khandwa,
Burhanpur, Khandesh and Kathiwar (5) Good M, G.
Southern Contract including Westerns, Northerns (excluding
"Red"), Bijapore, Cambodias, Tinnevellies and Karumgan-
nies. It is not at all easy to convert this large variety of
contracts to a single Hedge Contract on the Liverpool model
and the only possible reform lies in broadening the basis of
the contract. The Cotton Contracts Committee suggested
that the Broach Contract should be retained with the addi-
tion only of the Kumpta and Upland growth of the Dharwar
District and that the existing contracts in Fine Oomra and
Bengal should be left untouched. This widening is merely
a palliative and a better plan, may be to widen the contracts
by linking them whenever possible, e.g., making C. P. no. 1
tenderable under both Broach and Oomras, while Tinnevellies
and Cambodias may be tendered vmder both Broach and
Southerns. This arrangement would tend to make the three
main Contracts, Broach, Oomras and Southerns move, more
or less, together instead of independently of one another
and Cambodias may be tendered under both Broach and
w'ould be dependent to a far greater degree on spot prices,
v.'hich should in their turn regulate automatically the differ-
ences between the contracts for tendering purposes".

There is ample scope for improvement in the system of

arbitration. At present the two parties nominate their res-
pective arbitrators and if these two differ, a third one is
chosen as Umpire, and the first two press the claims of their
respective parties. There is no wonder that this system of
arbitration does not commend itself to the upcountry mer-
chants who would prefer the settlement of disputes by a
196 AGRICULTURAL MARKETING

number of Wholetime and well paid surveyors to whom the

names of parties would not be disclosed and thus the awards
would be given on the merits alone.
 CHAPTER XII.
AGRICULTURAi: PRICES

It would not be possible to attempt here any full dis-

cussion of the theory of prices but it may be stated, how-
ever that under conditions of unrestricted competition with a
rise in prices production tends to increase and the intensity
of the desire of consumers io decrease while with a fall in
prices the supply decreases and demand rises. Thus "in
a competitive market prices constantly tend towards an
equilibrium determined on the one hand by the amount
consumers will purchase at various prices and on the other
hand by the amount that can be profitably produced at these
prices". As a matter of fact, however, the elasicity of
demand as well as the scope of the producers to change
from one product to another affect the free play of these
forces and thus exercise a great influence on prices. Under
actual conditions too the costs of production are not uni-
form for all units of the product and -vary between pro-
ducers and with varying volumes of production and ulti-
mately the price which the consumers pay determines to
a large extent the scale of production. Therefore the con-
sumer's price for a given supply sets the upper limit to the
fluctuation of market prices while the lower limit is deter-
mined by the cost of production including the expenses of
marketing. Market prices, as distinguished from normal
prices, are the actual prices ruling from day to day and they
are the result of anticipations and judgments made by sellers
and buyers about the different factors of demand and supply
in the market.

The question of prices is complicated by the fact that

any farm produce is sold at varying prices at a given time
and over a period of time, e. g., the price which the farmer
receives in his village, the price paid by the wholesale mer-
chant or by the retailer or consumer vary from one another.
The complication is further increased by the fact that the same
198 AGRICULTURAL MARKETING

commodily includes a number of varieties differing from one

another in quality, so that we get not one market price but
a series of market prices which are interrelated. With a
well developed marketing organisation where the dealer has
a choice of wholesale markets, the prices in the various
wholesale markets tend to be the same, except for differ-
ences in transport charges bvit where due to lack of suitable
transport facilities he has no such choice wide variations are
noticeable. The following table gives the average monthly
rates for wheat per maund for three months in the important
wholesale markets of the Punjab and the United Provinces

Mandi. June June August

tyallpur Rs. 2—1—9 Rs. 2—0—8 Rs. 2—0—7
Amritsar Rs. 2—4—9 Rs. 2—4-0 Rs. 2—2—9
Okara Rs. 2—1—8 Rs. 1—15—1 Rs. 2—2—1
Hapur Rs. 2—6—8 Rs. 2—7—1 Rs. 2—6—2
Chandausi Rs. 3 - 6 - 0 Rs, 3—5—9 Rs. 3-7-0

It may be mentioned here that the rates at the Karachi port

during this period varied from Rs. 1—13—3 to Rs. 1—14—4
per maund or were lower than those at any of these mar-
kets. There is a greater disparity in the prices even in the
case of the neighbouring Districts. Muzaffarpur and Patna
Districts in Bihar are situated on the two banks of
the Ganges. The following figures illustrate the difference
in prices of paddy in these Districts.

Year Patna. Muzaffarpur.

1926. January Rs. 3 5 3 Rs. 3 10 0
July Rs. 4 0 0 Rs. 4 1 0
1927. January Rs. 4 0 0 Rs. 4 0 0
July Rs. 4 2 0 Rs. 4 7 0
1929. January Rs. 3 10 0 Rs. 3 10 0
July Rs. 3 7 0 Rs. 4 6 0
1930. January Rs. 2 11 0 Rs. 2 14 0
July Rs. 3 2 0 Rs. 3 0 0
 AGRICULTURAL P^JCES 199

In the commodities wliicli do not enter into our foreign

trade the same disparity is also noticable.

Arhar.
1925. March 5 11 0 5 10 0
August 5 0 0 6 8 0
192G. March 6 8 0 8 U 0
August 6 10 0 8 0 0
1927. March 9 6 0 8 4 0
August 7 4 0 7 14 0
1928. March 8 0 0 8 14 0
August 6 11 0 6 9 0

Jowar (Great Millets)

1929 1930 (Index

Number of prices)
1873 Base year
Bellary 275 162
Coimbatore 268 232
Trichinopoly 233 178
Ahmedabad 256 200
Ahmednagar 354 254
Belgaum 174 135
Dhalia 327 200
Sural 243 200
Meerut 333 207
Mirzapur 214 133
Fyzabad 300 247

From the figures given above some idea of the range of

iiuctuations of wholesale prices may be formed. The main
reason of the frequency of these fluctuations is that
the wholesale business is very much centralised and the
merchant is in a better position to forecast the probable
changes in supply and demand and take precautions accord-
ingly. The retail prices show very little fluctuation because
the consumer is willing to pay the same price for any length
200 AGRICULTURAL MARRETING

1)1" time and looks upon any rise in price with suspicion and
the retailer is also averse to changes in the rate. He safe-
guards himself against any fluctuations by keeping a Avide
margin.
The normal relationship between tlie wholesale price and
the retail price and also between the wholesale and the
grower's prices is to a large extent governed by the cost of
marketing. The important position which the wholesaler
occupies in the chain of marketing is no "indication that they
determine what price they will pay and receive. It indicates,
rather, that imminent changes w-hich have a widespread effect
on the retail market, or in the country market, or on the
prices manufacturers pay for raw materials are usual-
ly sensed in the wholesale market before they be-
come evident to producers, or retailers or even manufac-
turers" The grower on the other hand is not so advant-
ageously placed as neither is he able to forecast nor is he in
a position to vary his production easily from season to sea-
son. With a fall in the consumer's demand and the price
he is willing to pay, there is a contraction of the volume of
business at all the intermediate stages and the ultimate
burden falls on the grower and the price he receives is cut
down. When the consumers' demand increases this is felt
back through all the factors involved and all prices tend to
rise so that the grower also shares in this increase. The
retail price is usually much higher than the harvest price.
Taking the ayerage harvest prices of rice for five years be-
tween 1922 and 1927 at six centres in Bihar and Orissa and
comparing them with the annual average retail prices for
the same period and for the same centres, the retail price has
been found to be 7.4 per cent, higher than the harvest price.
Prof. S. R. Bose, however, has pointed out that in the cases of
many foodstuffs in Bihar and Orissa, the retail prices were
lower than the harvest prices. "I have taken the harvest
prices at Patna for winter rice, wheat, barley, maize and
gram for the fourteen years 1918-31 and compared the
average prices over these 14 years with the average retail
prices at Patna over the same period with the following
results;
 AGRICULTURAL PRICES 201

Rice Wheat Barley Maize Gram

Harvest Rs. Rs. Rs. Rs. Rs.
Price .. 5.9 5.8 3.6 4.2 5.2
Retail
Price .. 5.7 5.2 3.5 4.0 4.6

He has further made an intensive study of wheat prices

at Patua for a nine year period and he has come to the con-
clusion that "the retail price of wheat is lower than the har-
vest price by more than 10 per cent, of the harvest price
while the wholesale price of wheat at harvest is lower than
the harvest price by more than 9 per cent."*

Among the other factors which play an important part

in determining prices the most important are the conditions
imder which marketing is carried on and the bargaining
capacity of the parties. Where storage facilities are avail-
able and the competition acute the prices are apt to be high
while the lack of market informaion by the primary pro-
ducers or the primary m;iddlemen may result in a lowering
of prices. The course of prices is to a large extent influen-
ced by the conditions of production in India and m foreign
counti'ies. The monsoon exercises a great influence on the
prices of all crops particularly on paddy and jute. With
the prospect of the failure of crops due to untimely rain or
scanty rainfall the prices of paddy register a rise instead of
a fall in December-January and sales contract. The follow-
ing table illustrates the effect of rainfall on prices of paddy
in Orissa: —

Year Deviation o"f Rainfall Excess of price

from normal over normal
1923 minus 7 p. c. Rs. 2.4
1924 minus 8 p. c. Rs. 3.5
1925 plus 17 Rs. 3.9
1926 plus 3 Rs. 4.0
*S. R. Bose—A Statistical Study of the Prices of Foodgrains
in Bihar and Orissa, 1861-1934.
202 AGRICULTURAL MARKETING

la the case of wheat, "stock holders at ports, when they

iound in the last month that the Punjab and the United Pro-
vinces continue to enjoy favourable weather conditions, began
to show iieenness for an early disposal of wheat, at prices
which cannot but be regarded as definitely unremunerative"'*'
Seasonal factors play a great part in causing variations in
the price of wheat. From tlie index nuinbers of wheat prices
prepared by Noel Paton basing His calculations on data col-
lected from six markets in the Punjab for 10 years we find
that the difference between the maximxun price in January-
February and the maximum price in June varies from 13 to
17 points. The rise in prices begins from September and
the rate of this rise depends to a large extent on the mon-
soon, on the faiku'e of which the acceleration may often be
by 10 per cent, ui a month. Another sudden rise is often
noticed in January when the growing crop is liable to risks
of drought and liea%^ rain.

Harvest conditions in foreign countries exercise a great

influence on the price of those of our commodities which ai'e
subject to export. The development of rice cultivation in
Siani and Indo-China is to some extent responsible for the
increase in the import of rice into India and consequent low
internal prices. While production of rice in India has
steadily gone down from 71,678 million pounds in 1931 to
62,962 million pounds in 1934, otiier countries have register-
ed a'Steady increase as the folFowing table will show: —

Production of Rice (million pounds)

Burma French Indo- Siam
China
1931 10.458 9,034 6,727
1932 12,228 9,305 8,460
1933 12,905 9,376 8,280
1934 11,282 X 8,572**
•Agriculture and Livestock in India, Vol. VIII, p. 264.
••International Review of Agriculture, Vol. XXVI, No. 3.
March, 1935.
 AGRICULTURAL PRICES 20^

The natural result of this is the competition of Siam anrl

Indo-China rice with Burma rice in the Indiau market which
however has been restricted by the imposition of an impori
duty on broken rice. The production of rice in 1934-35 Ug
fallen considerably due to poor harvests mainly in India
Japan and China with the result that the prices of rice will
show an upward lenBency, advantage of which will be taken
by Burma, Siam and Indo-China. In the case of wheat, win,
the failure of crops in the U. S. A. in 1934-35 jj bris\i demand
for Indian wheat in the European market developed an 1
prices in the Puiijab showed a marked rise. (2) Local de
mand by the mills or by the traders for despatching to othe •
inland centres is another important factor. Areas of rice pr^
duction have invariably a higher level of prices particulariv
^vherc ntsny rice mills h^ire sprifNg wp snd there is somp
competition among them. In the case of sugarcane howevei-
the existence of Mills in the vicinity has not always acted n'
an agency for stimulating prices due to the perishable nature
of the commodity and the lack of bargaining power of th
growers, hence the Government has been forced in the pro
vince of Bihar and Ihe U. P. lo interfere in laying down
minimum prices for sugarcane. In big centres flour niili
are large purchasers of wheat and their coiiipetition helr»s
to push the prices up. Cyallpur has 4 flour mills and of
the arrivals of wheal in the Lyallpur market they accounted
for 29.2 per cent, in the first week, 34.3 in the second \\^^\
40.0 in the third and 42.2 in the fourth week and the prices
at Lyallpur were 0-2-4 per maund higher thtm in the Tohn
Tek Singh Mandi which has no flour mills.*

(3) It may be admitted that in remote parts of the

country, quotations of current prices at foreign or Indian
])ort markets are not known to the illiterate producers but this
information is available at all important internal markets
and this guides the dealers in making theii- offers. The
Bengal Jute Enquiry Committee have observed in this con-
nection that "evidence is conflicting as to the extent
to which the grower receives informaion of Jute prices. Some

* Agriculture and Livestock jn India, Vol, VI][i, p. 280.

204 AGRicuLTunAL MARKETINC

say that he is completely ignorant and that he sells his fibre

for whatever the Faria or Bepari cares to offer to him. Others
believe that the raiyat has little if anything, to learn about
prices. The truth is probably somewhere between the two
points of view. It is a fact that the raiyat'is not always a
helpless dupe of the dealer. Moreover, Hats and baling
establishments are so common in the jute districts that cul-
tivators never have to go very far for information". In
wheat, Ihde Hapur market prices regulate the prices in the
neighbouring Mandis. Hapur receives by telegram the ^open-
ing prices and "tone" of the markets at Liverpool, London,
Chicago, Karachi and Bombay and this information is com-
municated to the Mandis through-an evening' daily news-
paper called the Vyapar published at Hapur. In organised
cotton markets iy<e that at Khamgaon,. the market receives
by telegram early in the morning the Bombay prices of a
few qualities of cotton like Oomras, Broach, Bengals etc.,
and these rates are posted in big letters for public informa-
tion and the "ruling rate of the day" is to a large extent
based on these rates. Increase in exports no doubt gives a
stimulus to prices in the interior but in very many cases due
to the weak bargaining power of-the primary producer and the
difficulties of transport very little of the gain accrues to him
and it is mainly shared by the middleman who have held
stocks. Thus although market information is broadcasted
fronj Calcutta and various suggestions have been made to
improve the methods for the dissemination of market prices,
it is doubtful how far the grower would be able to derive the
benefit.

(4) Speculation has no doubt a steadying influence on

prices but unregulated "Satta" trading has the tendency of
depressing the market and cause loss to the growers; as
well as to the smaller dealers. "A mature speculation is
wasteful anB disturbs the prices by allowing opportunities
for manipulations and tampering with the markets." Besides
this the price fluctuations in the world markets are magnified
by these speculative transactions in the local imarkets. Com-
paring the ready and future rates in the Amritsar wheat
 AGKICULTURAL PRICES 205

market for the month of August 1934 we find that the ready
rate was steady on eight days in the month as against 2 days
for the S a t t a ^ s u j ) rate.*
There is no doubt, however, that the influences wliich act
on ready prices affect the future prices as well. "The fol-
lowing statement summarises the co-efficients of correlation
obtained for the Lyallpur market:—**
Correlation between
Ready prices and Phagan (February—March) + 0.87
and Magh (Jan.—Feb.) + 0.87
• „ Har (June—July) + 0.51
„ Asoj (Sept.—Oct.) + 0.81
„ Maghar (Nov.—Dec.) + Q.80
It is not infrequently found that the prices of Jute
in London are lower than those in Calcutta on the
same day as the result of speculation at both these
markets as a result of which the consuming interests often
find it to their advantage to make their purchases in London
instead of establishing agencies in India.
(5) Cost of transport—Where 50 to 75 per cent, of the
growers sell their produce in the Mandis and the commodity
in question has to be transported to the ports for export or
to distant market prices, a market which is close to the
consuming centres has to pay low freight charges, hence the
prices received by the grower are relatively higher than if
the railway freight figured more prominently in the cost due
to greater distance. The lowering of railway freight exer-
cises an immediate influence on local prices by pushing them
up and stimulating movement of goods. A mere rumour
about the reduction of freights on the N. \V. Railway to
Karachi resulted in a rise in the price of wheat in the Punjab
markets by about Rs. 0—0—9 per maund.

^Agriculture and Livestock V III, p. 284.

**I. D. Mahendru—Some Factors Affecting the Price of
Wheat in the Punjab, p. 70, 1937,
206 AGRICULTURAL MARKETING

Compared' to gram, maize and other foodgrains, the

price of wheat shows much lesser fluctuation. "When the
general level of prices is high, wheat rises generally less than
would be indicated by the average deduced from the price of
wheat, barley, bajra, jowar and gram; when, on the other
hand, the general price level is low, the price of wheat does
not sink to the same extent as does that of other commodi-
ties."* This may be due to the fact that the carryover of
the stocks from year to year is much larger than those of
other grains and this has a stabilising influence on prices.
Wlieat enters into foreign trade and has a very wide market
and is thus influenced by world prices to a large extent.
Another possible explanation is the operation of tlie process
of substitution in response to changes in,Jpirice. When the
price of wlieat tends to rise, the "marginal wheat consumer",
falls back to the coarser grains, the demand for which in-
creases and the demand for wheat contracts and as a result
of this the price of wheat is to a large extent checked. As
wheat enters into the foreign trade in years of surplus the
Liverpool price to a large extent influences our home prices.
"The situation may be made dearer by imagining that the
whole wheat world is shaped like a large shallow bowl. In
"he centre at the bottom; is Liverpool. We can then imagine
itreams of wheat flowing from the great countries of surplus
iroduction towards the bottom of the bowl." In order to
;nduce this flow the price which Liverpool is prepared to pay
should be high enough and this depends ultimately on the
world supply of* wheat and the volume of the total world
demand for it. The phenomenal increase in the price of
Indian wheat in recent months clearly illustrates this. The
rise in price has been by abo^it 50 per cent, and although
prices have not yet returned to the normal average of Rs. 4
per maund, it rose to Rs. 3—7—9 on the 2nd January 1937
at Lyallpur. The increase in exports has been no less re-
markable. The approximate tonnage exported in the first
nine months of each year since 1930 was as follows; 1930—

*W. H. Myles—Sixty Years of Punjab Fooa Prices 1861—1920*

(Indian Journal of Economics 1925, p. 26.)
 AGRICULTURAL PRICES 207

190,000; 1931—18,000; 1932—2,000; 1933—400; 1934--

100,000; 1935—9,000 and 1936—200,000. We find an ex-
planation of this when we consider that the crop in Europe
in 1936 was the lowest since 1931 and was 113,000,000
bushels less than that of 1935. The North American crop
was below the 1932 level for the fourth consecutive year.
The Argentine showed a slight increase but Australia's crop
was smaller than what it was in 1932. The world's total
production, excluding Russia's, is estimated to be 100 mil-
lion bushels less than in 1935 and 356 million bushels less
than in 1933.

Mahendru's enquiry into wheat price in the Punjab

brings out the relationship between acreage and prices,
"The effect of expansion or contraction of wheat acreage on
prices continues to the two succeeding years atleast, becom-
ing more marked in the last year." The increase in the
outturn in a particular year depresses the prices of the next
two years as the co-efficient correlations between the annual
outturn and price given below show :—*

Correlation between:—
Current year's price and current year's outturn .. —0.027
Current year's price and last year's outturn . . —0.31
Current year's price and year before-last outturn .. —0.34

A study of the production and price statistics of winter

rice in North Bihar between 1923 and 1931 has produced
similar results. It must he stated, however, that from 1928
onwards there was a continuous decline in the prices which
was caused by a large number of factors, yet even before
that, the fall in the outturn from 11,28,000 tons in 1925 to
9,48,000 in 1926 was followed by a definite rise in prices in
tlie two following years while an increase in the acreage in
1929 was followed by a steady decline in prices in 1930 and
1931'.
*I. D. Mahendrii—Some Factors Affecting Price of Wheat in
the Punjab (1937), p. 69.
 CHAPTER XIII.
COOPERATIVE MARKETING
The employment of the cooperative principle for ttie
organisation of marketing and for the solution of some of
the main )>roblems arising out of it has met witli a consi-
(icrable measure of success in the West and it imfolds a new
avenue of approach towards the problem in India. It has
bceji eslimated ihat in the Untied States alone about 23 per
cent, of the total farm produce is marketed through these
co-operative organisations. Jesness estimates that "the total
annual vohniic of business of farmer's marketing and pur-
chasing organisations in recent years has been in the neigh-
bourhood of one and a lialf billion dollai's."*

In the U. S. A. the movement started as the economic

side of the farmers' fraternal associations which were group-
ed under the National Grange. With the rapid develop-
ment of large scale farming, there was a great increase in the
agricultural output and the necessity for fmding an effective
solution of the problem of marketing became imperative.
Local associations and elevator companies were started in
various parts which confined their activities to the immediate
neighbourhood. In course of time these associations have
been grouped under federations and have been able to secure
the economies of large scale marketing. Although there is
a good deal of divergence in the constitution and work-
ing methods of these centralised associations, three classes
stand out prominently. (a) The Federated Association with
groups of marketing organisations as members (b) The
Centralised Association having no intermediate link between
it and the growers (c) The Federated Exchange which is a
selling agency formed by the local associations. The South-
ern California Fruit Exchange illustrates the Federated type.
The growers first organised the local associations and these
were later on grouped into District Exchanges and they in
* Jesness—Co-operative marketing of farm products, p. 21.
 CO-OPERATIVE MARKETING 209

tlieir turn formed the Central Exchange. In this organisa-

tion, "the grower picks, the local association packs, the dis-
trict Exchange bills and the Central Exchange sells the
fruit".* The California Prune and Apricot Growers' Asso-
ciation is a purely Centralised Association with the growers
only as members who are under a district contract with it.
Associations of this type are planned by business experts and
instead of the structure being gradually built up from bottom
by voluntary effort, co-operation is usually superimposed
upon the members. The Federated Exchange, on the other
hand is the creation of local associations and has no direct
touch with the growers.
True co-operation is possible only where the growers
control the policy of the Federation through their local asso-
ciation and in this way can promote contentment and pre-
vent friction. In the Centralised Association on the other
hand, although the grower-member's vote is very important,
in many cases the Association seizes into its own hands the
right of fixation of prices and the control over standardisation
and distribution, thus reducing to the vanishing point the
freedom of the grower. In the Federation the local associa-
tions being based upon geographical divisions, are more
likely to promote the co-operative spirit than the centralised
type which has to employ various methods, e. g., propaganda
in farm bureau centres, bulletins and field agents, to keep up
the interest and ensure the loyalty of its members.
The contract binds the member to supply the Association
with the stipulated quantity of produce and at the same time
ensures the association a definite supply and this forms the
main feature of the Co-operative Marketing Organisations of
the U, S. A, By this method, disloyalty is penalised and
the supply of produce is regulated. These contracts are
usually of two .types:— (1) The Agency Contract by which
the ownership of the commodity remained with the grower
and the Association was merely his selling agent. As it was
not possible to raise funds on the pledge of the produce, on
*Mears & Tobriner—Principles and Practice of Co-operative
Marketing pp. 80.
210 AGRICULTURAL MARKETING

the basis of this contract, the more popular type now is (2)
the sale and resale contract by which the title passes on to
the association which promises him a proper share of the
proceeds of the sale. The duration of the contract may be
from one to ten years, although the short period contract,
renewable every year, is more popular. In some regions,
"Continuing" contracts are used, by which the contract obvi-
ates the necessity of renewal at frequent intervals. The
contract is automatically renewed every year unless either
party cancels it at any time between two seasons. Some
associations include the marketing contract in their bye-laws
so that as soon as a grower accepts the rules of the associa-
tion and becomes a member, he enters into a binding contract
to supply the stipulated amoimt of produce.

In the marketing of grain in the U. S. A. the farmers'

elevator companies play a great part. The earlier companies
served the community at a particular exporting point and
had very little co-operative character, but recent organisa-
tions are mainly co-operative. A novel feature of these
elevators is cash payments to the member on delivery in-
stead of payment after sale. In the U. S. A. the organisation
of grain elevators at different centres came first in the order
of development, while in Canada with her slow agricultural
expansion, the organisation for terminal marketing preceded
the country elevators. The United Graingrowers Lid. of
Manitoba after having organised their marketing at the ter-
minal end have installed a chain of country elevators through
which the supply is controlled. In recent years in the
U. S. A. the organisation of the cooperative marketing of
grain is proceeding on the Canadian model.

Co-operative development in the marketing of cotton in

the U, S. A. is of recent growth. The difficulties of proper
grading and warehousing by independent Co-operative asso-
ciations proved at one time the main causes of the failure of
efforts in this direction. In 1920 the Oklahoma Cotton
Grower's Association was organised with its jurisdiction ex-
tending over the entire State. It had no share capital and
it looked after the enlistment of members and securing of
 CO-OPERATIVE MARKETING 211

the members' produce under a seven years' contract while a

separate Association organised on a share basis arranged for
the warehousing of the members' cotton. These State
Associations have been grouped into an apex sales agency
called the American Cotton Growers' Exchange.

In the marlieting of such perishable commodities as

fruits and vegetables it was inevitable that centralisation
should prevail over local initiative. The fruit marketing
organisations of California present a wide diversity of forms
and marketing methods. In some organisations, e. g., the
Citrus growers, the local associations were federated into the
District Exchanges and the Central Fruitgrowers' Exchange.
The fruit is assembled, graded and packed in the
packing houses of the local associations. The Central Ex-
change which is organised on a share basis, employs a large
staff of representatives in different markets through whom
the actual marketing is carried on. The Central Exchange
also arranges for transportation facilities and improvement
in methods of growing and looks after the publicity work.
The success of this organisation is mainly due to careful
standardisation and proper distribution.

Before considering the scope of organising agricultural

marketing on co-operative lines in India, it would not be out
of place to make a rapid survey of the Cooperative Market-
ing in Europe. Pride of place in this survey should be
given to Denmark which has within a short time succeeded
in reorganising her agricultural economy on a cooperative
basis and has, with State aid, built up her marketing organi-
sation with the main purpose of capturing foreign markets.
Credit societies exist no doubt but Sale and Supply Societies
on the commodity basis predominate. Primary Societies are
grouped into Commodity Associations which are in their
turn federated into the Central Cooperative Council. These
Commodity Associations have no share capital but are on
the principle of unlimited liability. Every member has to
enter into a contract for marketing his entire produce
through the Association for a fairly long period and the pro-
duce is pooled before marketing. Grading and the testing of
212 AGRICULTURAL MARKETING

the produce is performed with great care and this accounts

for the ready demand which the Danish Cooperative produce
meets within the foreign marEet.
In Germany the primary credit banks in villages carry on
the sale of grain while in many parts of the country, a group
of banks pool together their resources and start grain ele-
vators. In recent years a strong centralising tendency there
has become perceptible as Central Banks and landown-
ers have started huge elevators and marketing organisations
meets with in the foreign market.

The value of international contact to the cooperative

movement is well illustrated in the development of the Wheat
Pools in Canada. The Pool was started as a war measure
and the Wheat Board was given a complete monopoly of the
marketable crop with sole powers to arrange for its distribu-
tion. The success of the Pool in ensuring a good price to
the grower gave rise to a demand for its continuance even
on voluntary lines in J923 and in course of three years, these
Pools succeeded in securing under contract 21 million acres.
Starting work without any elevators and working in con-
junction with elevator companies the Pools are gradually
acquiring elevators and other handling facilities. The Pool
has representatives in all the leading countries and 75 per
cent, of the wheat handled is exported direct. The contract
with the members is for a period of 5 years and the member
on delivery receives a part of the price, the rest being paid
on sale after the usual deductions are made. The local or-
ganisations are grouped into regional bodies which form the
•central selling agency which lays down the general sale
policy and controls the marketing organisation.

India has not many remai'kable achievements in the field

of Cooperative Marketing to be proud of. The Cooperative
Act of 1904 restricted the development only to the organisa-
tion of credit societies and its scope was not extended till
1912 so as to enable the organisation of Cooperative
Marketing, yet the emphasis on Credit Cooperation has
still continued and it was not recognised that "the
 CO-OPERATIVE MARKETING 213

question of organised marketing is of greater national

importance than tliat of rural credit. To supply cre-
dit i-equrements of the ryot is important but it is not so
much so as it is to cure the diseases from which the indebted-
ness arise."* The onesidedness of the development will be
borne out from th'e following figures representing the results
of the attempt to organise Cooperative Marketing during 18
years between 1912 and 1930.
Province Number of No. of Pri - Member- Member-
sale socie- mary socic!- ship of ship of
ties ties sale socie-
ties Primary
societies
Madras . . 73 14,552 5,261 9,77,108
Bombay .. 81 5,768 15,142 5,72,676
Bengal . , 108 23,490 31,606 7,60,184
Bihar and
Orissa 2 9,150 50 2,54,462
United Pro-
vinces .. 42 5,551 2,436 1,47,736
Punjab .. 26 20,578 4,765 6,79,616
Central Pro-
vinces 7 4,056 775 76,615
It must also be staled in this connection that a large
percentage of the credit societies grant loans to the mem-
bers of agricultural primary credit societies for trade or for
payment of reiit and other emergent expenditure with a view
to enable the ryot to hold up his crop or to market it to the
best advantage. The history of Cooperative Marketing in
India is literally strewn vilth. the wreckages of past attempts
and it is a record of faulty organisation, ignorance of busi-
ness knowledge, and general ineflSciency, which converted
in many instances seeming successes into hopeless failures,
and put a brake on enthusiasm and progress. In the midst of
these failures and general stagnation, a few bright "patches
attract attention, e. g., the Cotton Sale Societies in the
Bombay and Madras Presidencies and the Commission shops
•Central Banking Enquiry Reporl, page 726.
214 AGRICULTURAL MARKETING

of the Punjab while the failure of the first large scale at-
tempt to market Jute cooperatively in Bengal has a great
lesson for the future.
It is but natural that the earliest success in cooperative
marketing in India would be with cotton, which figures so
prominently in our foreign trade and which discloses so
wide a range of fluctuations in prices. In the Bombay Pre-
sidencj', the cooperative marketing of cotton has made great
progress in the Karnatak Division, the Surat District and
Khandesh regions which produce some of the best varieties
of cotton in Western India. The Hubli Market, where the
earliest Cotton Sale Society was started, commands about 42
per cent, of the cotton grown in the Karnatak. The factor
which may be considered to have contributed to its initial
success was the attempt to start as a seed store and to push
on the cultivation of improved varieties and the assistance it
gave through the agency of the Department of Agriculture to
the proper gradition of the raw cotton. The Society has a
membership exceeding 2,600 but it deals with non-members
also. On arrival at the Society's office, a sample is taken of
the cotton and it is weighed and a receipt is issued. The
sale takes place on the basis of the quality of this sample. In
the case of superior varieties the sale is usually by auction
and while cotton of inferior qualities is sold by private treaty.
The ginning is done in the factory of the buyers who are
agents or contractors of the Bombay firms but the Society is
making efforts to gin member's cotton with a view to supply
direct to the Bombay Mills. Member's cotton may be de-
posited in the Society's godowns oh the basis of which the
Society grants an advance not exceeding 60 per cent, of its
market price. The neighbouring Sale Society at Gadag has
a large number of rural credit societies as members which
grant short term loans to their members on condition of
marketing their crop through the Sale Society, which in its
turn also gives an advance on the security of the produce
deposited in its godown but the total credit does not exceed
75 per cent, of the market value. The Gadag society was
started in 1918 with 191 members and between 1919 and
1934 its membership has risen by 253 per cent, and thp
 CO-OPERATIVE MARKETING 215

quantity oi raw cotton sold by it by 988 per cent. The

charges realised by the society on sales are at market rates
l)ut the member is given a bonus at the end of the year on tlie
amoimt of business transacted by him.
The Iiumble beginnings at joint sale made at Sonsek in
llie Surat District in 1919 by 13 cotton growers have assumed
very large proportions and at one time the Sonsek society
extended its sphere of influence over 32 villages. In recent
years however some of these villages have been taken to form
the Talad group. The Sonsek society had in 1935 a mem-
bership of 553, a share capital of Rs. 20,000 and its average
annual receipt of raw cotton for sale amounts to 41,000
inaunds. This cotton is ginned in the Purshottam Co-
operative Ginning Factory started by this society so as to
break the monopoly of the local ginners and improve the
quality of ginning. The Factory charges Rs. 3-8-0 per bhar
for ginning wliile the market rate was Rs. 5 and it gives a
rebate and bonus on trade done and dividend to sharehold-
ers. The success of this venture has been remarkable. It
started in 1927 with a share capital of Rs. 30,000 and a loan
of similar amount and in course of 8 years it has been able
to repay the loan, and set apart about Rs. 60,000 in the Re-
serve and Depreciation Funds, while its annual profits are on
Ihe average well over Rs. 10,000.
A striking feature of the Sonsek Society is that although
tliere is a provision in its bylaws for the compulsory deli-
very of cotton to il, on the failure of which a member is lia-
ble to be fined Rs. 50 and have his shares forfeited very few
cases arise where loyalty has to be enforced. The members
have realised that it is more advantageous to deal with
the Society than with the dealers, who, no doubt give out
large sums as loans but deduct a discount of 10 per cent, be-
fore payment and cheat at the time of weighment of the pro-
duce while the Society lends, at a lower rate of interest short
term loans at Rg. 4 per acre.
A recent development is the organisation in 1934 of a
Cooperative Ginning and Pressing Society at Surat for the
purpose of ginning the cotton brought to the societies afflliat-
 216 AGRICULTUIL\^L MARKETING

ed to it and of starting ginning factories at suitable centres

where there are groups of Cotton Sale Societies. This factory
has succeeded in breaking the monopoly of the local presses
and has lowered the charge from Rs. 5 per bale to Rs. 3/4/-.
"The mosf striking fact about the Gujrat sale societies is
that the cotton is not only ginned but also graded and the
cotton of different members belonging to the same grade and
class is allowed to be pooled and sold as a lot to the buyers,
members agreeing to accept the average pool price."*

Another stage in cooperative marketing has been reach-

ed in Surat by the organisation of a Sales Union with the Cot-
ton Sale Societies and the Ginning factories as members.
The Union organises new Sale Societies, arranges for the
better type of seeds and looks after the grading of cotton,
but its main lask is to secure purchasers for the ginned and
pooled cotton of its members. The Union, by its capacity
for collective bargaining, is able to obtain good prices and
sell at the best advantage and this accounts for the rapid
development of its business. In 1931 it handled about 6 per
cent, of the cotton sold at Surat and in four j^ears its share
has almost doubled.

The Loan and Sale Societies of Madras Presidency differ

in many important details from the Surat Sale Societies men-
tioned above. The biggest Society is at Tirupur, the most
important cotton market in the Coimbatore District. Origin-
ally it was started in 1927 as an agriculturists' supply so-
ciety and gradually it undertook the introduction of Co. 2
cotton and the marketing of members' produce. It has a
membership of over 900 including 67 village credit societies.
These societies give short term loans to members on condi-
tion of their selling 1,040 lbs. of cotton per liead through the
sale society, but this rule is rarely enforced. Recently the
sale society has started a branch called the Cotton Growers'
Society which gives short-term loans to the individual mem-
bers of the \allage credit societies which are usually on the

*Cotton Sale Societies in Bombay and Madras by K. C. Ram-

krishnan, (Indian Cooperative Review, Oct, 1935.)
 Co-oi'iiiuTivE MAKKETING 217

basis of unlimited liability. The Sale Society does not under-

take to gin collon and sell it as lint. The society had in
1927 a membership of 197, share capital of Rs. 14,740, and
did business to the value of Rs. 88,000 while in 1934 the
juembership rose to 811, share capital to Rs. 20,800 and sale
proceeds to Rs. 4.04,000. Rs reserve fund amounts to
Rs. 6,700, and although it enjoys a cash credit from the
Coimbatore District Bank, it has few occasions to use it as
it is able to attract deposits at a lower rate of interest. It
cannot be denied that judged from the standard of the Gujrat
societies, this society has done very little beyond giving crop
loans to the members and acting as their selling agent. In
striking contrast to the sturdy leadership of Surat coopera-
tors and the absence of Government aid, is the amount of
spoon-feeding which the Tiruppur Society receives at the
liands of the Cooperative and Agi'icultural Departments and
recently of the Indian Central Cotton Committee.

Of the other Sale Societies the Koilpatti Society has made

a ijlienomenal progress during the past decade. Its mem-
bership has increased from 25 to 842, and the quan-
tity of produce handled has I'isen from 163 candies of
lint and 259 pothies of Kapas in 1927 to 4,823 candies of lint
and 5,335 pothies of Kapas in 1932. This Society is res-
ponsible for the marketing of about 25 p. c. of the cotton
arriving at the local market. This unique success is due "to
the type of members who compose the Society. The members
are all drawn from the well-to-do Naidu and Reddi ryots who
arc actuated by strong feelings of commimal solidarity. Fur-
thermore they are substantial ryots owning very large sized
farms. They have larger quantities to sell and can afford
lo sell Ihem leisurely"* In contrast to the success of this
society may be cited the instance of Dindigul Society mainly
composed of very small farmers. The membership is too
small being 71 in 1934 and the society handles only 3 per
cent, of the total cotton arriving at the local market. There
are 75 commission shops in the locality and they give liberal
* Cooperative Marketing of Cotton in S. E. Madras by J. S.
Ponniah—Indian Cooperative Review 1936, p. 370.
218 A«RiGULiuRAL MARKKLINO

advances free of interest and allow their clients to store their

produce in their warehouses without any charge, but they
make up their losses by clrarging very high rates of commis-
sion. The Cooperative Society charges tlie market rate of
commission without giving them the same financial assistance
during the cultivation season. "Thus it is tlie superiority
of the private marketing system that deprives the local Co-
operative Marketing Society of its business and makes its
position so small."

The most noteworthy contribution of tlie Punjab to tiie

Cooperative Marketing is the development of the Cooperative
Commission shops. When the Canal Colonies were extend-
ed and an impetus was given to the expansion oi wheat cul-
tivation there, a serious attempt was made to check the evil
practices of the petty middlemen by starting commission
shops on cooperative lines. In 1919 the first shop was
started and and now^ there are 22 handling grain amounting
to 7 lakhs maunds valued at Rs. 19 lakhs. In the Lyallpur
District about 30 per cent, of the agricultural produce is
marketed cooperatively. Tlie object of these shops is (1)
the purchase and sale on commission of the seed and other
requirements of the members (2) sale on commission of the
agricultural produce of the members (3) the promotion of
the use of improved varieties of seeds by members. Mem-
bership is drawn both from individuals and coooperative so-
cieties. Advance may be given to a member upto 75 per
cent, of the estimated market value on delivery of his pro-
duce. Attempts are made to sell at the best advantage and
the balance is paid on sale.

The rules of the shop provide for compulsion bothways,

as it is incumbent upoji the society to accept for sale all agri.
cultural produce supplied by the member, who in his turn is
also bound to deliver for sale the whole of his produce. In-
spite of the many benefits conferred by the shop, the loyalty
of the m,embers is at a discount, about 40 per cent, of the
membership does not usually deal with the shops. Among
the reasons of disloyalty as enumerated by Khan Muhammad
 CO-OPERATIVE MARKETING' 219

able t h a t most of the successful institutions are those whose

Bashir Ahmed Khan* the most important a r e : — "(1) The
indebted members do not come to the shop because they are
afraid of the vakies being set off against their previous loans
(2) those members, who are indebted to tlie broliers, are
obliged to sell to them, (3) there a r e also instances where
means of communications and methods of transport are most
important factors in marketing (4) there is discontent in some
places for failure to declare dividend or to give rebate (5)
some of the shops liandicaped themselves by investing large
sun>s in sites and buildings for godowns (6) there is the
danger of communal dissension which is the worst plague of
all."

The progress made by the commission shop is no doubt

very much great when one realises the ignorance and illiter-
acy among its members, the lack of business experience
of the management and the boycott of the local dealers. Boy-
cotts have been too frequent and for all sorts of reasons. One
society was boycotted for declaring a rebate of six annas in
the rupee. "The Jaranwala Shop was boycotted because in
the Municipal election the Changars (men who keep the grain
platforms clean) refused to vote for a candidate and were dis-
missed by all the shops in the market except the Commission
Shop." '

The shop has encouraged the petty cultivator to market

his produce himself instead of depending on the village grain
dealer for the same. It suffers, however, from several seri-
ous defects the most important of which is that it sells main-
ly to the local merchants and makes no effort to put itself
in touch with the exporters. This is inevitable as it sells
the produce of its members in separate lots and does not
pool or grade it so as to render it suitable for export. The
rule enforcing the loyalty of the members should be made
more stringent. It is a common experience that the viola-
*CQ-operaliv6 Commission shops in the Punjab by Khan
Muhammad Bashir Ahmed Khan (Indian Co-operative Re-
view. October 1935.)
220 AGRICULTURAL MARKETING

tion of these rules is usually initiated or connived at by the

members of the managing committee, who are the most in-
fluential members of the village hence some external agency
should be entrusted with the enforcement of these rules. The
Punjab Registrar notes in his Annual Report that "it is not-
clientele is composed mostly of ex-soldiers, whose common-
sense qualities, keen spirit and discipline arc factors of great
value in enterprises of this nature. The Arifwala Society's
membership is preponderingly military and that of Khanewal
very largely the same; the Renala Fauzi Union is ex.
clusively military and all these had outstandingly suc-
cessful years.'" Shah and Dawar state that all the
markets in the Lyallpur District they enquired into
had Co-operative shops. "911 cultivators returning after
making sales in markets which had such shops were
asked as to whether they had sold their wheat through,
these shops, bnt only 91 (10 per cent.) had done so and the
other 820 (90 per cent.) had sold through Arhtias." The
reasons given by these cultivators for, or against selling
though these co-operative organisations bring out into bold
relief the strength and defects of Go-operative marketing.

Reasons for Sale.

Member of the Co-operative shop .. 15.4 per cent.

Expectation of fair dealings .. 13.2 per cent.
Lower rate of Commissions and other
deductions •. 43.9 per cent.
Communal or class considerations .. 24.2 per cent.
Miscellaneous .. 3.3 per cent.
Reasons against Sale.
Ignorance of the existence of the Co-
operative shop .. 39.4 per cent.
Loans in advance not available .. 15.5 per cent.
Taken advance from Arhtia on con-
dition to sell through him .. 3.2 per cent.
Long established connection with Arhtia 28.3 per cent.
Find no special advantage in selling
through the Co-operative shop .. 2.1 per cent.
Miscellaneous .• 11.5 per c^nt,
 Co-OPEUATIVE .NFARKETINO 221

The Co-operative markeling of Jute was undertalcen in

Bengal as early as in 1924 with a view to give the grower a
better return for his labour. It was realised that the orga.
nisation of stray Jute sale societies handling small lots of
jute will not serve the purpose as the Calcutta Jute Mills
would not buy small quantities; nor would they accept any
consignment unless the quality was guaranteed. To solve
this difficulty a big scale organisation was projected and
between 1924 and 1927 as many as 10 sale societies were
started at important jute marketing centres. The total quan-
tity of jute purchased by these societies between 1924 and
1929 amounted to 1,870,000 maunds but the cost incurred
in establishment was as high as Rs. 5J lakhs and the profits
were as low as Rs. 67,000. This organisation however suc-
ceeded in securing its "C. O. .S." mark accepted as a reliable
mark in the trade and the prospects of the society appeared
to be quite favourable. The society had made an initial mis-
take in buying outright the produce of the members and
undertaking all risks from the time of purchasing and sale.
The steady fall in the price of raw jute synchronised with the
development of the Jute Society with the result that

Average Annual Price of Jute (Calcutta)

Bales of 400 lbs.

1925 Rs. Ill 9 9

1826 Rs. 98 11 6
1927 Rs. 76 6 0
1928 Rs. 75 0 11
1929 Rs. 71 4 0
1930 Rs. 50 4 9
1931 Rs. 37 5 6
a large portion of their funds were locked up in raw jute
which had to be sold up at loss. The overhead cost, which
with the expansion of business would have been quite mode-
rate now proved too heavy and all these combined to bring
on the liquidation of the societies. Thus ended the first at-
tempt to organise on a large scale the Co-operative markeling
of Jute in Bengal,
222 AGRICULTURAL MARKETING

There is no denying the fact that the Co-operative mar-

keting of jute presents greater difEculties than the
marketing of cotton or wheat. The diflficultics of transport
in Bengal and the scattered nature of the jute growing areas
make the task difficult enough while the disinclination of the
ryots to part with his produce unless he receives full value
for it and his conviction that his jute is better than the
average quality in the lot leading to disputes about the allot-
ment of his share of the price make the prospects of the
introduction of commission sale or pooling all the more diffi-
cult. It has heen suggested that the cooperative structure
should be built from the bottom upwards with the Village
Sale Society arranging for the joint sale of the produce to
representatives of balers ^^sitvng the village. This would
no doubt give the growers the benefits of the coilectivc bar-
gaining but would not lead to the removal of any
other link in the chain of middlemen. Even if the
village society gives advances to the growers against
the delivery of the produce, it will be difficult for
it to hold up the crop for a rise in prices as ade-
quate warehousing facilities do not exist, hence the profits
to the grower will not be considerable. "Cooperative So-
cieties would serve little useful purpose unless they could, by
pooling the resources of individual growers, give them the
capacity to hold the stock against a favourable market and
to sell at the best m a r k e t " * With a view to achieve this it is
necessary to build up a Provincial Wholesale Society with
the village sale credit societies as its units. The Sale So-
ciety would advance upto a stipulated percentage of the value
of the produce on delivery and the jute would be sorted and
graded by it. Any member of the Credit Society would be
given credit by his society for the value of the jute delivered
by him to the Sale Society. At the apex of the organisation,
the wholesale society would arrange for the financing of the
societies and the sale of the societies' produce and put the
village society in direct touch with mills or exporters. It
would further undertake the work of the final assortment
and bailing of the jute and give directions to the societies

^Report of Bengal Jute Enquiry Committee, p . 175,

 CO-OPERATIVE MAUKETING 223

ihrough its branches about market prices and purchases.

With a view to ensure a large supply of produce to the village
societies, which would go a long way towards securing the
sviccess of the organisation, it would be necessary to intro-
duce compulsion by legislation, making it obligatory on the
minority to sell through the society if a major portion of the
villagers have agreed voluntarily to market their produce
through it.

Gosaba in Bengal marks the realisation of the dream of

a cooperative commonwealth wliich Sir Daniel Hamilton, the
merchant—idealist of Calcutta saw some years ago. The
Gosaba settlement started its cooperative career with a num-
ber of credit societies in 1916 which were grouped under tire
Gosaba Central Cooperative Bank in 1924. After the people
had become familiar with the cooperative principles, it was
considered desirable to start a paddy Sale Society in 1922
so as to eliminate the numerous intermediate links in the
marketing chain. The Sale Society was followed by a Rice
mill in 1927. The Society had to face, in its early life, great
difficulties caused by the fall in price due to over production
in Siam and Indo-China but it has fared better than the most
of the cooperative sale societies of Bengal. It is now linked
with the Central Paddy Sale Society of Calcutta, which is the
apex organisation of the cooperative marketing of rice in
Bengal.

In Madras Presidency some progress has been made in

the cooperative marketing of paddy mainly where the bigger
ryots have agreed to join the cooperative organisation. The
Nellore Paddy Sale Society has made a special arrangement
with a private Rice mill to get its paddy milled at 8 annas per
putti lower than the market rate. The Society pays the ryot an
advance upto 60 per cent, of the market value of the paddy
deposited and supervises its milling and arranges for the
sale making an allinclusive charge of 12 annas per putti.

The membership of the Nellore Society includes 21 agri-

cultural societies and 89 individual members. The business
is well managed and the cost of management is low, yet the
224 AGiucuLTUnAL MAUKETING

profits arc quile low due to the fact that the outside mer'
chants very often undersell the society by adidterating the
famous Nellore Molagurukulu rice with inferior varieties
Ivarlakadda, Thellasamba etc.
The pettj' ryot however is not liowever benefitted mucli as
he likes to have full price on .delivery and "in milling tliere
is some incoilvenience and slight loss to the ryot handling
smaller lots than 10 putties." The Madras Paddy Sale So-
ciety started in 1934 advances upto 75 per cent, of the market
value and charges interest at the rate of 7* per cent. The
warehouse exhibits Ihe samples of the paddy in stock which
were examined by the buyers who are mainly the local rice
millowncrs. The lots are put to auction and usually the
])aymcnt is paid on the spot, but in case of a few approved
buyers, a week's credit is given. In March 1935 a confer-
ence was held at Chidambaram to devise ways and means to
develop the cooperative marketing of paddy. "The whole
question resolved into 3 main heads : the cost of transport to
the godown, provision of godown accommodation; (he care
of paddy during storage; and lastly the fluctuation of prices.
The suggestions put forth at the above conference are worth
examining. Some were in favour of godowns, say one in a ,
group of villages with a responsible man in charge of the
godown. Paddy has to be examined now and then during
the long storage. It has to be dried, aired and spread out
at short intervals. It was decided that honorary supervi-
sion was out of the question. The storage and the petty
charges would work out at 25 per cent, per annum to the pro-
duce and the conference decided that it was not a paying
proposition as the average maximum rise in price between
harvest time and July is just this 25 per cent.*"

Very recently the organisation of sugarcane growers for

Ihe efiicient marketing of their produce has been taken up in
Bihar and in the United Provinces. The objects of these
societies include (1) facilitating the sale of cane at a fair
price (2) improving the quality and quantity of the yield (3)
*T. Adinarayana Chetty: Cooperative Marketing of Agri-
cultural Produce in South India, 1935, p. 28.
 CO-OPEKATIVE M A B K E T I N G 226

lenioving difficulties of transport from the field to the factory

(4) general improvement in the economic condition of the
canegrowers. The bylaws provide for the cooption of an
outsider evidently a representative of factories on the Man-
aging Committees of the societies with a view promote better
understanding between the two parties and remove causes of
friction. Small advances are given to members but they are
recovered immediately after from the price paid for the cane.
Upto the end of 1936 in Bihar 150 societies have been organi-
sed mainly in North Bihar. Some of the leading sugar
manufacturing firms like Messrs. Begg Sutherland & Co.,
Octavius Steel & Co., Birla Brothers, Gupta Brothers, Ambalal
Sarabhai, Mahammad Hanif and others have expressed their
readiness to encourage these societies by entering into con-
tracts with them for the purchase of a certain quantity of
cane and have promised a fair rate of commission but a
large number of firms have not yet extended their support
and are suspicious of these new developments. In the
United Provinces the number of societies has gone up from
26 to 111, some of these are close to the Co-operative Sugar
Factoi-y at Biswan. The societies make advances to their
members and sell them improved "seeds" on the security of
their crops and act as the agent for the sale of the produce
to the factory. No commission is charged from the growers
but instalments of the shares are taken collecting one seer
extra per maund of cane purchased. The market price is
paid and arrangements are made tlu'ough a paid staff for
fixing the dates of supply and for organising delivery to the
factory. A new departure is the organisation of societies in
areas where there are no vacuum factories for the purpose of
making sugar by means of the open pan process.

Success of this venture will to a large extent depend on

the cooperatioii of the factories concerned and as we have
already stated this has been forthcoming to a certain degree
but it is necessary to think of some punitive provision under
which any recalcitrant factory may be penalised for wilful
refusal. The Government may encourage this movement by
giving a rebate on the excise duty to those factories who have
to buy from these societies.
5*46 AcntctrLTuKAL ^IARKETING

TJie brief survey of some of the leading cooperative or-

ganisations in India points to tlie imperative necessity for
making a more intensive effort to solve the problem. Suc-
cess in cooperative marketing would depend to a large extent
on (1) Organisation on commodity basis on a large scale,
preferably with a jurisdiction co-extensive with the area
producing that commodity as a staple crop. Small scale or-
ganisations started on locality basis will prove ineffective
owing to their inability to employ adequate staff and to con-
trol a large proportion of the supply in order to influence
the market. The success of the cotton sale societies in
Gujrat is in a large measure due to their handling a large
volume of produce. Connected with this is the problem of
restrictive dealings willi the members onlj'. Tlie associa-
tion of the private traders in the management of the Co-
operaivc Marketing Societies has been vmavoidable but should
be dispensed with as far as possible. Sale societies have
carried on transactions with non-members in almost all the
provinces but have not paid them any rebates, so that the
non-members' business has gone to increase the profits and
I'cduce the overhead charges of the society. (2) the grading
and pooling of the produce. l l i i s is required not only to
secure the cultivators proper prices on the basis of quality of
his produce but avoids causes of suspicion and dissension as
cvci-y lot sold is considered part of the whole of Ihc same
grade and the sale proceeds are pooled and distributed pro-
rata among the members. One of the main reasons for the
failure of the Jute Sale Societies of Bengal was the failure of
the societies to promote the pooling of the Jute tendered by
the uicmbers with the result tliat it had to be purchased out-
right by the society and even then the members had the feel-
ing of not havhig received proper price for their produce.
(3) Binding contracts—It is true that the sale societies
provide for llie compulsory delivery of their produce
by the members on the failure of which they can be
penalised, but as a matter of fact this rule is observed in the
breach as the members of the Managing Committee are in
many cases themselves guilty of this offence. Besides these
contracts can only be enforced under the Co-operative Act
 CO-OPEnATIVE MAnKF.TING 227

and not in the ordinary Courts and this procedure is not at

all effective. It is therefore necessary to provide for com-
])ulsion on u \Yider scale so that these liinding contracts may
be effectively enforced. (4) on the metliods of marketing.
With a large sized organisation it is possible to employ an
expert staff engaged in studying marlcets at liome and abroad,
framing marketing policies and advertising campaigns. The
California fruit growers' exchanges have created a world mar.
ket for them by developing new methods of preparation and
handling of fruits and also by successful advertising. In India,
the Tea industry is devoting the funds derived from the cess
on the exports to publicity at home and in the United States.
(5) on credit—By the provision of adequate warehousing
facilities and the grading of produce^ it would be possible to
raise funds on the basis of the warehouse receipts and give
advances to the members, so as to enable them to hold np the
produce if necessary. During the past decade. Co-operative _
Banks in many parts of India have attracted more deposits
than they could possibly invest in their credit societies. Funds
let loose from a depressed competitive world have come into
the co-operative sphere for profitable investment, but here
too the depression has contracted the normal borrowing
capacity of the members, hence the Co-operative Banks are
faced with the problem of finding an outlet for their surplus
funds or refusing to accept them and thus discouraging thrift.
These surplus funds can be utilised for giving the much need
financial assistance to the grower during the cultivation sea-
son. Already Central Banks in Madras and Bombay arc
giving loans to sale societies for short periods at low rates
of interest. In the United Provinces the Moradabad Bank
has inaugurated the experiment of realising repayments in
grain and although it incurred some losses in 1932 and 1933,
it has recently made some profits. In Burma, credit and
banking have been combined in the same society and a loan
is now given out on condition that the payment of both prin-
cipal and interest must be made only in kind immediately
after harvest. The society will sell the grain and credit the
jiroceeds to the account of the member and return to him
the surplus, if any. The refusal in the past to give any
advance except on the pledge of produce has stood in the
228 AGRICULTURAL MARKETING

way of the expansion of sale societies. It is desirable, how-

ever, for the sale societies to go further than give advances
to members for their expenses of cultivation or for market-
ing their produce, These societies should take an active
interest in the improvement of the methods of cultivation, in
the introduction'of better varieties of crops, and in the grad-
ing and pooling of produce. The Koppai Cotton Sale So-
ciety in the Nizam's Dominations has specialised in the in-
troduction of the Jaiwant variety of cotton and it has made
great progress within a short period, having secured for its
members Rs. 10 to Rs. 15 per Nag (of 168 seers) more than
the local variety called .Tawari. "There is plenty of
work to be done in the multiplication and distribution of bet-
ter seeds, in the purchase and use of manures, in the scrutiny
of the utilisation of loans by members for the above and
other purposes, in the watching of the growth of crops and
the prevention and cure of pests and above all, in securing
proper deliveries of surplus crops. The Sale Society ought
to do this if it is to survive the competition of middlemen;
as a public institution, it is bound to guard against risks; as
a cooperative society, it should be more interested in the wel-
fare of individual members".*

The future lines of development of Cooperative Market-

ing in India may well be indicated in the words of Mr. A. P.
McDougall—"Cooperative marketing is not worth doing if
existing methods cannot be improved on. If it is to be of
any real assistance to producers in India then the whole pro-
blem must be tackled on entirely different lines. The Co-
operative movement throughout India has no clear line of
advance. It is uncertain as to its future procedure with
regard to marketing because it has no clear understanding of
the goal to be aimed at; there is only one—clearing the lines
of surplus goods".**
The promotion of direct relations between the producers
and consumers in India may seem a far cry yet but a start
*Marketing Credit—K. C. Ramakrishnan—Indian Coopera-
tive Review, 1936, p. 473.
**Report of Central Bank Enquiry Commission, p. 725,
 CO-OPERATIVE MARKETING 229

may be said to have been made by the organisation of sugar-

cane growers' societies. In Europe the development of direct
trading has been retarded by the divergent political tenden-
cies of the producers' and consumers' organisations, the lat-
ter being usually dominated by the Left parties while Ihe
former are suppoi-ters of the agrarian parties holding oppo-
site vie\Vs. "These political considerations tend to slow
down enthusiasm for direct relations and to introduce differ-
ent interpretations of cooperative principles".* In some
countries however direct relations have been developed in
villages or in small towns e. g., in France rural bakeries re-
ceive the wheat of their members and return the loaves for
their consumption. In the post war period cooperative
dairies in Czechoslovakia attained a large measure of success
by supplying direct to the consumers' societies and this led
to the conclusion of an agreement between the Cooperative
Wholesale Society of Czechoslovakia and the producers' or-
ganisations.

In international trade in food stuffs in particular great

progress has been made in establishing direct relations by
national federations of societies. The English Cooperative
Wholesale Society has played a leading p a r t in this enterprise
and today as much as 8 per cent, of its imports are from
overseas" cooperative organisations. It was due to its ini-
tiative that the producers' organisations in New Zealand were
organised and the New Zealand Producers' Cooperative Mar-
keting Association Ltd. was formed the net sales of which-
rose from £1,108,000 in 1924 to £1,973,000 in 1929. Denmark
has arranged for the marketing of her bacon and butter in
England on these lines. Soviet Russia has gone a step further
by planning production for community consumption. There
production is being regulated according to consumption
and all barriers between these two have been broken down.
"Soviet t r a d e " said Stalin, "is trade without capitalists, great
or small, trade without speculators, great or small", hence
the trade is not restricted to the state trading system alone
by which the producers' organisations are brought in direct
touch with the consumers stores but the local industries,

EWorld Agriculture; an International Survey, p. 293.

230 AcRicurTunAL MARKETING

the collective farms and even the individual peasants have

been drawn into this business and profiteciing in any form is
resolutely resisted.
In India the consumers' societies have not been well
developed and organisations of the size and importance of
the Triplicane Urban Stores of Madras arc very few, hence
the development of direct trading will have to wait till the
consumers' societies, particularly in the important cities,
grow up. Attempts have however been made in some places
to link up producers and consumers if not as members of two
separate organisations but under the same organisation. The
Calcutta Milk Union is an organisation "which links to-
gether producer and consumer—so often set against one an-
other in shai'p conflict—in a harmonious relationship cal-
culated to promote the interests of both"* The unit of this
organisation is the rural milk society of the limited liability
type, which usually covers the while village. The Union
arranges for the delivery and transport to Calcutta by rail or
motor of the milk supplied by the societies." The Union
has devised very careful measures to ensure the purity of
milk supplied to its customers. The milk of rural societies
is transported by rail from collecting centres in heavily tin-
ned sterilised milk churns. On its arrival at the dairy fac-
tory, every churn is checked For cleanliness, tested for speci-
fic gravity, fat and acidity. The milk after being filtered
and weighed in the weighing scales, passes through a chan-
nel into the pasteurising coil vat where it is heated to 145' F.
and held at that temperature for 32 minutes, thereby destroy-
ing injurious micro-organisms in the milk. It is then pump-
ed on to the top of the "cooler" and is cooled down to 40' F.
From there the milk is taken into a tank which fills bottles
in the automatic bottle-filling discing and carping machine"*
The milk is supplied to registered individual customers,
hotels, Hostels and hospitals and is also sold through a num-
ber of depots and distributing centres located all over the
city. In 1935 tlie primary milk societies supplied to the
Union milk valued at Rs. 1,49,928 as against Rs. 1,69,000 in
the previous year and this decline was mainly due to the pre-
vailing economic depression.
* Cooperative Milk Societies in~Bengal by HTKTSanyarin
Cooperation in India page 178—9.
 CHAPTER XIV.

STATE & MARKETING

The unprecedented nature of the economic depression in

recent years has accentuated the hardship of the agriculturist
in all countries and the State had to intervene in various
ways willi a view to alleviate distress and to give the much
needed support to agriculture. The transition from tlie
laissez faire policy of a century ago to active participation in
trade is indeed striking and the degree of state intervention
has varied in different countries according to the financial
position of the Government concerned and the place of its
agricultural commodities in its foreign trade.

The disparity which had set in between the cost of pro-

duction and agricultural prices during the post war period
had already made the lot of the agriculturist hard when the
catastrophic fall in prices caused by the present depression
made all hopes of recovery without any extraneous aid, well
nigli impossible. "Thus in Switzerland, in 1928, the index
number of prices of farm products (1914 = 100) was 151; that
of cost of production 172. In Holland, in June 1929, the
indices (1910-1911 to 1913-1'!= 100) were: agricultural pro-
ducts 129; wages 204; all costs 163. In Sweden, in 1927-28
the index numbers (1909-13 = 100) were 143 for agricultural
products, 186 for wages and 152 for commodities brought by
the fanners. In Germany in 1928-29 all farm costs stood at
190'5 per cent, of the pre-war figure, while agricultural pro-
ducts reached only 132 per cent." Thus no wonder that by
1930-31 average prices were distinctly lower than the cost of
production in most of the countries as the following figures
will indicate.

*The Agricultural Situation in 1929-30, p. 15.

*The Agricultural Situation in 1932-33, p. 35.
232 A G R I C U L T U U A L MAlUCliTlNS

Table indicating the extent of the fall of prices below

cost of production.
Per Kilogramme Wheat Potatoes Duller Milk
Switzerland . . 0-04 fr 0-01 fr 0-43 fr 0-02 fr
Sweeden . . 0-04 Kronor 0 • 01 Kr 0-01 Kr 0,'04Kr
Finland . . 0-06 Mark x 0-60 0-03
Denmark . . 0-02 Kr O'Ol 0-36 0-02

It was but natural that in view of this disparity and the

consequent increase in the burden of agricultural indebted-
ness, State action should primarily be directed towards a
solution of the price problem. It was realised that just as
industrial labour was entitled to minimum wage, the agri-
culturist had a right to demand a minimum price for his pro-
duce and many countries went beyond this iii trying to secure
for him higher prices by various devices varying from the
raising of tariff Avails to direct participation in the trade and
even to the extent of the destrucion of produce with a view
to the redviction of stock.

Among the methods by which the State helped the agri-

culturist may be mentioned (1) Tariff protection (2)
Financial aid to Joinstock companies for effecting the pur-
chase and sale of Ihe produce (3) Valorisation (4) Cen-
tralisation and regulation of exports (o) Supporting a high
inland price by the State monopoly of sale (6) International
agreement and bilateral and multilateral treaties.

Effective barriers have been set up against the free im-

portation of produce not only by the imposition of import
duties but also by the fixation of import quotas and licensing
systems. In 1931 Czechoslovakia formed an Interministerial
Committee with a view to regulate the imports of wheat and
Hour so as to protect the interests of the home growers. This
Committee was later on replaced by the Czechoslovak Grain
Syndicate in 1932 which lays down monthly not only the
quantity to be imported and the rale of import duty to be
levied but also the countries where from they are to be pur-
chased. Belgium, in addition to Ihe raising of import duties
 STATE AND MARKETINO 233

to high levels, e. g., duty on. butter at 140 fr per 100 kilogram-
me and on potatoes in bulk at 9 fr per Kilogramme, has pres-
cribed drastic rules regulating the import of seeds and ferti-
lisers primarily with a view to check fraud but ultimately
to restrict their imports. Veterinary regulations have also
been stiffened in many countries and this has resulted in a
contraction in the imports of livestock. In 1929 Germany
started with the enforcement of a compulsory milling quota
and followed it with the inauguration of an elaborate system
of import licenses.

The Federal Farm Board was constituted in the U. S. A.

under the Agricultural Marketing Act to promote orderly
marketing, minimise speculation and stabilise the movement
of prices. The National Grain Corporation organised by the
Board acted as the selling agency of the principal co-operative
associations. Its policy of stabilising prices by lending to
the co-operative organisations on the security of produce
tendered proved ineffective and in 1930 it was reorganised as
the Grain Stabilisation Corporation and although it was able
to secure the control of 50 per cent, of the Wheat supply
of the U. S. A. its efforts at the stimulation of prices proved
a failure. The attempt of the Farm Board to stabilise cotton
prices by offering a loan at the rate of 16 cents per lbs. to
members of co-operative associations on the condition that
they would market the produce through these associations,
also proved a failure and as the stocks mounted up, the Cor-
poration was winded up. "The total loss of the United
States Government on all Federal Board marketing and sta-
bilisation schemes are estimated by Mr. Morgenthan, Chair-
man of the Board, at about 350 dollars."*

In Germany an effort was made to regulate the marketing

of rye with a view to stimulate prices and effect its better dis-
tribution within the country. The German Corn Trading
Company started the purchase of rye in the autumn of 1929
and it was financed by the State aided Com Industry and

*Results of State Trading (International Co-operative

Alliance), 1933, page 83.
234 AGRICULTURAL MARKETING

Trading Company. Rye was purchased at current market

rates and resold in an "eosined" form which has made it
unfit for human consumption. Although it succeeded in
maintaining prices at a level of 160—170 marks per ton, it
was soon burdened with a heavy stock and had to incur a
loss of £3 millions.

Price stimulation by the restriction of production has

been attempted with varying success in different countries.
Restriction proves a different undertaking where the crop is
not localised but is grown over a wide area by a large num-
ber of growers. France in January 1933 decided to build
up a safety stock of wheat not exceeding 5 million quintals.
The Government laid down a minimum price for wheat hav-
ing a specific weight of 76 kilogrammes. All over the coun-
try, Committees for the organisation and regulation of the
production and marketing of wheat have been set up and all
cultivators have to submit statements showing the
acreage under wheat with a view to enable the Government
to have a correct estimate of the position to fix the import
duties, to determine the minimum price and also to settle the
rate of extraction of flour by the millers. These measures
have given the Government ample opportunity to control the
wheat market and to stabilise prices.

Coffee is a perennial plant and although its cultivation is

more or less localised, its supply cannot be controlled at the
source by regulating the addition of a year to the acreage
already under it. Its demand for it however is also in-
clastic and a bumper harvest is likely to lead to over stock-
ing and a slump in prices. The Coffee Valorisation S'cheme
aims at the creation of an artificial equilibrium between de-
mand and supply and carrjang over the surplus crops of one
good year to the years following. The first Valorisation
scheme to be inaugurated on a large'scale was in 1905 when
a catastrophic fall in Coffee prices had taken place. In recent
years the Institute for the Permanent Defence of Coffee has
regulated the distribution of Coffee by withdrawing it from
the local market and storing the same in Government ware-
houses with the financial assistance from foreign Banks. It
 STATE AND MARKETING 235

also determines the quantity to be shipped from the different

ports. It is true that by the imposition of artificial restric-
tions on shipments an encouragement is given to the exten-
sion of acreage in other countries, yet it gives the Brazilian
Coffee planter immunity from exploitation of foreign specu-
lators and it has resulted in the maintenance of prices at a
fairly high level in recent years. In 1931 the Government
decided to increase the export tax from 10s. gold per bag of
60 kilogrammes by 50 per cent, and to eliminate 12 million
bags per year. The National Coffee Council which has re-
placed the Institute was empowered to use the fund raised
out of the Export Tax for the destruction of stock and for
the improvement in the quality of production and increase
in consumption by propaganda. Arrangements were made
with the British Coffee Corporation for extending the market
_in England for Brazilian Coffee and also for assistance in
"marketing there. By March 1933 about 950,000 tons of
coffee were destroyed and with a view to restrict the acreage
the Government issued in November 1932 a Decree prohibit-
ing the planting of coffee anywhere within the country.

Cuba affords another instance of an attempt at the stabi-

lisation of prices by crop restriction and regulaion of exports.
In 1925 the price of Cuban Sugar dropped to 2 cents and it
showed a tendency of falling further next year when the new
harvest was reaped. On the petition of the sugar planters,
the Government introduced a compulsory 10 per cent, re-
duction of the crop estimated at 5 million tons and imposed
a production tax of 5 dollars for each bag of sugar in excess
of the allotted quota. In 1926 the crop was further reduced
to 4.5 million tons and with a synchronisation of bad harvests
in Java and Europe it was expected that prices would rise
turned out otherwise as the world's consumption had con-
and crop restriction in Cuba would be effective. Things
traded and price fell to 3 cents. It was decided to support
the restriction programme by controlling the exports. In
1927-28 a Sugar Defence Commission was set up which was
not only empowered to determine the size of the crop to be
raised but also to control the distribution to foreign coun-
236 AGRICULTURAL MARKETING

tries. Alhough the Commission made a further reduction

in the crop, the prices in the New York market Gontinued to
decline owing to the import of duty free sugar and the re-
action of the New York prices on the European markets made
the efforts of the Commission to push on exports futile.
Acreage restriction was abandoned and prices fell to 1,75
cents in 1929 when a Co-operative Exporting Agency was
entrusted with the monopoly of marketing the crop. The
immediate effect of this single seller system was of course-
a rise in prices which reached the 2.5 cent level but the lack
of business knowledge of those in the management of this
Agency coupled with a marked contraction in consumption
due to the world depression have resulted in a heavy accu-
mulation of stocks and a decline in prices to 1.25 cents.
Another factor which stood in the way of the efforts of
Cuba to stabilise prices by singlehanded restriction of the
crop was the growing tendency in all the principal consum-
ing countries to develop their own resources with a view to
attain self-sufficiency. Many European countries have or-
ganised their sugar factories in cartels which fix production
quotas and selling prices. In 1931 the inability of a single
country like Cuba or Java to influence prices or to reduce
heavy stocks was recognised and an effort was made by in-
ternational action to regulate the marketing of sugar. In
January of that year the Chadbourne Restriction System was
agreed to by Cuba, Germany, Poland, Belgium and Czecho-
slovakia under which every country was to export upto the
alloted quota which was to be determined on her present
productive capacity and average exports in the past. Although
this scheme met with success in 1931 it could not prevent a
fall in prices in the next year,, caused by a heavy increase in
production in non-contracting countries.

The control of exports by state agency has been adopted

by many countries in recent years with a view to push up
prices, regulate production and improve the quality of the
produce. Argentina has set up the Grain Regulation Board
which fixes the basic prices of wheat, maize and linseed at
which it will buy them from farmers for sale to exporters.
 STATE AND MARKETING 237

Without the adoption of the familiar programme of quotas

and crop restrictions, Yugoslavia has achieved some success
in the improvement of her marketing organisation by intro-
ducing the State regulation of exports. In 1929 the Govern-
ment organised the Privileged Company for Export with the
Agricultural Co-operative Societies, the exporting firms and
the state as the shareholders and the Company was given a
large credit by the Government and the National Bank, It
undertook directly on behalf of its constituents to market
their produce and to promote better grading and standardisa-
tion. Trading in small quantities at home was left with private
traders. This Company has succeeded in raising prices at
home, e. g., in August 1931, the farmers received 160 dinars
per 100 kilogramms, at that time about three times higher
than the world price. This high price could only be paid
to the home producer by raising the price of wheat inside the
country so that the home consumer paid 240 dinars per 100
killogramms. "It is true that up to 30th June 1933 the con-
trol of wheat exports had cosl the state about 344 million din-
ars but it meant also higher prices for the farmers and the
sale of 4,623,000 quintals of the wheat grown by them."*

Without taking up the work of exporting in the hands of

the State directly, many c«mntries have adopted various
meastires to encourage exports. Italy has a surplus of about
one third of her rice produce' but it is difficult to find for it a
place in the foreign market due to the keen competition of
better situated countries. To encourage exports, the Nation-
al Rice Institute was started in October 1931 and "it was
'authofised to raise a fixed levy on every quintal of rice mar-
keted, thus forming a fund out of whicti exporters are to be
compflisated for the difference between the prices of home-
grown rice and the prices of foreign rice."** All rice growers
have to furnisH from time to time information about the acre-
age under rice arid the quantity actually harvested and these
statements are checked by local Committees. The Institute
prepares an annual estimate of the total acreage and the aver-
* Results of State Trading.
*Agricultura) Situation 1932-33, p. 235,
238 AGRICULTURAL MARKETING

age yield per acre. On every sale, the purchaser has to pay an
"agreement fee" which is fixed from time to time by the Insti-
tute and the funds so raised are used to recompense any loss
caused by exports. "While the prices of the foreign rice in
1931-32 fell considerably, the price of Italian rice rose from
62.25 liras in 1930.31 to 67.75 liras in 1931-32. The first
year's working of the Institute resulted in increasing the
returns to Italian agriculture by more than 50 million liras
in comparisan with the previous year."*
In Japan, the State has played an important part in the
development of her export trade by securing the coordination
of the firms engaged in the export trade. The organisations
started under the Export Guild Law perform the following
functions: "fixing export quantities or prices according to
markets; inspection of export shipment and enforcement of
a fair standard of quality; maintainence of the agents abroad;
investigation of new markets; advising inexperienced export-
ers; elimination of middlemen causing a reduction of sales
prices; negotiating sales for the members and direct selling to
these organisations and guaranteeing loans obtained by them
from the Cooperative Banks.
In 1931—32 Australia assisted the wheat exporters by in-
troducing a system of marketing bounties. The Govern-
ment decided to incur an expenditure of £3 millions on the
payment of a premium at the rate of 6d. per bushel on all
wheat exported or used for local consumption so long as the
market price remained below 3s. There developed a bitter
controversy about the machinery for the distribution of this
bounty and ultimately the proposal had to be modified and
a bounty was sanctioned on a flat rate of 4Jd. per bushel on
wheat without any references to the prices prevailing. Al-
though the immediate object was realised, this scheme led
to a great extension of the wheat acreage in the following
year and there was much discontent when the Government
declined to renew the Marketing Bounty.
Early in 1936 the Ceylon Government inaugurated a
scheme for securing to the cocoanut grower adequate prices
*"Made in Japan" by G, Stein, p. 133.
 STATE AND MAnKExiNG 239

and an extensive market. The area under cocoanut in Cey-

lon is more than the area under tea and rubber put toge-
ther. A cocoanut board has been established which is in
charge of the Central Sales Room. No copra or cocoanut oil
can be exported out of the country except upon production
of an export license issued by the board and this license will
not be issued unless the commodity is brought into the Sales
Room and satisfies certain requirements as to standard, qua-
lity etc. This Sales Room will enable the producer to deal
with the consumer or his dealer direct. The board will also
open a register of approved buyers and brokers who collect
copra fi'om the producers in the villages and bring samples
to Colombo on which bids are made. The Board will arrange
for the broadcasting from Colombo of market quotations and
these will be displayed at village post offices. Besides these
the Board has also inaugurated a "Use more cocoanut" cam-
paign and has allotted funds to give an impetus to those in-
dustries in which cocoanut is used as raw material e. g., liquor
and fibre industries.

A State monopoly of imports is no doubt a protective

measure but it does not cause the same amount of hardship
to the consumer as would be done by an import duty. Under
this scheme, the State purchases the entirely homegrown
crop at a price usually higher than the world price and also
imports the required quantity of produce at market price
and sells to the home millers at a price somewhere between
these two prices. The loss on the purchases of homegrown
produce is made up by the gain on imports, provided the
country normally has to depend on foreign produce for a
large proportion of its requirments. The consumer no doubt
has to pay higher prices, but the burden would be even higher
with a high import tariff. Switzerland grows about one-
fourth of her requirement of wheat and has to depend on
foreign sources for the balance. She adopted a rigid mono-
poly of wheat imports in 1922 with great success and secured
for the farmer a price about 8 francs per 100 kg. of wheat
higher than the world prices, but it proved unpopular as the
entire burden of the higher ^rice fell on the consumer of
wheat breaH and not on the whole population, hence the sys-
240 AGhlGULTURAL MABKfetiNG

tem has been modified. The Government buys homegrown

wheat at 8 francs per IGO kg, higher than the world price.
Although the Government continues to import wheat to main-
tain a national stock, imports on private account are permitted
but millers are compelled to purchase homegrown wheat in a
fixed proportion and milling premiums are granted to en-
courage them.

With almost a similar degree of dependence on foreign

imports as Switzerland, Norway has adopted an improved
system of monopoly of imports. The monopoly is under the
control of a small committee representative of all interests
concerned. It purchases homegrown wheat at 4 shillings
per 100 kg. highei' than the price at the ports and tt is sold
to the mills after being cleaned and graded. The mills can
buy imported wheat at a fixed price and the percentage of
admixture with homegrown wheat is also fixed from time to
time. Imported flour and home made flour have to be sold
at prices which are uniform throughout the country, hence
the incentive to increase the imports is not strong.

Importation certificates failed to stabilise prices in

Czechoslovakia and more effective measures were called for.
In 1931 an Inter-Ministerial Committee was formed to take up
the control of the imports of wheat. It laid down every
month the limit of imports and brought up prices of imported
wheat to the same level as homegrown wheat by levying im-
port duties. In 1932 this Committee was replaced by the
Grain Syndicate which worked under the dfrect supervision
of the Commissioners appointed by the Government and in
the determination of import quotas and prices attempt is
made to safeguard the interests of both the consumers and
the farmers,, "It Has succeeded in having a systematic pro-
cedure followed in order to regulate the imports of cereals
and milling products, its work in relation to the formation of
prices has affected chiefly those cereals and their products
of which the home production had hitherto been, at times,
insufficient, that is, wheat, flour and majze. It is owing to
the Syndicate that the prices of wheat and of maize were
 STATE AND MARKETING 241

maintained upto the time of the harvests of 1933 at a level

which underwent comparatively slight changes."*

Reference has already been to the part played by the Farm

Boards in the U. S. A. in connection with marketing. The
Emergency Agricultural Adjustment Act of 1933 was more
thorough-going and aimed at the control of production, ob-
taining higher prices for producers, orderly marketing and
sale of surplus crops. The Restriction Schemes introduced
under the act provided for compensation and while securing
minimum prices to producers efforts were made to improve
standard of quality. The agreements under the act enabled
the Government to penalise recalcitrants so as to give it a
complete hold on the market. In cotton, when the grower
agreed to reduce his acreage by 30 per cent., "he was given an
option to purchase an amount of cotton not exceeding the
amount by which his production was reduced. The pro-
ducer was to have the option to buy such cotton at the aver-
age price paid by the Secretary for cotton procured as above
described. He could exercise his option at any time upto
1st January, 1934 by paying the option price and all actual
carrying charges, or the Secretary might sell such cotton on
the account of the producer, paying him the excess of
the market price at the date of the sale over the average price
above referred to after deducting carrying charges. In no
case, however, was the producer to be held liable for finan-
cial loss incurred in the holding of such cotton. "In the
case of wheat, on the grower undertaking to reduce his
acreage by 20 per cent, or less below the 1930-32 average he
was assured the "parity price" on wheat on the quan-
tity which may be considered to have been consumed as
human food. The "parity price" was based on the pur-
chasing power of one bushel of wheat in the prewar period.
Besides this, he was given a bounty of 28 cents, per bushel
on the average production of the 1930-32 period. Vigorous
steps were taken to divert the surplus crop from the domes-
tic to the export market. A contract was made with China
imder which the Reconstruction Finance Corporation was to
^Agricultural Situation. 1932-33, p. 163.
244 AGRICULTURAL MARKETING

destruction and "it cannot said that the policy of autono-

mous price formation has generally succeeded in solving the
agricultural price problem on the markets in which it has
been applied".*

It is a welcome sign that in recent years, a more com-

prehensive view has been taken of this problem. As George
Pavlosky has remarked, "the agricultural year 1932-33 has
been partjfijjlarly remarkable for thTs tenSency towards de-
liberate co-ordination and planning of production and mar-
keting, whicBnlnkeB the agriculFural development of the
period under review of the genefal"'trend^ towards planned
economy."** Price "stabilisation is therefore tackled not as
an isolated phenomenon but as one aspect of the general pro-
blem of economic rconstruction which can only be solved by
the rationalisation of the farming organisation. Hungary
has not only entered into agreement with France, and Yugo-
slovia to secure a reciprocal perferential tariff but has brought
about a large reduclion in the railway freight and transport
charges. She has started a clearing Bureau for agricultural
products and for foreign trade. Ample protection has been
given to the indebted farmers so that they may not be easily
dispossessed of their land and steps have been adopted to
improve the methods of farming and to raise the standard
of quality. The Italian wheat programme indicates not only
the measures to limit the area and tb improve the yield by
the use of selected varieties but compulsory milling percent-
ages have been fixed, and the marketing of wheat is so re-
gulated as to build up a collective stock of wheat within the
country and arrange for the export of the surplus. Liberal
subsidies have been given for the construction and equiiJ-
ment of elevators and grain warehouses.

It cannot be denied that economic planning can produce

the best results if it is supported by international action and
this aspect of the problem is receiving greater attention in
recent years. The Lausanne Conference in 1932 realised that
* Results of State Trading, p. 87.
**Agricultural Situation. 1932-33, p. 38.
 STATE AND MARKETING 245

no solution of tlie Reparations problem could be made with-

out adopting "measures to revive the activity of trade, both
among those countries themselves and between them and
other States and to overcome the difficulties caused by the
agricultural countries of Central and Eastern Europe by the
low prices of cereals." This marks the beginning of a series
of attempts to arrive at a solution of the problem of national
economic degeneration by international action. It is true
that many of these attempts did not produce tangible results,
yet the Ouchy Convention and the Economic and Agricul-
tural Commission of the Stressa Conference impressed on
the world the need of concerted action. Although the
World Economic Conference proved abortive, the net result
of this effort was the London Wheat Agreement in 1933 in
which all the principal wheat growing countries of the world
took part. "This agreement provides for a reduction of ex-
ports of wheat by the exporting countries, applying to the
crop years 1933-(34 and 1934-35 while the importing countries
agreed not to encourage the extension of their own wheat
growing, to do everything in their power to increase the con-
sumption of wheat and when the prices of wheat have reach-
ed and maintained for a specific period a certain definite
level considered as sufficient, to begin the lowering of tariffs
and the removal of quantitative restrictions on wheat im-
ports".*
Besides these, bilateral trade agreements have been con-
cluded between different countries incorporating reciprocal
concessions in tariff or exchanges of definite quantities of
produce at favoured rates, e. g. the trade agreements be-
tween Germany and Rumania for a reduction of duties on
imports of Rumanian barley and maize. The Anglo-Danish
Agreement of 1933 provided for reciprocal reductions in the
tariff of certain commodities and for a guarantee by Den-
mark of the 80 per cent, of her coal requirements from Eng-
land. The Anglo-Argentina agreement of 1933 gave mutual
facilities to the export of British coal to Argentina and the
export of Argentinian frozen meat to England. The Indo-
Japanese agreement laid the basis for the exchange of Indian
^Agricultural Situation 1932-33, p. 50.
246 AGRICULTURAL MARKETING

raw cotton with Japanese cotton cloth. Although these

have proved successful in many cases in giving temporary
relief "in the present stage of the evolution of planned
national economics these beginings of economic re-organisa-
tion of the world through bilateral agreements between
countries complementary to each other, must not be given
exaggerated importance."*

After this survey of State aid to marketing in the foreign

countries, when we turn to India, we And that till very re-
cent times practically nothing was done by the Govern-
ment in India in this direction. The problem of agricultural
development and the amelioration of the condition of the pea-
santry has no doubt arrested the attention of the Government
from the eighties of the last century but it has been tackled
from the point of view of agrarian reform, relief of rural in-
debtedness and the introduction of better methods of farming,
while the sole assistance given to marketing was by the im-
provement in the means of communications. In the present
century while the Government failed to introduce an uniform
system of weights and measures in India, a beginning was
made to improve the quality of raw cotton by the Bombay Gin-
ning and Pressing Acts and a serious attempt was made to
develop regulated markets in the Central Provinces and
Bombay. Although our total exports represent only 9 per
cent, of the total production the conditions under which in-
ternal marketing was carried on remained chaotic and in the
world's markets Indian produce received low prices due to
its low reputation. It was left to the Royal Commission on
Agriculture to point out that—"the incentive to grow im-
proved varieties introduced by the agricultural departments
is pro tanto diminished if the cultivator fails to obtain the
fuli premium justified by their superiority over those ordin-
arily grown. Again, he has little incentive to market his
produce in the best possible condition unless that condition
is recognised in the price he gets for it."** Non-oflScial opi-
nion in the country pressed for State aid to marketing. The
•*Agriculture Situation, 1932-33, p. 53. -
**Report of Royal Commission on Agriculture, para, 398.
 STATE AND MARKETING 247

Indian Economic Conference at its Mysore Session in 1929,

discussed this problem at length and the present writer among
others, tried to impress on the public the immediate necessity
of State action with a view to promote orderly marketing. The
All-India Provmcial Co-operative Institutes Association also
formed Committees to prepare schemes for the inauguration
of Cooperative Rice and Wheat P'ools. The Central Banking
Enquiry Committee in 1931 again went into this question
from a different point of view and recommended, ^among
others, that Provincial Marketing Boards should be establish-
ed and their activities should be co-ordinated by the Imperial
Council of Agricultural Research. The construction of ware-
houses by private agencies should be encouraged and railway
receipts should be made negotiable. Suggestions were also
made for the provision of better banking facilities with a view
to place the exporter jn an advantageous positjon. The
first definite indication we had that the Government had
abandoned their policy of non-interference in agricultural
marketing, was by the appointment of Mr. A. D. Livingstone
who is one of the leading experts in the U. K. as the Market-
ing Adviser to the Government in 1934. The Provincial Econo-
mic Conference in April 1934 suggested that an intensive pro-
gramme to develop marketing facilities for agricultural pro-
ducts should be taken up and this should include propaganda
and dissemination of information' about the quality and
grades of Indian produce in foreign markets, its grading,
sorting and bulking, regulation of production on the basis of
demand, establishment of regulated markets and the intro-
duction of a system of licenced warehouses. As a result of
this a Central Marketing Board has been organised and a
large staff of Marketing Officers appointed both in the centre
and Provinces. At present the work is being carried on,
three lines:—(a) investigation into the conditions under
which the principal commodities like the cereals, oilseeds,
tobacco, fibres, fruits and animal husbandry products are at
present being marketed; (ft) Development work, including de-
monstrations of any improvements suggested as the result of
the marketing studies; (c) Assistance giving to the establish-
ment of grades and standards.
"248 AGRICULTURAL NTARKETING

Among the more direct measures undertaken by the

Government which may be said to give some relief to the
Indian farmer are the wheat import duty, the protective duty
on sugar and broken rice and the cotton tariff. The wheat
duty was required to give s'ome protection to the Indian
grower against the competition of Australia. In 1929-30
the acreage under wheat expanded in India to lOJ million
acre.s and the consumption at home averaged 8J million tons.
This along with the sudden increase in the exports Russian
wheat forced prices down and necessitated the imposition of
the import duty in 1931 which has further been extended up
to 1935 but it was reduced in 1936 to Rs. 1 per cwt. With an
increase in imports of low grade rice from Siam and Indo-
China in recent years which rose from 8,500 tons in 1933 to
58,000 in 1934 it has been considered necessary to protect
paddy cultivation in Southern India by the imposition of an
import duly on broken rice. The protection given to the
sugar industry on the recommendation of the Tariff Board
has brought about a reduction in the imports of Java sugar
and a large expansion in the acreage. The manufacture of
Gur has also increased from 27,72,000 tons in 1931 to
37,00,000 in 1934. It was however realised that the era
of prosperity which had set in was not been shared in due
proportions by the industrial interests and the disorganised
growers of sugarcane. With a view to protect the latter
and ensure to them a fair return the Sugarcane Act was pass-
ed in 1934. Under this Act, the Local Government was
em]>owered to fix from time to time a minimum price for the
purchase of cane by the factories in any notified area. Local
Cane Committees have been formed to look after the interests
of the growers and special officers have been appointed to
organise Cooperative Societies for cane-growers with a view
to increase their bargaining power.
As a result of pfotection to the Cotton industry not only
have the spindles increased from 66 lakhs to 96 lakhs and
looms from 94,000 to 1,95,000 between 1913 and 1934 but
the consumption of Indian raw cotton by the mills in India
has gone up from 20,96,016 bales in 1913 to 27,03,990 in
1934. The Ottawa Pact, the Indo-Japanese Trade Pact and
 STATE AND MARKETING 249

the Bombay EancasHire agreement also illustrate the efforts

which are being made under the leadership of the Govern-
ment to promote the marketing of Indian produce. As a
result of the activities of the Lancashire Indian Cotton Com-
mittee, England purchased twice as much Indian cotton in
1933-34: as she did in the previous year and while the total
volume of Indian cotton consumed outside India has risen
only by 25 per cent., in England the increase has been by 100
per cent. In the actual trade with Japan, India has sold
raw cotton much above her quota than she has imported.
In course of a lecture on "Indo-Japanese Trade" in Cal-
cutta, Mr. Kakitsubo, Vice-Consul for Japan pointed out that
60 per cent of tfee Japanese manufacture of cotton piecegoods
is from Indian Cotton and he urged that "by limiting the
import of Japanese cotton goods, India will be limiting her
export of raw cotton to a large extent. Japan has been for
many years the best customer for the Indian cotton growers.
In the last 20 years the average annual purchase of Indian
cotton by Japan was more than 14 million bales, i.e. 40 per
cent, of the total production of raw cotton in India. It may
not be too much to say that the living and comfort of a large
portion of the Indian peasants and Japanese indusrial popu-
lation is dependent upon the future of the Indo-Japanese
trade."

The Ottawa Trade Agreement based on a large measure

of imperial preference was passed in 1931. Although the
period of 'the working of the Trade Agreement covered abnor-
mal times when among other factors was the reversion of
some countries to the system of barter, there is no doubt that
some of our agricultural commodities gained great advant-
age. Our export of linseed to the United Kingdom has in-
creased to 3,79,000 tons in 1933-34, and 2,39,000 tons in 1934-
35. The crop of 1935 amounting to 4,18,000 was the biggest
linseed crop during the past decade and of this after internal
consumption and exports only 7,000 tons were left. Our
rice exports to the United Kingdom too showed a progressive
tendency, the exports having risen from 23,000 tons in 1933
to 45,000 tons in 1935, The same increase is noticed in the
250 AGRICULTURAL MARKETING

case of groundnuts. India exported 20 crores worth of tea

to the United Kingdom which represented 55 per cent, of
the total tea imports in the United Kingdom and over 90 per
cent, of the total exports of tea from India.

The activities undertaken by the Government in recent

years to restrict the cultivation of Jute marks another phase
in the evolution of the scheme of State aid to marketing.
Between 1928 and 1930 the Jute acreage in Bengal rose from
27,02,000 acres to 30,62,000 followed by a progressive accu-
mulation of the stock and fall in prices.

In view of this state of things, "the problem of adjust-

ment of supply to demand thus resolved itself into a ques-
tion of curtailing the crop to such an extent that the re-
dundant stocks would be brought down to their normal pro-
portions and thus prevented from exercising any prejudical
influence on the price of the fibre."* Although there was a
strong demand for compulsory restriction the Bengal
Government decided to carry on voluntary restriction of the
acreage by one-third. A large staff of special officers were
appointed to impress upon the farmers the great necessity
for restriction. They interested the educated middle Classes
in this work and with the backing of the local officials, it
was possible within a short period to approach hundreds of
thousands of cultivators scattered over a wide area and win
them over to the cause of restriction. An attempt was made
simultaneously to introduce substitute and alternative crops
for the land set free from Jute cultivation. The results were
quite favourable, and prices showed a rise, helped also to some
extent by bad weather conditions during the sowing season.
The restriction scheme is being continued with unabated
energy, but jt is also realised that this alone will not afford
a permanent solution of the problem of Jute marketing and
Jute prices. Dr. S. G. Barker in a report submitted to the
Indian Jute Mills Association recently has pointed out that

Address delivered by Mr. N. R. Sarkar on "The Problem of.

Jute at the Indian Institute of Economics on November 29,
1934."
 STATE AND MARKETING 251

competitive countries have adopted scientific metliods of

cultivation, extraction and control in manufacture. The
advance of science in other industries both competitive and
consuming will in future aggravate the Jute marketing pro-
blem. "Jute must also be able to do this by the establish-
ment of an organisation to study ways and means of con-
ferring upon either fibre or fabric characteristics which they
do not possess in the ordinary natural condition. Agencies
must be established for the intelligent anticipation of such
modifications. A critical survey of present machinery and
technique should be made of its flexibility both as regards
production and product." Now that under the new Reform-
ed Constitution, Bengal is likely to receive a larger share of
the proceeds of the Jute Export Cess, it would be possible to
utilise a portion of these funds to finance work of the type
envisaged in the Barker Report.

The Government of India have in April 1936 taken steps

to give effect to the recommendation of the Royal Commission
on Agriculture about the formation of a Central Jute Commit-
tee which will be under the control of the Government of India
and will undertake agricultural, technical and economic re-
search. Its work will include improvement of crop fore-
casting and statistics, production, testing and distribution of
impr'oved see3s, inquiries relating to banking and transport
facilities and improvement of marketing.

Success in price stabilisation can only be attained by a

proper co-ordination of all the factors involved in marketing.
Reduction in the acreage alone without the provision of the
necessary marketing facilities to the cultivator or without
the removal of some of his basic deficiencies in bargaining
power may produce some temporary effect but will not have
any permanence in it. With this object in view, Mr. A. P.
McDougall submitted before the Central Banking Enquiry
Committee his scheme of a Jute Corporation, which does not
appear tto have received suffifeient attention. He suggested
that the Corporation should be givem powers to fix prices for
the raw materials, to eliminate unnecessary costs of distri-
bution and effect all round improvement, While the capital
252 AGRICULTURAL MARKETING

would be contributed by the Provincial Governments concern,

ed, in the Board of Directors all the interests involved should
be given adequate representation. "Prices shall be fixed in ad-
vance in consultation with various interests involved. Manu-
factures and export balers shall be bound to pur-
chase all their requirements through the Corporation
at the stated price. The Corporation will be respon-
sible for all surplus Jute and shall withhold same
from the market unless for purpose which shall
not be in competition with the manufactured jute
fabric"* Co-operative societies of jute growers should
be^formed who would collect and despatch the produce to
local depots from where it would be transported to the central
depot where the final price payable to the grovv'er would be
settled. On delivery at the local Depot the grower would be
paid an advance not exceeding 75 per cent, of the value. The
Corporation would ascertain from the manufacturers their
annual requirements at the beginning of the season and they
would be under an obligation to buy the amount specified.
It is however doubtful how far it may be possible to ascertain
the requirements of manufacturers at home and in foreign
countries and more so to hold them to their promises, but
tKe scheme on the whole points to the need for a definite
lead by the Government in this direction. A minimum
price may be fixed for the jute at which the Corporation will
buy^from the growers \he funds for which may be derived
from the Jute Export Cess or may be raised as a loan on the
security of the Cess revenue. After this the Corporation will
utilise the existing channels of trade and stand as a dominat-
ing factor in competition.
The future of agricultural marketing in India will there-
fore involve a large measure of State intervention varying
from tariff protection, bilateral treaties tb the application of
science to the productive and distributive process. The in-
auguration of regulated markets, licensed warehouses, stan-
dardisation of weights and measures, grades and standards
would be as necessary as the provision of banking facilities

*Report of the Central Banking Enquiry Commission, p. 729,

 STATE AND MARKETING 253

for moving the wheels of trade and in some cases it might

be necessary for the State to adopt some of those direct me-
thods for controlling imports or developing the exports of
agricultural produce which many countries in the West have
done with success. It may, at times. Be necessary to defend
the home industries from the prohibitory action of other Gov-
ernments which used to buy our commodities and for this,
legislative retaliation coupled with scientific improvement
may be necessary. India had a fairly extensive export trade
with New Zealand in woolpacks made of Jute the exports in
1928 being valued at £147,906 and they declined in 1931 to
£58,700 but gradually rose to £102,960 in 1933 but in May
1936 the New Zealand Government have prohibited the im-
portation of woolpacks except with the special permission of
the Minister of Industries and Commerce. This step has
been taken to give assistance to the New Zealand Woolpacks
and Textiles Limited who supplied 18 per cent of Jhe Domi-
nion requirements in 1935 and the production has since then
been increased very much.
 Glossary of Marketing Terms.

Ahata—Warehouse.
AIsi—Linseed.
Arit—Commission of the Artia.
Artia, Arhatiya, Arthi, Aratdar—Commission Agent.
Artia KacHcha—Agent who acts for the seller.
Artia Kachcha Pakka—Agent who acts for buyer or
seller.
Asoj—Indian calendar month (Mid September to mid
October).
Baisakh—Indian calendar month (mid April to mid
May).
Bachat—Quantity rejected as of inferior quality.
Batta—^Discount.
Bepari—Middleman.
Bhadon—Indian calendar month (mid July to mid
August).
Bharole—Cylindrical bin with concave sides.
Bichak—Invoice.
Bikrami Calendar—Named after King Vikramaditya
and commencing from 57 B. C.
Cashiery—Charge made on account of clerical service.
Chadai—Charge for placing grain on the scales,
Changar—Market porter.
Chaudhari—Headman or Overseer.
Chaukidar—^Watchman.
Chhani—Charge for cleaning.
Chuhra—Sweeper,
 feLoSSARY OF MARKETING TERM^ S55

Chungi—Grain paid to weighman in addition to custom-

ary dues; Octroi charges.
Dalai—Broker; middleman.
Dami—Market deduction paid from the buyer.
Dara—mixed lot.
Dhalak—Customary quantity of grain taken in excess.
Dhatta—Allowance for dryage in Jute.
DHarmam, Dharmao, Dharmday—Charity contribution.
Dharmkhanda—Standard scale.
Dharway—^Village weighman,
Dheri—Charge for heaping the grain.
Dokra—Gunnybag into which unginned cotton is packed.
Doon—Wicker basket for measuring grain in Assam.
Faria—-Middleman.
Gumasta Rasum—Payment for account keeping.
Hatta—Sale by secret bidding.
Hundekari—Transport agent for fruits in Bombay.
Jachnadar—Jute sorters.
Jalap—Advance against standing crops.
Kabari—Allowances realised from sellers of Jute.
Karda, Karta—Allowance for diet.
Kasar—Charge for money changing.
Kat—Discount on cash payment in the Punjab.
Kattai—Charge for opening gunny bags in the C. P.
Khandsali—Middleman in the Gur trade in U. P.
Kharif—Autumn harvest.
Khatti, Kotha—Storage chamber.
Khatik, Khatidar—Middleman in fruit marketing.
Kolagaram—Weighment free in Madras Presidency.
Kunjra, Bagwan—Middleman in the fruit trade.
Maghar—Indian calendar month (mid November to mid
December).
266 AGRICULTURAL MARKETING

Manda—Put option.
Manda Tezi—Combined put and call option.
Mukaddam—Transport agent in cotton in Bombay.
Muthi—Quantity of grain taken in excess at random in
sales.
Ojan Sarkari—Weighment fee in Jute.
Paikar—Middleman.
Palledar—Market porter.
Palledari—Labourer's wages.
Parchhatti—Earthen vessel for grain storage.
Rabi—Spring harvest.
Rulai—Charge paid to the man who rolls grain with
hand to clean the dust before it is placed on the
scale for weighment.
Sokary—Earthen bin for storage of wheat in Attock
District.
Safari—Charge for cleaning.
Saftap ata—Bond.
Shagirdi—Fee for apprenticeship.
Sowcar, Mahaj an—Moneylender.
Tabro—Charges for weighment in Sind Markets.
Taula—^^'^eighman.
Tezi—Call option.
Tharagan—Commission agent in S. India.
Theka—Gunny bags for storage.
Tolai—Weighment fee.
Toria—Rapeseed.
Wadha—Premium.
Watta—Deduction for moisture, adulteration etc. in
cotton sales.
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258 AGRICULTURAL MARKETING

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22. A. R. Khan—^Economic Survey of Bhambu Sandila.
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39. Cheema anH Dani—Report on the Export of Man-
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40. Report of the Committee on the Improvement in
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 BIBLIOGRAPHY 259

41. L. R. Dawar—Market Practices in. the Punjab.

42. T, Prasad—Organisation of the Wheat Trade in
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43. Report on an Investigation into the Financing and
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51. N. B. Mehta—Indian Railways, Rates & Regulations.
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