Policy for Procurement and Distribution of Fertilizer and Agro Chemicals through Cooperatives in Punjab

Distribution Margin during 1999-2000 (provided by Markfed, IFFCO and KRIBHCO)

• The policy was again reviewed in May 2000 when IFFCO and KRIBHCO offered distribution margin at par with the margin of Markfed i.e. Rs. 295/- PMT on Urea and Rs. 430/- PMT on DAP. However, Markfed offered a distribution margin @ Rs. 400/- PMT on urea, if total supplies were assigned to them. As a result, it was decided to entrust total procurement and distribution of fertilizers through Cooperatives in the State to Markfed. This arrangement has continued for the last two crops i.e. Kharif 2000 and Rabi 2000-2001. The  during these two crops has been as follows:

Sale of Fertilizers (In Lakh Metric Tonne)

Sale of Fertilizers through Cooperatives in the State during last three years (In lakh Metric Tonne)

Source: Department of Agriculture, Punjab

• The Above Data reveals that sale of fertilizers through Cooperatives in the State has gone down after May 2000 when total procurement and distribution of fertilizer was entrusted to Markfed. Many reasons are adduced for such a decrease. These include delay in supplies, lack of adequate marketing efforts by Markfed, forcible sale of other products of Markfed including cattle feed, agro-chemicals etc. to PACS, inadequate or no infrastructure support to PACS by Markfed etc. These reasons have been given by farmers and members of PACS at various forums including Annual General Body Meetings of Markfed organised in recent past. It is observed that sale of fertilizers through Cooperatives has also gone down after introduction of Revolving Cash Credit Scheme.

Policy for Procurement and Distribution of Agro-chemicals

• While policy for procurement and distribution of fertilizers has been framed and reviewed time and again after 1986, there was no such policy for procurement and distribution of agro-chemicals through Cooperatives in the State till May 1999 when first such attempt was made. The Department made an attempt to liberalise marketing of agro-chemicals through Cooperatives. It identified major producers of quality brands of agro-chemicals and determined their prices at competitive levels. PACS were allowed to procure notified agro-chemicals through these manufacturers at given prices and margins. However, the policy of May 1999 was withdrawn by the Government on persistent objections by Markfed that it would adversely effect their production and sales.

• Thereafter, the policy was revised in May 2000 when Markfed was designated as a Nodal Agency to procure and distribute some of the popular brands of agro-chemicals including those produced by Markfed. The Government constituted a Committee chaired by FCC to identify agro-chemicals recommended by PAU and largely consumed by the farmers and determine their procurement and distribution prices.

Prices of Major Brands (Price In Rs.)

• These agro-chemicals were procured and distributed through PACS on following terms and conditions:

1. Agro-chemicals of various manufacturers as noted above, should by all means be manufactured and marketed by the same agencies;

2. Agro-chemicals should have atleast two years shelf life from the date of supply;

3. Agro-chemicals would be sold on consignment basis and unsold stock of indented quantities with PACS would be lifted back by the suppliers;

4. Both Markfed and private manufacturers would ensure supply of indented quantity of agro-chemicals. However, the suppliers would, also provide for any demand for additional suppliers over and above the indents;

5. Leakage of agro-chemicals would be at the cost of supplier;

6. Insurance of agro-chemicals would be at the cost of supplier;

7. For any complications arising due to favilure of sample at the level of Agriculture Department, the responsibility would have to be borne by the supplier for the same. RCS, Punjab would take suitable action with regard to replacement of sub-standard stock and recovery of the amount with interest;

8. Responsibility for the addition of manufacturer’s product name in the license of Cooperative Society would lie with the manufacturer;

9. The proposed rates of agro-chemicals would be FOR destination (PACS). These would be exclusive of Sales Tax as may be levied by the State Government; and

10. DRCS would ensure that a sample from each batch in every District is taken from the supplies made by manufacturer including Markfed, for testing at the approved laboratories, the cost of which would be borne by the supplier.

Total Sale of Agro-Chemicals (Quantity in Litres)

Prices of Agro-Chemicals used for Cotton (Figures in Rs. & Per Litre)

Agro-Chemicals sold during last Cotton Crop (Quantity in Litres)

• The policy for supply of agro-chemicals through Cooperatives was reviewed in October 2000 when it was reported that most of the reputed manufacturers of agro-chemicals were disinclined to supply their products on consignment basis. Therefore, the Government decided to modify the policy to the extent that Markfed was allowed to do commercial trading in identified brands of agro-chemicals. Rest of the parameters of the policy were continued as earlier.

Prices of Agro-Chemicals for Rabi 2000-2001 (Figures in Rs. per litre)

Sale of above brands of Agro-Chemicals during Rabi 2000 – 2001 (Quantity in Kgs. or Packets)

• Above detail of sale of agro-chemicals through Cooperatives indicate that despite liberalisation, desired objective of capturing additional market of agro-chemicals has not been achieved. While Markfed has been able to maintain its share of about 10% of total consumption of agro-chemicals in the State, additional supplies made through Cooperatives are only to the extent of 3-5% whereas it was intended that the Cooperatives should be able to capture 15-20% of the market in agro-chemicals. This has not happened due to various reasons including persistent apprehensions and reluctance on the part of Markfed to encourage sale of non-Markfed brand of agro-chemicals through PACS. Some of the officers of the Department had expressed these apprehensions during discussions on the policy for procurement and distribution of agri-chemicals. This has come to be true.

• During various public functions organised at village and district level for Cooperative Week Celebrations and Sangat Darshans, organised by CM, above two polices of the Department namely, to assign total procurement and distribution of fertilizers to Markfed and commercial trading by Markfed in some popular brands of agro-chemicals have come under criticism. This decision was also questioned during the last session of Vidhan Sabha through a Call Attention Motion.

• Both the policies do not seem to have achieved desired objectives. On fertilizer side, share of Cooperatives has gone down. It was 48% for urea sold during Kharif 1998 and has gone down to 41.6% during Kharif 2000. In case of DAP, Cooperative share was 45% in Kharif 1998 whereas it has reduced to 39.4% in Kharif 2000.

• There is now a persistent demand from PACS and CMSs to recast the policies as follows:

1. Procurement and distribution of fertilizers should be devided amongst Markfed, IFFCO and KRIBHCO as prevalent before May 2000;

2. Markfed, IFFCO and Kribhco should supply fertilizer to PACS. FOR destination (the Society); and

3. CMSs should be allowed to procure and distribute popular brands of agro-chemicals from private companies as may be identified by the State Level Committee, through PACS in their respective jurisdiction while Markfed may continue to distribute agro-chemicals produced by it through PACS as they used to do earlier.

• Reformulation of policies with regard to procurement and distribution of fertilizers as per (i) to (iii) above, merits consideration in case share of Cooperative Institutions in total marketing of fertilizers and agro-chemicals in the State is to be sustained and increased. Although, Markfed has been able to ensure adequate supplies and there were no shortages of fertilizers and agro-chemicals during the last two crops, they are unable to hold on or increase share of Cooperatives in fertilizers’ and agro-chemicals market in the State. They would always have a clash of interest with private producers / manufacturers in so far as supplies of agro-chemicals are concerned. They do lack aggressive marketing structures and efforts. On the other hand, PACS and their members need to be allowed freedom of choice.

• In these circumstances, it is felt that we may consider reformulation of the policies in such a way that Markfed retains its share but Cooperatives particularly Primary Cooperatives capture additional markets through liberal policy prescriptions. In case, the Government agrees to reformulation of the policies in keeping with (i) to (iii) above, necessary steps would be initiated by the Department accordingly to re-position the structures and prescriptions in a manner that revised policies become operative from the next crop, sowing for which would begin around last week of May / first week of June, 2001.