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World Bank Study
operations of freight vehicles. Agriculture and the licensing of road transport are under state jurisdiction, as are several kinds of local taxes. This necessitates checkpoints and road blocks at state borders and within states to ensure that goods on the move are permi ed to do so and that taxes have been paid. These practices result in delays and deterioration of produce and provide numerous opportunities for rent-seeking behavior. Thomas (2008) estimated that with be er roads, improved trucks, and removal of unnecessary check posts, transit time between Mumbai and Delhi could be reduced to 24–36 hours from the present 48–72 hours. Traditional Channel for Crops
Starting in the mid-1960s, every year, the government of India announces guaranteed minimum support prices (MSPs)2 for staple food grains to be paid by its agencies and companies. In the same period, the central government mandated sale of farm produce at regulated markets called mandis, with a daily auction of produce offered by farmers to registered traders, held under government auspices. Most Indian states have their own Agriculture Produce Marketing Commi ee (APMC) Acts to conduct this business. Most of the produce is packed in bags that are stored in the warehouses. Grains are typically packed in 50–90 kilogram bags, which are convenient for handling and storage. Storage facilities at farm level are poorly developed or absent when compared to major centers. Currently government agencies and parastatals are the largest entities providing warehousing, though privately owned warehousing is also available. Though it is generally difficult to have an accurate figure of storage capacity,3 there is a wide network of state-provided storage infrastructure. The estimated storage capacity in Madhya Pradesh is around 1.8 million metric tons, out of which the Central Warehousing Corporation (CWC) accounts for about a one-third of the capacity; the rest is provided by the State Warehousing Corporation (SWC). Utilization rates of the state warehouses is about 80–85 percent and as high as 90–95 percent at some locations. The state infrastructure is complemented by numerous private sector storage facilities across the state. One of the major problems faced is post-harvest losses. In India, while estimates vary, a recent review4 estimated that losses were at least nine percent of total agriculture production.5 Losses are 8–10 percent in food grains and 30–40 percent in horticulture. Most post-harvest losses take place in farm storage and the rest in the supply chains to markets in transport, handling, and storage. The bags that are widely used contribute to the relatively high losses compared, for instance, to storage in silos. Even the large government agencies report losses of around 1 percent of stocks in storage and transit each year. Traditionally, Indian farmers can either sell their produce to a trader or bring their crops to a mandi. Once farmers have brought their crop to the mandi, there is a period of visual inspection by potential buyers, followed by an open oral auction (Bowonder et al. 2002). After the price has been established, the farmers brings their produce to the weighing areas that are operated by the buying agent. At the weighing areas, the produce is bagged into sacks and weighed. With the full weight of his produce calculated, the farmer collects his payment (figure 5.7). The mandi system has numerous inefficiencies and problems. Most importantly, is that the farmers do not have information about pricing beyond the MSP set by the APMC beforehand. Therefore, farmers are not always able to sell their produce at the optimal time that would allow them to maximize their income. There are also several