The food and Grocery supply chain

Supply chain management is of paramount importance to the food industry. The supply chain is long with in commensurate value added in terms of sorting, grading, storage and bulk handling facilities. In the Indian context, the farmers are not getting the due value for their produce. They are forced to sell their produce to the intermediaries at prices quoted by the intermediaries. At present the share of the producers in the value chain is less than 30%.

As per a study conducted while the consumer pays an amount of Rs 11.6 for a Kg of fruit the price realized by the farmers is only Rs 3.3 a Kg (28%). The trader at the village takes Rs 4.1 (35%) the wholesaler dealer takes Rs 1.7 (15%) and the retailer takes Rs 2.5 (22%). All these margins are without any value addition to the product. Studies have reported that there are 6-7 intermediaries in the supply chain for fruits and vegetables in India, as against 2-3 in the developed countries. This reduces the farm gate price and income levels.

The reasons for such distress selling are:

1) Lack of direct linkages with markets.
2) Lack of processing facilities.
3) Lack of on farm pre-cooling and value addition infrastructure (sorting, grading etc)

Lack of processing and storage facilities for fruits and vegetables result in huge wastages estimated at about 35 % of production valued at Rs 33000 Crore.

For retailers who are in the business f selling food and grocery supply of produce can be sought from the food mandis or from the Agricultural Produce Marketing Boards (APMC). The APMC consolidates the buyers and the sellers in a central place; this was done with was done with the objective of reducing time, cost and efforts. The article below focuses on the Maharashtra State APMC. While the APMC was created with good intent, a large number of agents and middlemen are also believed to be in the picture and therefore, the end price at which the goods are bought from the APMC is relatively high, but the benefits of the price is no always received by the farmer. Many companies like Hindustan Lever and retailers like Subhiksha, Food world etc. now source a substantial amount of the products required from the mandis, instead of sourcing them from the APMC.

Thus, the flow of food and grocery in many cases is as illustrated below:

Consolidator>> Commission agent >>
Traders >>
Wholesalers >>
Retailers >>

At each stage in the chain, there is an addition in terms of price and as the level increase the possibility of wastage also increases. The other important aspect of the food and grocery supply chain is the cold chain. Cold chain refers to the procurement, warehousing, transportation and retailing of food products under controlled temperatures. Cold chain is necessary to maintain the integrity of food products and retain their freshness and nutritional value.

India is major producer and consumer of a wide range of agricultural horticultural dairy meat, fish and other products. Traditionally over 35 – 40 per cent of fresh fruit and vegetables are lost due to lack of post harvest handling storage and processing facilities. Cold storage units in 1960’s were built for storage of potatoes and potato seeds. It is estimated that there are more than 3,000 cold storages in the country.

The infrastructure in the cold chain primarily consists of

1) Cold storages
2) Refrigerated carriers.


Agriculture produce means all produce (whether processed or not) of agricultural horticulture animal husbandry, pisci-culture and forests, as specified in the schedule. The APMCs were established by the State Government for regulating the marketing of different kinds of agricultural and pisci-culture produce for the same market area or any part thereof.

The Maharashtra Agricultural Produce marketing (Regulation) Act was passed in the year 1963, with a view to regulate the marketing of agricultural and pisci-culture produce in market areas. After giving due consideration to various committee’s recommendations and study groups, some important changes have been made in this Act in the year 1987 and thereof


Every market shall consist of:

1) Agriculturists residing in the market area and being 21 years of age on the date specified from time to time by the Collector in this behalf.
2) Traders and commission agents holding license to operate in the market area.
3) Chairman of the co-operative society doing business of processing and marketing of agriculture produce in the market area.


The Act provides for establishment of Market Committees in the state. These market Committees are engaged in development f market yards for the benefit of agriculturists and the buyers. Various agricultural produce commodities are regulated under the Act. At present, there are 285 APMCs with main markets and 593 sub markets.