Redefining the Middleman Concept
With a Model
To Meet the Cold Storage Shortage
Boosting Agricultural Productivity
Shiba Prasad Sahoo
Suraj Kumar Rath
By the end of ninth five year plan, India had emerged as the second
largest producer of fruits and vegetables in the world (worth US$ 25 billion)
And at the end of tenth five year plan, out of the expected production
about 30% (US$ 13 billion) got wasted due to various reasons and did not
reach the end consumers.
And every 1% reduction in wastage of fruits and vegetables would translate
to savings of US$ 0.13 billion.
Post Harvest Loses Pie Chart
Enough attention has been
paid at the Pre-Harvest
stage for boosting up the
levels of production by
But, Post Harvest issues
have been grossly
neglected or addressed
Problem 1: India is short by 10 million tonnes of cold storage capacity
WHY THIS REASON ?
Increasing cold storages would
save perishable food and
mitigate food crisis.
India experiences significant
price inflation due to cold
Over 90% of the cold storages
are in private sector which are
less accessible to most small
30 % of total agricultural
produce goes to waste every
20% of food grain that India
produces annually is eaten
India stores only 2 % of its
farm produce in
High operating costs &
energy expenses makes
setting up Cold Storage Units
unviable and uneconomical.
India’s food waste challenge
lies in the fact that much of
its cold chain infrastructure is
About 75 % of cold storage
capacity in India is suitable
only for potatoes.
Problem 2: Monopoly of Middlemen and exploitation of farmers
WHY THIS REASON ?
Big retailers or middlemen
commodities and create
The 60% plus margins for
middlemen have prevented
innovation in Indian retail
The agricultural sector can be
exploited by creating Job
opportunities in the
organized retail segment.
A Indian farmer gets only
28% of what the end
More than 17,500 farmers a
year killed themselves
between 2002 and 2006.
The year 2010 witnessed
overall inflation rate crossing
10% for five consecutive
Farmers are compelled to
sell their crop at whatever
price they can get due to no
safe storage facilities.
While most farmers may be
experts at production, they
often lack skills in investment
Absence of Govt.
intervention and lack of huge
Solution: Introduction of a government post replacing the middlemen in
the current system to initiate and manage the proposed
chain of low scale cold storage facilities in rural areas
Advantage Over Existing System
Will deliver more and cheaper facility than National
Centre for Cold Chain Development (NCCD) which is
a registered society working with various industry to
develop integrated cold chain in India.
About 30-35% of losses can be reduced by
transporting the freshly harvested fruits and
vegetables in refrigerated containers.
Efficient usage of these cold storage facilities due to
their location, being in the vicinity of the farms.
Generates more Govt. job in the agriculture sector.
Reduces the number of Middlemen, so some of
them might be compelled to take the role of
Suppose a block consists of 4 villages comprising of 200 farmers.
The PHM first splits them into 4 groups of 50 farmers each depending on their locations and then
sanctions the Govt. loan to install the cold storages on behalf of each group.
Each farmer group elects a chief farmer every year who represents that village and ensures
transparency in the system by acting as a link between the PHM and the farmers.
A general body is formed consisting of PHM ,BDO, investor, the Sarpanch and the elected chief
farmer of each group or village.
This body decides the cost price and selling price of the farmer's harvest after every member’s
approval with reference to various demands which at last is executed by the PHM.
This body meeting shall be held every harvesting season.
Emergency meetings may be held depending on various crisis e.g. flood, drought, pest infestation etc.
All Investors under the PHM get a Govt. license.
The license of the Investors shall be reviewed yearly, failing to meet the norms shall result in
termination of the license.
Potential investors cannot form union with their own agendas.
The Investor shall always be answerable to the PHM.
A survey of farmers ,
wastage of harvest,
distribution of cold storages
The number or size of cold
storages will depend on the
number of farmers in that
Recruitment of PHMs by the
Registration of farmers for
membership in the cold
storage facility chain.
PHM then handles the
purchase and installation of
Refrigerated Containers or
low scale Cold storages
setup through subsidized
loans by the govt.
Investors will be selected by
method of tenders by the
Implementation and Functioning
PHM (Post-Harvest Manager)
Only a person with an Agricultural degree
and with some years of experience can opt
to be a PHM.
One PHM exists under every BDO.
He is an extended member of the
Handles the accounting work of profits and
losses of the farmers.
Organizes Open Market Sale for farmers
every harvesting season.
Manages the cold storage facilities under
the block level.
Integrates farmer-consumer relationship.
Conducts interactive sessions with farmers
regarding hybrid crops ,crop rotation, soil
conservation, pest control, natural
fertilizers, irrigation, environmental
The PHM post is a state govt. job with a
monthly salary of around INR 25,000.
With monumental wastage in Indian
agricultural sector it would be advisable to
rethink seriously into the golden
opportunities which this wastage has in
store for investors in agro business in India.
They can invest on the raw material and
various requirement of the farmers.
They can also cater the needs of
transportation, maintenance & security of
cold storages .
He sells the harvest of the farmers to the
retailers and in return they get a profit %
chartered by the PHM only.
He should be a permanent resident of that
He should sponsor for organizing various
farming related campaigns.
Middlemen can turn out to be investor
owing to their position loss due to new
Farmers will pay a minimal amount as tax
for storage according to the quantity of
They can legally file a complaint if the PHM
misuses his position.
They should be aware about the current
market prices and the demand.
They should try to have higher access to the
govt. subsidies or the investor's funding.
They should try to get rid of non scientific
and haphazard forms of farming.
They shall pay back the initial loan for the
installation of the storage facilities within
the time allocated by Govt.
They should be responsible for the
safekeeping of the refrigerated containers.
The chief farmer from their respective
groups should ensure transparency in the
Role of Various Stakeholders
Govt. should deliver the initial funding
for installation and maintenance .
Investor are also a major source of
funds as per the necessities of needy
Farmers also pay a nominal value as tax
for usage of the storages.
Rough Annual Budget for a single
Annual budget for PHM =12x25,000
=3 lakhs INR
Installation budget for 4 cold storage =4x5
=20 lakhs INR
Maintenance budget for 4 cold storages = 4x0.5
=2 lakh INR
1st Year budget= 25 lakhs INR minus investments.
Following Years= 5 lakhs INR minus Investments.
The PHM maintains a recorded history of the transactions of farmers harvest and provides them monthly
bills presenting their harvest cost price, selling price and investor’s payback.
Annual auditing by the Govt. inspection team confirms the billings with the PHM’s transaction record .
Village with highest profit can be motivated by supplying them with more support and allowances.
A survey should be
conducted to show the
Difference in the wastage
and spoilage of the
Difference in the prices
for the consumers.
Differences in the profit
of the farmers.
before and after the
implementation of the
The gap between scientific know-how and field level do-
how can be minimized by technically qualified PHMs.
Fresh investment in organized retail under the PHM will
generate around 10 million new jobs in the near future.
It would open enormous opportunities and lead to
much-needed investment in cold chain and warehousing.
Will reduce waste by improving logistics, creating cold
storage to prevent food spoilage.
Improve hygiene and product safety, reduce counterfeit
trade and tax evasion on expensive item purchases.
It will increase choice and reduce India’s rampant
inflation by reducing waste and cutting out middlemen.
It will offer the small Indian farmer more competing
venues to sell his products and increase his income.
Govt. will support the funding until the
availability of sufficient investors.
They can be educated about investing
opportunities in the proposed model.
Installing cold storages run by solar cells.
Incentives like transport and housing
should be included in their job.
Convincing local people of the benefits of
the cold storage facilities.
Awareness gatherings should be
conducted by the PHMs to inform
farmers about the drawbacks.
Govt. inspection teams should conduct
random raids and take necessary steps.
Initial unavailability of sufficient
Opposition from the side of middlemen.
Some villages still don't have access to
Being qualified, some PHMs may be
reluctant to work in rural areas.
Unavailability of land for installation of
cold storage facilities.
Some farmers might be lured by existing
middlemen’s attractive offers.
Any PHM or Investor might resort to
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Energy efficiency- facilities.com