A study of marketing cost, marketing margin, price spread and marketing efficiency for different channels of potato in Gujarat

Introduction

The potato (Solanum tuberosum L.) is the world's third most important food crop, following wheat and rice. A greater proportion of potatoes is directly edible compared to these staples, and it boasts higher production per hectare. This, combined with its nutritional value, highlights its significance and explains the continuous growth in potato cultivation. In India, potatoes have been cultivated for over 300 years and are a rich source of carbohydrates, proteins, minerals, and vitamins. Nutritionally, potatoes contain 22.6 percent carbohydrates, 1.6 percent protein, 0.1 percent fat, 0.4 percent crude fiber and provide approximately 97 kcal of energy (National Horticulture Board, 2019) [1] . Potatoes constitute the largest share of the country's vegetable production, making up a significant portion of the 28 percent total vegetable output, followed by tomatoes, onions and brinjals. (Department of Agriculture & Farmers Welfare, 2021) [2] . Potato cultivation in India occurs primarily in two seasons: rabi and kharif. The rabi season, from October to March, is the main growing period for potatoes. More than 80 percent of the potato crop is raised in this season. During this season, the cooler temperatures and shorter days are ideal for tuber formation, leading to higher yields and better-quality produce. The growing season can vary from 90 to 120 days, depending on the variety and climatic conditions. Main potato-growing districts in Gujarat include Banaskantha, Aravalli, Sabarkantha, Gandhinagar and Mehsana. Banaskantha is the leading potato-producing district in Gujarat, accounting for a substantial share of the state's output. The district's favourable agro-climatic conditions and well-developed irrigation infrastructure, particularly from the Sardar Sarovar Project, support high potato yields and good quality produce. Banaskantha has the largest area under potato cultivation (53548 hectare) among all potato-producing districts, with a production of 1579666 metric ton and a productivity of 29.50 MT/ha (Director of Horticulture, Government of Gujarat, 2023) [3] . The global contribution of agriculture to gross domestic product (GDP) has declined as non-agricultural activities have taken precedence. However, this shift is anticipated to support overall GDP growth. Despite its relatively smaller economic contribution, agriculture remains vital in the agroindustry value chain and the sustainable use of natural resources. Indian agriculture has witnessed significant growth over time, yet its export supply chain faces challenges such as fragmented markets, seasonal fluctuations, diversity, and environmental changes. Key issues include the prevalence of small and marginal farmers, fragmented supply chains, limited processing, and inadequate marketing infrastructure. Given the dependency of the Indian economy on agriculture, there is a pressing www.extensionjournal.com need to develop effective supply chain models to enhance efficiency and improve shelf life. Effective supply chain models in agriculture help reduce losses and wastages in fruits and vegetables, ultimately boosting farmer incomes, enhancing livelihoods, and generating employment opportunities for local communities. These improvements contribute to the overall growth of the Indian economy. The commercial value of vegetables has grown significantly due to their roles in direct consumption, processing, and trade. From an economic perspective, horticultural products have gained importance, while the labour-intensive nature of vegetable production further underscores their significance as a source of employment. An efficient agricultural marketing system is vital for ensuring that farmers receive fair returns for their produce, ultimately improving their living standards. However, the current supply chain connecting farmers to both organized and unorganized retail remains highly inefficient, characterized by numerous intermediaries and extensive manual handling. Significant post-harvest losses occur due to inadequate packaging, lack of temperature-controlled transportation, absence of cold chain facilities, and insufficient market information. Additionally, price volatility, market malpractices, wide price spreads, limited extension services, and unfavourable government policies exacerbate the inefficiencies. These factors, combined with inadequate processing, lead to substantial national losses in agricultural produce. The primary objectives of the study were to evaluate the marketing costs and margins of various intermediaries involved in potato marketing across different channels. Additionally, it aimed to analyze the price spread, marketing efficiency, and the producer's share in the consumer's rupee within these marketing channels.

Methodology

The present study was taken out in Gujarat State. Gujarat state comprises of 33 districts. Out of 33 districts top five districts with highest area and production of potato were selected. Banaskantha, Sabarkantha, Aravalli, Gandhinagar and Mehsana are the major potato producing districts. A multistage sampling was adopted as appropriate sampling procedure for the study. A list of talukas of these five districts was prepared with cultivation area and production. Ten respondents from each selected village were taken randomly from those who were engaged in contract farming of potato. A total of 200 contract farmers were selected for the study, consisting of 42 small (up to 2 ha) farmers, 66 medium (2 to 4 ha) farmers and 92 large (above 4 ha) farmers. The marketing channels for potatoes were analyzed based on the major products derived from potatoes and their respective market coverage. A random sample of intermediaries, including five traders, five wholesalers and five retailers was surveyed. Additionally, ten organized processors involved in producing major potato-based products were selected. The analysis employed simple and weighted averages, along with percentage methods for tabular data interpretation. Further evaluation to address the specific objectives was conducted using various standard statistical tools. A brief description of the different analytical procedures like marketing cost, marketing margin, price spread and marketing efficiency are presented below:

Marketing Cost

It is the total cost incurred on marketing either in cash of in kind by the producer and on various intermediaries involved in the movement of potatoes till it reaches the ultimate consumer. It was calculated as follow:

Modified Measures of Marketing Efficiency

Marketing efficiency is the ratio of the total value of goods marketed to the total marketing cost. The higher the ratio, higher is the efficiency. The marketing efficiency was worked out using Acharya -Agarwal modified marketing efficiency method which is as follows:

Where, MME = Modified Measures of Marketing Efficiency FP = Price received by farmer MC = Total marketing cost MM = Total marketing margin

Results and Discussion

Majority of farmers (178) preferred processors to sell their produce. Although, all concerned farmers were contract farmers it was found that some farmers were selling their produce to traders as well. The total quantity sold to traders www.extensionjournal.com was 67887.48 quintals and average price received by farmers from was 1407.60 ₹/q. The total quantity sold to processors was 523770.29 quintals and average price received by farmers was 2557.46 ₹/q. Table 1 displays major marketing channels found in the study area. There were eight major marketing channels of potato. The channels were identified for the four major products of potato: french fries, chips, flakes and aloo tikki. In, channel I and II the end product was french fries, in channel III and IV the end product was chips, in channel V and VI the end product was flakes and in channel VII and VIII the end product was aloo tikki.

Marketing cost, marketing margin and price spread of channel I

Table 2 provides a detailed breakdown of costs, margins and price spread across different stakeholders of the marketing channel I in the study area. It highlights the disparities between the net price received by producers and the price paid by consumers, along with the cost components and marketing margins at each stage. Channel I included producer, processor and restaurant. Marketing cost for producer, and processor was 18.90 and 8295.10 ₹/q. Thus, total marketing cost for channel I was 8314.00 ₹/q. Marketing cost of producer included cost of gradingpacking (10.00 ₹/q) and loss (8.90 ₹/q).

Marketing cost of processor included cost of packing material (16.00 ₹/q), loading and unloading (6.00 ₹/q), transportation (50.00 ₹/q), weighing (8.90 ₹/q), storage (250.00 ₹/q), loss (4.36 ₹/q), operational cost (2510.77 ₹/q), labour (1345.42 ₹/q), electricity (2326.86 ₹/q), packing material (144.39 ₹/q) and other cost (1632.40 ₹/q). Other cost included the cost of transport and storage of the product.

Total marketing margin of channel I was 11113.17 ₹/q. Price spread was 19427.17 ₹/q. Net price received by producer was 1405.35 ₹/q, producer's share in consumer rupee was 6.75 percent and purchase price of consumer was 20832.52 ₹/q. paid by consumers, along with the cost components and marketing margins at each stage. Channel II included producer, processor and exporter. Marketing cost for producer and processor was 18.90 ₹/q and 8295.10 ₹/q. Thus, total marketing cost for channel II was 8314.00 ₹/q. Marketing cost of producer included cost of gradingpacking (10.00 ₹/q) and loss (8.90 ₹/q). Marketing cost of processor included cost of packing material (16.00 ₹/q), loading and unloading (6.00 ₹/q), transportation (50.00 ₹/q), weighing (8.90 ₹/q), storage (250.00 ₹/q), loss (4.36 ₹/q), operational cost (2510.77 ₹/q), labour (1345.42 ₹/q), electricity (2326.86 ₹/q), packing material (144.39 ₹/q) and other cost (1632.40 ₹/q). Other cost included the cost of transport and storage of the product.

Total marketing margin of channel II was 4280.55 ₹/q. Price spread was 12594.65 ₹/q. Net price received by producer was 1405.35 ₹/q, producer's share in consumer rupee was 10.04 percent and purchase price of consumer was 14000.00 ₹/q. Marketing cost for producer and processor, wholesaler and retailer were 22.07 ₹/q, 2028.32 ₹/q, 18.94 ₹/q and 12.82 ₹/q. Thus, total marketing cost for channel III was 2082.15 ₹/q. Marketing cost of producer included cost of gradingpacking (12.00 ₹/q) and loss (10.07 ₹/q).

Marketing cost of processor included cost of packing material (14.00 ₹/q), loading-unloading (8.00 ₹/q), transportation (30.00 ₹/q), weighing (7.30 ₹/q), storage (220.00 ₹/q), loss (6.79 ₹/q), operational cost (529.33 ₹/q), labour (352.68 ₹/q), electricity (818.89 ₹/q), packing material (18.82 ₹/q) and other cost (22.51 ₹/q). Other cost included the cost of transport and storage of the product. Marketing cost of wholesaler included transportation (4.70 ₹/q), loading-unloading (6.24 ₹/q) and storage (8.00 ₹/q). Marketing cost of retailer included transportation (3.20 ₹/q), loading-unloading (3.92 ₹/q) and storage (5.70 ₹/q). Total marketing margin of channel III was 265.07 ₹/q. Price spread was 2347.22 ₹/q. Net price received by producer was 1282.97 ₹/q, producer's share in consumer rupee was 35.34 percent and purchase price of consumer was 3630.19 ₹/q. www.extensionjournal.com

Marketing cost, marketing margin and price spread of channel IV

Table 5 provides a detailed breakdown of costs, margins and price spread across different stakeholders of the marketing channel IV in the study area. It highlights the disparities between the net price received by producers and the price paid by consumers, along with the cost components and marketing margins at each stage. Channel IV included producer, trader, processor, wholesaler, retailer and consumer. Marketing cost for producer and processor, trader, wholesaler and retailer were 21.01 ₹/q, 465.45 ₹/q, 1578.20 ₹/q, 12.94 ₹/q and 9.04 ₹/q. Thus, total marketing cost for channel IV was 2105.15 ₹/q. Marketing cost of producer included cost of gradingpacking (12.00 ₹/q) and loss (9.01 ₹/q). Marketing cost of trader included packing material (8.00 ₹/q), loading-unloading (12.56 ₹/q), transportation (25.80 ₹/q), weighing (6.30 ₹/q), storage (370.00 ₹/q) and loss (42.79 ₹/q). Marketing cost of processor included cost of loadingunloading (16.00 ₹/q), transportation (30.00 ₹/q), weighing (7.30 ₹/q), storage (220.00 ₹/q), loss (19.24 ₹/q), operational cost (417.53 ₹/q), labour (352.68 ₹/q), electricity (474.12 ₹/q), packaging material (18.82 ₹/q) and other cost (22.51 ₹/q). Other cost included the cost of transport and storage of the product. Marketing cost of wholesaler included transportation (4.70 ₹/q), loading-unloading (3.24 ₹/q) and storage (2.00 ₹/q). Marketing cost of retailer included transportation (3.30 ₹/q), loading-unloading (2.00 ₹/q) and storage (3.74 ₹/q). Total marketing margin of channel IV was 258.68 ₹/q. Price spread was 2363.83 ₹/q. Net price received by producer was 1282.97 ₹/q, producer's share in consumer rupee was 35.34 percent and purchase price of consumer was 3630.22 ₹/q. www.extensionjournal.com

Marketing cost, marketing margin and price spread of channel V

Table 6 provides a detailed breakdown of costs, margins and price spread across different stakeholders of the marketing channel V in the study area. It highlights the disparities between the net price received by producers and the price paid by consumers, along with the cost components and marketing margins at each stage. Channel V included producer, secondary processor, tertiary processor and restaurant. Marketing cost for producer, secondary processor and tertiary processor was 18.90, 9239.78 and 5803.08 ₹/q. Thus, total marketing cost for channel V was 15061.76 ₹/q.

Marketing cost of producer included cost of gradingpacking (14.00 ₹/q) and loss (8.90 ₹/q). Marketing cost of secondary processor included cost of packing material (16.00 ₹/q), loading and unloading (6.00 ₹/q), transportation (50.00 ₹/q), weighing (8.90 ₹/q), storage (250.00 ₹/q), loss (4.36 ₹/q), operational cost (2510.77 ₹/q), labour (1345.42 ₹/q), electricity (2326.86 ₹/q), packing material (144.39 ₹/q) and other cost (1632.40 ₹/q). Other cost included the cost of transport and storage of the product.

Marketing cost of tertiary processor included cost of transportation (56.70 ₹/q), loading and unloading (8.10 ₹/q), storage (178.38 ₹/q), loss (4.36 ₹/q), operational cost www.extensionjournal.com (2818.12 ₹/q), labour (812.33 ₹/q), electricity (856.72 ₹/q), packing material (16.12 ₹/q) and other cost (1056.61 ₹/q). Other cost included the cost of transport and storage of the product.

Total marketing margin of channel V was 7933.48 ₹/q. Price spread was 22995.24 ₹/q. Net price received by producer was 921.78 ₹/q, producer's share in consumer rupee was 3.25 percent and purchase price of consumer was 23921.02 ₹/q.

Marketing cost, marketing margin and price spread of channel VI

Table 7 provides a detailed breakdown of costs, margins and price spread across different stakeholders of the marketing channel VI in the study area. It highlights the disparities between the net price received by producers and the price paid by consumers, along with the cost components and marketing margins at each stage. Channel VI included producer, processor and exporter. Marketing cost for producer and processor was 18.90 ₹/q and 9239.78 ₹/q. Thus, total marketing cost for channel VI 9258.68 was ₹/q. Marketing cost of producer included cost of gradingpacking (14.00 ₹/q) and loss (8.90 ₹/q). Marketing cost of processor included cost of packing material (16.00 ₹/q), loading and unloading (6.00 ₹/q), transportation (50.00 ₹/q), weighing (8.90 ₹/q), storage (250.00 ₹/q), loss (4.36 ₹/q), operational cost (2510.77 ₹/q), labour (1345.42 ₹/q), electricity (2326.86 ₹/q), packing material (144.39 ₹/q) and other cost (1632.40 ₹/q). Other cost included the cost of transport and storage of the product.

Total marketing margin of channel VI was 4272.53 ₹/q. Price spread was 13531.21 ₹/q. Net price received by producer was 921.78 ₹/q, producer's share in consumer rupee was 5.78 percent and purchase price of consumer was 15944.68 ₹/q.

Marketing cost, marketing margin and price spread of channel VII

Table 8 provides a detailed breakdown of costs, margins and price spread across different stakeholders of the marketing channel VII in the study area. It highlights the disparities between the net price received by producers and the price paid by consumers, along with the cost components and marketing margins at each stage. Channel VII included producer, processor and restaurant. Marketing cost for producer and processor was 18.90 and 10521.24 ₹/q. Thus, total marketing cost for channel VII was 10540.14 ₹/q. Marketing cost of producer included cost of gradingwww.extensionjournal.com packing (10.00 ₹/q) and loss (8.90 ₹/q). Marketing cost of processor included cost of packing material (16.00 ₹/q), loading and unloading (6.00 ₹/q), transportation (50.00 ₹/q), weighing (8.90 ₹/q), storage (250.00 ₹/q), loss (4.36 ₹/q), operational cost (3217.21 ₹/q), labour (1819.60 ₹/q), electricity (2786.92 ₹/q), packing material (144.39 ₹/q) and other cost (2218.16 ₹/q). Other cost included the cost of transport and storage of the product.

Total marketing margin of channel VII was 9878.12 ₹/q. Price spread was 20418.26 ₹/q. Net price received by producer was 933.62 ₹/q, producer's share in consumer rupee was 4.37 percent and purchase price of consumer was 21351.88 ₹/q.

Marketing cost, marketing margin and price spread of channel VIII

Table 9 provides a detailed breakdown of costs, margins and price spread across different stakeholders of the marketing channel VIII in the study area. It highlights the disparities between the net price received by producers and the price paid by consumers, along with the cost components and marketing margins at each stage. Channel VIII included producer, processor and exporter. Marketing cost for producer and processor was 18.90 ₹/q and 10521.24 ₹/q. Thus, total marketing cost for channel VIII was 10540.14 ₹/q. Marketing cost of producer included cost of gradingpacking (10.00 ₹/q) and loss (8.90 ₹/q). Marketing cost of processor included cost of packing material (16.00 ₹/q), loading and unloading (6.00 ₹/q), transportation (50.00 ₹/q), weighing (8.90 ₹/q), storage (250.00 ₹/q), loss (4.36 ₹/q), operational cost (3217.21 ₹/q), labour (1819.60 ₹/q), electricity (2786.92 ₹/q), packing material (144.39 ₹/q) and other cost (2218.16 ₹/q). Other cost included the cost of transport and storage of the product.

Total marketing margin of channel VIII was 4730.53 ₹/q. Price spread was 15270.67 ₹/q. Net price received by producer was 933.62 ₹/q, producer's share in consumer rupee was 5.76 percent and purchase price of consumer was 16204.26 ₹/q.

Marketing efficiency and price spread of different channels of potato

The marketing efficiency shows the performance of marketing channels. Marketing efficiency of potato has been differently presented with their end use product.

Table 10 shows the marketing efficiency for channel I and II in which the end product was french fries. The net price received by producer for marketing channel I and II was 1405.35 ₹/q. Price paid by consumer for marketing channel I and II was 20832.52 ₹/q and 14000 ₹/q, respectively. Marketing efficiency of channel I and II was estimated 0.07 and 0.11. Table 12 shows the marketing efficiency for channel V and VI in which the end product was flakes. The net price received by producer for marketing channel V and VI was 921.78 ₹/q. Price paid by consumer for marketing channel V and VI was 23921.02 ₹/q and 15944.68 ₹/q, respectively. Marketing efficiency of channel V and VI was estimated 0.04 and 0.07, respectively. Table 13 shows the marketing efficiency for channel VII and VIII in which the end product was aloo tikki. The net price received by producer for marketing channel VII and VIII was 933.62 ₹/q. Price paid by consumer for marketing channel VII and VIII was 21351.88 and 16204.26 ₹/q, respectively. Marketing efficiency of channel VII and VIII was estimated 0.04 and 0.06, respectively.

Conclusion

The study explores the structure and efficiency of potato marketing channels in Gujarat, focusing on key processed products such as French fries, chips, flakes, and aloo tikki. Findings revealed considerable inefficiencies in the marketing system, characterized by high costs, multiple intermediaries and limited producer benefits. Producers received a small share of the final consumer price, often under 10 percent in most channels. The cost of marketing, influenced by grading, transportation, storage and processing, significantly reduced profitability for farmers. For example, channels dealing with high-value processed products like flakes and aloo tikki incurred substantial marketing costs due to labour-intensive processing and inadequate infrastructure. The study emphasizes that low marketing efficiency and a wide price spread are major barriers to optimizing the potato value chain. Addressing these challenges requires investment in cold chain facilities, improved storage and transportation systems and reducing intermediary layers. Policies promoting direct market access for farmers and transparent pricing mechanisms could enhance their share in consumer prices and improve the overall efficiency and sustainability of potato marketing in Gujarat.

References

1. Anonymous. National Horticulture Board; c2019 [cited 2025 Jan 3]. Available from: https://www.nhb.gov.in/
2. Anonymous. Department of Agriculture & Farmers Welfare; c2021 [cited 2025 Jan 3]. Available from: https://www.agriwelfare.gov.in/
3. Anonymous. Director of Horticulture, Government of Gujarat; c2023 [cited 2025 Jan 3]. Available from: https://doh.gujarat.gov.in/
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