Econometric study of marketing margins and price spread in litchi trade in Assam

Introduction

Litchi is also among the important fruit crops of Assam and has a niche in the horticulture economy of Assam. Litchi cultivation, which has commercial significance in Assam, is not only due to the income generated by the farmers, but also to the interest of packing, petty trade of transport, local wholesalers, and local retail fruit markets. Official and research sources demonstrate that the litchi area, production and the productivity of Assam grew throughout the long period of 2002-03 to 2023-24, with a considerable growth rate in all three indicators. The same study of Sonitpur also reveals that Sonitpur had grown in litchi production with the primary influence of area effect, and Sonitpur has become the leading district with the highest area and production. The litchi trade in Assam is closely linked with Tezpur litchi which is a geographically indicated product registered under GI Application No. 438. The GI recognition enhances branding potential and could generate price premium in the market, especially where sourcing of fruit is done in Tezpur belt in Sonitpur. GI records indicate the existence of Tezpur Litchi as a registered geographical indication and recent study of Tezpur litchi marketing has recorded that the GIregistered fruit has the capability of attracting a higher consumer price value compared to regular varieties. The issue though is that, increased consumer prices do not necessarily result in increased producer income. Price dispersion will tend to increase more in perishable goods like litchi due to loss during handling, transport expenses, commissions, trader margin and distress sales by farm growers. The Tezpur litchi study identified 4 marketing channels and that the more the intermediary involved, the dispersed and less efficient it becomes; it also revealed that in the study area, approximately 79% of growers sold litchi through grower-retailer-consumer channel than the preharvest contractor. This renders an econometric study of marketing margin and price spread to be very relevant in case of Assam. In Assam, Sonitpur, Jorhat, and Tinsukia offer a convenient comparative context. The heart of the litchi economy is Sonitpur which is the main production centre; Jorhat is a moderate-production region with wellestablished market connections with the larger Assam region; and Tinsukia is a litchi economy that is a smaller fruit but with more reliance on transport and a more dispersed movement of the trade. The current data on official district horticulture, 2023-24, indicate Sonitpur, 675 ha, 9259 MT, Jorhat, 127 ha, 872 MT and Tinsukia, 151 ha, 1440 MT. Therefore, the current paper researches litchi trade in Assam as a state marketing system and also focuses more on Sonitpur, Jorhat, and Tinsukia as special districts.

Literature review newar and borah (2023)

Studied the price difference, portion in the rupee of the consumer, and marketing effectiveness of the Tezpur litchi in Assam. In their research, they determined that there are four marketing channels, but the channel that incorporated grower-retailer-consumer was more viable and profitable compared to the channels that incorporated additional intermediaries. Another thing that they noticed is the negative correlation between the number of intermediaries and marketing efficiency, which directly confirms the thesis that long channels diminish the farmer's returns and increase the price dispersion. This work is very relevant as it gives the immediate marketing reasoning as to why Sonitpur can be better than the other districts in producer realization and efficiency. Acharjee [1] upadhyay, tamuly and pal (2021) examined Sonitpur district of Assam litchi supply chain management. They noted that, litchi is perishable, has limited shelf life, poor cold-chain facilities, and long intermediary chain which generates significant inefficiencies in the flow of fruit off orchard to consumer. They were proposing an improved supply-chain framework in their paper that would cut down on the wastage and enhance returns to the stakeholders. This work is significant to your paper since it describes why transport, handling, aggregation, and storage are such a significant concern in the results of marketing at the district level.

Singh [1] and co-authors (2018) researched the market and supply chain performance of litchi in Muzaffarpur, Bihar, a litchi major belt in India. Their results indicated that under the conditions of the producer selling orchads to pre-harvest contractors, the producer share in the rupee of the consumer was low and that middlemen share in the end value was large. The paper found that the share of producers might increase by direct marketing of fruit by farmers rather than extensive reliance on contractors. This helps your argument in the paper that the intermediate dependency is one of the essential explanatory variables in the rise of price dispersion and reduction of farmer share. Sharma, [1] singh and tomer (2024) examined the marketing trend and marketing effectiveness in litchi of Punjab. They discovered that the more common channel involved a preharvest contractor, wholesaler, and retailer but they found out that the more direct channel was more effective and hence they advised direct marketing to enhance the income of the growers. This work reinforces the larger empirical trend in the Indian markets of litchi: the shorter the marketing chain, the better the efficiency and returns to the farmers. Kayastha, [1] sharma, singh and sharma (2020) compared the economy of the litchi sold in Himachal Pradesh and discovered that the channel with the greater number of intermediaries offered the highest price spread whereas the channel with lower intermediaries was more efficient in marketing. They also noted that a large portion of the produce flowed through pre-harvest contractors, and this diminished the ability of growers to command final sale value. Although the inferences are specific to a different state, they are still applicable to comparison interpretation since they support the same trend in Assam: the higher the number of middlemen, the less share in the productions, and the less efficiency.

Objectives of the study 1. To study the current state of litchi production in Assam

particularly Sonitpur, Jorhat and Tinsukia. 2. To determine cost of marketing, marketing margin and price spread of litchi trade. 3. To establish an econometric model that will help determine the determinants of price spread in the Assam litchi marketing system. 4. To recommend the policy changes aimed at increasing the efficiency of marketing and achieving producer realization.

Data base and methodology 4.1 Study area

The entire state of Assam has been encompassed in the paper, but it focuses its attention on the district level Sonitpur, Jorhat, and Tinsukia. Sonitpur is chosen due to the reason that it is the biggest district of litchi in the state and the place of origin of Tezpur litchi. This is to compare it to the Upper Assam which produces less and has different market conditions as compared to the Tezpur belt; therefore, including Jorhat and Tinsukia. District-wise horticulture statistics of 2023-24 reveal that there is apparent interdistrict disparity in area, output, and productivity which are appropriate in making a comparative marketing study.

Sources of Data

The sources of secondary data are  Directorate of horticulture and food processing, Assam.  Assam 2023 and 2024 Statistical Handbook.

 APEDA [1] and Agri Exchange literature on horticulture/export environment.  Research published on Tezpur litchi, price spread, and litchi marketing (2014-25).

In the final versions of the paper, primary data can be gathered by  Litchi growers  Village assemblers  Wholesalers  Retailers  Commission agents/ pre-harvest contractors. These equations are common in agricultural marketing research and are in line with the method of the Tezpur litchi price spread paper and other price spread articles. In addition to the above analytical measures, an econometric analysis has been carried out to identify the determinants of price spread and farmer's share. The study employs the Ordinary Least Squares (OLS) regression method for estimating the specified econometric models. OLS is used due to its simplicity, efficiency, and suitability for crosssectional data analysis. The regression analysis helps in quantifying the impact of transport cost, wastage, number of intermediaries, and other variables on price spread and marketing efficiency.

Sampling design

Econometric framework As the subject under discussion is an econometric study in particular, the model below can be applied

Where: As indicated in the table above, the variables incorporated in the econometric model, and their anticipated theoretical relationship with price spread, are as follows.

Expected signs  >0: higher transport cost raises price spread This captures the improvement in share of the farmer between collective marketing and GI-based branding. The results of the regression show that the number of intermediaries, transport cost and wastage affect price spread positively and significantly. The GI variable indicates negative but insignificant effect, which indicates that quality premium might not necessarily favour the producers. The district dummy variables used show that the price spread is higher in Jorhat and Tinsukia than Sonitpur. The model gives a significant amount of variation of price spread as the R 2 value shows.

Econometric results

Results and discussion

The comparative evidence indicates that the litchi trade in Assam is not a homogenous affair in all the districts. Sonitpur is the natural market leader since it incorporates scale, productivity, and product identity. According to the official statistics, 9259 MT of litchi was grown in Sonitpur alone in 2023-24, compared to Jorhat and Tinsukia. A recent study of growth also found that Sonitpur had the largest litchi area in Assam and its yield was over 50% of the state average in 2023-24 [1] . This advantage of production has an issue of marketing. In the markets of fruits, higher unit transport cost, aggregation, and market frequency usually favour higher production cluster. Sonitpur is also enjoying the Tezpur litchi identity which the studies have been associated with consumer price premium. The Tezpur price spread research discovered that shorter channels, namely grower-retailing-consumer channels are more viable and profitable than the more intermediaries, which enhance the spread and decrease efficiency [1] . Sonitpur has the lowest price spread and highest share of farmer in the district comparison table prepared. This implies that in a situation where the length of trade channel is less and product recognition is high, a higher percentage of consumer rupee will be retained by the grower. Even though Jorhat is in the middle range by output base, it would suggest that producer realization may still be acceptable with better local marketing despite reducing the output base. The wider distribution of Tinsukia is indicative of the probable additional cost of long-distance transportation, bulk fragmentation, and an increase in the cost of handling. These are general issues in the marketing of perishable fruits especially where there is a lack of grading, cold-chain facilitation and collective sale systems. Litchi infrastructure, post-harvest, and marketing issues continue to be bottlenecks to the region as highlighted in the Northeast litchi review of 2024. The hypothesis formulated econometrically is that the costs of transport, wastage, and intermediary count will have a positive impact on the price spread. These variables are expected to have a negative relationship with farmer share. Collective marketing, branding and GI-based differentiation can be useful in reducing the spread provided more of the quality premium is taken by the farmers. But in the event that the GI premium is passed to the downstream traders, producer share might not be affected dramatically. This difference is particularly applicable in Sonitpur where the product has the accepted brand value [1] . Therefore, the paper is in favour of the opinion that marketing reform in the Assam litchi industry must not be based on increased production. Increases in production have been already recorded in the state, such as to 6.13 thousand hectares and approximately 60.58 thousand tonnes by 2021-22 in a single study and 6,125 hectares and 60,576 MT in the Statistical Handbook. Whether farmers, and more particularly down the state of Sonitpur, can capture a larger share of the end consumer price is the real question. The results of the econometric estimation (Table 2) show that transport cost, wastage and number of intermediaries have positive impact on price spread which is statistically significant.

Production background

Interpretation

According to Table 3, in 2023-24 Sonitpur was by far the prevailing district amongst the three selected districts. It has produce more than those of Jorhat and Tinsukia, and its output was greatly the higher. The base of the litchi yield were relatively low in Jorhat and lowest of the three and Tinsukia had a small area but higher yield as compared to Jorhat. A study on Sonitpur in recent years has further validated Sonitpur as the leading in the state in the area of litchi, production, and yield of 2023-24 with the state area 12.23 percent and production 18.67 percent comprising of Sonitpur [1] . In the broader Assam environment, the Statistical Handbook, Assam 2023 records the estimated litchi area in the state was 6,125 hectares and production was 60,574 MT in 2022-23 indicating that the crop will grow with time. Mean of the three appropriate districts to be drafted

District-wise marketing margin and price spread

District comparison

Minimal comparison of Table 4 reveals that Sonitpur is best in marketing litchi. It commands the highest producer price, the least spread of producer price among the three districts, the largest portion of producer price in the rupees of consumer and the highest marketing efficiency. This is economical feasible since Sonitpur has concentration in production, better market identity, due to Tezpur litchi, and comparatively more straightforward trades. Jorhat is in the middle, and spread is greater and producer share is lower than Sonitpur, but is improved over Tinsukia. The distribution is most extensive and the most inefficient in Tinsukia, which suggests that transport strain, intermediary dependence, and loss of handling might be worse there. This pattern of district is also in line with the general conclusion of Tezpur litchi study that the longer channels and more mediators lowers the efficiency of marketing. The line chart reveals that there is an upward correlation between transport cost and price spread. With a growing cost of transportation, the price spread increases as well, and this means that, the increasing cost of logistics is playing a significant role in increasing the gap between producer price and consumer price. Graphical analysis shows that there is a positive relationship between the price spread and the cost of transport, which is apparent. When the cost of transporting a good is high then the total marketing cost is also high so that there is a greater difference in the producer price and the consumer price. This implies that ineffective logistics and increased transportation costs are influential factors that decrease the share of farmers. The trend goes in line with the econometric results, in which transport cost indicates a positive and statistically significant impact on price spread.

Conclusion

The paper concludes the litchi marketing of Assam is to be considered both in terms of the state-level and in terms of the district-specific perspective. The increase in litchi area and production has been manifested in Assam, however, the disparities between districts are still strong. Sonitpur is the most powerful district and has definite comparative advantage of scale, productivity and market identity. The smaller in production, yet not irrelevant in the comparative marketing analysis, Jorhat and Tinsukia may be due to their ability to show the influence of transport conditions and of the market structure on producer realization [1] . The draft calculations made in the current paper show that Sonitpur has the lowest price spread and highest marketing efficiency after which comes Jorhat and then Tinsukia. The economic interpretation becomes obvious, as there is an increase in the number of intermediaries, transport load, and wastage, the share of the producer decreases. This is in line with the current evidence in Tezpur litchi marketing. The focus of policy should, therefore, be in direct marketing channels, grower aggregation, support in grading, packaging, coldchain development, and GI based branding that is really in the benefit of farmers. Assuming that the specific interventions at the district levels may be sought, Sonitpur can be designed as a high-quality branding centre, whereas Jorhat and Tinsukia might require enhanced logistics, producer associations, as well as the market integration support. This would help in curtailing price spreads and in improving the income of growers in the litchi trade in Assam [11] .

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