Can institutional innovations in agri-marketing channels alleviate distress selling? Evidence from India Disha Bhanot a,⇑ , Vinish Kathuria b , Debabrata Das c a SP Jain Institute of Management and Research (SPJIMR), Bhavan’s Campus, Andheri (West), Mumbai 400 058, India b Shailesh J. Mehta School of Management, Indian Institute of Technology (IIT) Bombay, Powai, Mumbai 400 076, India c National Institute of Industrial Engineering (NITIE), Powai, Mumbai 400 087, India article info Article history: Accepted 11 September 2020 JEL classification: Q13 Q18 Keywords: Distress selling Agri-marketing Contract farming Farmer producer companies India abstract Distress selling of agri-produce is a common phenomenon in Indian agriculture, and is especially true for horticulture crops, given their highly perishable nature and not being covered under minimum support prices. This study focusses on uncovering the role of institutional innovations in agri-marketing channels in addressing the issue of distress selling. Using primary survey of 108 tomato grower farmers from the Western state Maharashtra in India, the study compares the likelihood of distress selling for farmers sell- ing through the alternative channels of Contract Farming (CF) and Farmer Producer Companies (FPCs), as against selling through the conventional marketing channel of Agriculture Produce Marketing Committees (APMCs). Building on the insights from prospect theory, where a farmer would react more severely to losses than to gains, we develop a mathematical model to compare the utility derived from selling in alternate channels (that is, CF and FPC) vis-à-vis selling through the APMC channel. Subsequently, using econometric analysis, we find that opting to sell through alternative marketing chan- nels helps farmers minimize losses and shields them from distress selling. Finally, a probability function is developed to determine the likelihood of a farmer opting to sell in an alternate marketing channel (CF/ FPC) as against the conventional APMC channel. The findings aid in framing optimal pricing strategies that could be used by the contracting firms and FPCs. Ó 2020 Elsevier Ltd. All rights reserved. 1. Introduction The agrarian crisis and distress of farmers is a leading policy issue in India, given that agriculture sector provides livelihood to about 50 percent of India’s population, yet contributes merely 17 percent to the country’s Gross Domestic Product (GDP) (Al Shriaan & Hassan, 2018; OECD, 2018). One distinct facet of this crisis is often seen in the form of farmers resorting to panic selling (also termed as distress selling) of their produce. Farmers, espe- cially the small and marginal farmers, in many developing coun- tries including India, grapple with having limited choices for selling their produce, besides facing constraints such as limited irrigation, high input costs, inadequate storage and processing facilities (Chand et al., 2007; Poulton et al., 2010; Dev, 2014). This forces them to sell their produce in distress 1 . Market access remains a major impediment for most small-scale farmers in developing countries, and providing alternate marketing infrastructure 2 is widely seen as an effective strategy for improving their income (Chand, 2012; Chamberlin & Jayne, 2013; Kherallah et al., 2002). This study focusses on studying the linkage between the nature of insti- tutional marketing infrastructure/channels, and the occurrence of distress selling by small and marginal farmers. The phenomenon of distress selling is more pronounced for hor- ticulture crops, given their highly perishable nature and not being https://doi.org/10.1016/j.worlddev.2020.105202 0305-750X/Ó 2020 Elsevier Ltd. All rights reserved. ⇑ Corresponding author. E-mail addresses: disha.bhanot@spjimr.org (D. Bhanot), vinish@iitb.ac.in (V. Kathuria), debabrataiitb@gmail.com (D. Das). 1 Distress selling can be defined as an urgent sale of goods at deeply discounted prices, typically characterized by unfavourable conditions for the seller. 2 Sengupta (2010) classifies marketing infrastructure in two categories – physical and institutional. While the former is concerned with access to roads, transport, grading, storage, packaging, and processing facilities, the latter consists of institutions meant to facilitate the marketing process. Though these two appear distinct, there is an overlap in the sense that provision of institutional infrastructure through innovations like farmer cooperatives or contract farming facilitates the provision of the physical infrastructure of varying degrees (as we shall see later). World Development 137 (2021) 105202 Contents lists available at ScienceDirect World Development journal homepage: www.elsevier.com/locate/worlddev