Infrastructure Development in Agriculture - Route to Rural Transformation

8/8/2019 Infrastructure Development in Agriculture - Route to Rural Transformation

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InfrastructureDevelopmentin

AgricultureRoutetoRuralTransformation

7August2009,NewDelhi

KPMG IN INDIA



©2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwiss

cooperative.Allrightsreserved.



ThisisabriefingpaperwrittenbyKPMGinIndiathatanalysestheopportunities

presentedbytheIndianAgriculturemarketwithrespecttoitsinfrastructural

shortcomings.

ThestudybeginsbyexplainingtheroleofagricultureinIndia’sruralmarketsand

highlightstheneedtoimmediatelyaddressthechallengesfacedbythesector;it

goesontoexplainthevariouschallengesentailedintheagriculturalsupplychain-

rightfromissuesinpreandpostharvestingtoconcernsaboutresearchand

development,humanresourcedevelopmentaswellasinadequaciesofrural

infrastructure.

Whilehighlightingthechallenges,thepaperusesvariousexamplesofsuccessful

andinnovativecasesthatbringtolightthekeyopportunitiesforplayersacrossthe

agriculturalvaluechain.

Thestudyconcludeswithourlearningsandrecommendations.

About the study





Thepopularadage“Mayyouliveininterestingtimes”couldnothaveperhaps

foundabettercontextintheglobaleconomy.TheIndianeconomytoohasnot

beencompletelyimmuneintheaftermathoftheglobalfinancialcrisiswhichhas

hitmostsectorsandgrewatamuchslowerrateof6.7percentin2008-09

comparedtoitsperformanceinrecentyears.TheUnionBudget(2009-10)has

revealedtheIndiangovernment’splanstogettheeconomybacktoahigher

growthrateof9percent,includinggettingtheagriculturesectorto4percent

growthrate.Agriculturepresentsanexcellentplatformforthegovernmentto

driveitsinclusivegrowthagendaforruralIndia.Ruraldemandisincreasinglyan

areaoffocusforcorporateIndiaandpresentsopportunitiesthathavehithertonot

beenfullyexploited.1

Thereisalotthatmustbedoneifsuchambitioustargetshavetobemet,

particularlyinmodernizingtheagriculturalsectorandensuringitssustainability.

Thisreportaddressesafewkeyinterventionsthatareneededforthegrowthof

theIndianagriculturalsectorspanningvariouslinkages–bothpreandpost

harvestinfrastructure,marketinginfrastructureaswellassofteraspectsofthe

infrastructuresuchashumanresourcedevelopment.Thelatterdoesnotusually

meritmuchattentioninagriculturalpolicy,itselfanareawhichneedsarethink.

Ramesh Srinivas

Executive Director and

Head - Consumar Markets Sector

KPMG in India

Foreword from KPMG India

1 UnionBudget2009-10





Thereportmakesafewrecommendationstoaddressthegapsininfrastructure

supportingtheagriculturalsector,basedonanalysisofkeychallengesacross

varioussegmentsoftheagri-businesssupplychain.Severalsuccessfulefforts,

bothdomesticandinternational,havebeenusedtoshowcasepossiblesolutions

totheissuesinIndianagriculture–includingpublicprivatepartnerships.Sectors

thatderivetheirdemandfromagriculturesuchasfoodprocessingandfood

logisticscanalsobenefitfromtheserecommendationsandtheseshouldhave

importantimplicationsfortheruraleconomyfrombothanemployment

generationandsocialdevelopmentperspective.

Theanalysesandpointofviewpresentedinthereporthavebeengatheredand

validatedthroughdiscussionswithvariousindustryplayersandexperts.Wetake

thisopportunitytothanktheindustryplayersformakingthisendeavorpossible.

WealsothankCIIforhavinggivenusthisopportunitythroughknowledgepartnershiptoparticipateinthedevelopmentofagri-infrastructureandthe

harnessingoftheuntappedpotentialofruralIndia.





TheconceptofRuralMarketinginIndiaEconomyhasalwaysplayedaninfluential

roleinthelivesofpeople.InIndia,leavingoutafewmetropolitancities,allthe

districtsandindustrialtownshipsareconnectedwithruralmarkets.

TheruralmarketinIndiaisnotaseparateentityinitselfanditishighlyinfluenced

bythesociologicalandbehavioralfactorsoperatinginthecountry.Therural

populationinIndiaaccountsforaround627million,whichisexactly74.3percent

ofthetotalpopulation.

TheconceptofruralmarketinginIndiaisoftenbeenfoundtoformambiguityin

themindsofpeoplewhothinkruralmarketingisallaboutagriculturalmarketing.

However,ruralmarketingdeterminesthecarryingoutofbusinessactivities

bringingintheflowofgoodsfromurbansectorstotheruralregionsofthe

countryaswellasthemarketingofvariousproductsmanufacturedbythenon-

agriculturalworkersfromruraltourbanareas.

TheruralmarketinIndiaisundergoingasilentbutdefiniterevolutionontheback

ofenhancedpurchasingpowerofruralconsumers,thechangingconsumption

patternsandincreasingoverallvalueofconsumptionofgoodsandservices.The

sheersizeoftheruralmarketwhichhaswitnessedtremendousgrowthinthe

recentyearsaslargesectionsofruralpopulationtransformedintodiscerning

consumershascaughttheimaginationandincitedbusinessinterestofthetop

conglomeratesinthecountry.

Tarun Sawhney

Conference Chairman &

Chairman, Agriculture Competitiveness

Sub-Committee, CII NR &

Executive Director,Triveni Engineering & Industries Ltd.

Foreword from CII





Key Trends

Rising Purchasing Power

OnaccountofrisingpurchasingpowerinruralIndia,thecorporatesectoris

discoveringthehugepotentialthatcanberealizedbycreatingaccessand

focusingmarketingeffortsintheruralsegment.AccordingtotheNationalCouncil

forappliedEconomicResearchthereareasmanymiddle-incomeandabove

householdsintheruralareasasthereareintheurbanareas.

Government Initiatives

Thefocusedapproachofthegovernmenttobringaboutoverallruralprosperityis

evidencedbyinitiatives.RegionalRuralBankshavealsobeeninstructedto

expandtheirbranchnetworksandextendtheirservicestonon-residentIndians

aswelltoexpandtheirscopeingeneral.Lookingatthecoreconcernsofthis

sector,thegrowthofthissectorintermsofincreasedpublicinvestmentisof

immensenecessityatthisjuncturetorevivethefateoftheruraleconomyof

India.Therewasalotofhopethatthepresentgovernmentwouldaddressthese

concernsbyallocatingfundsinbudgets.Severalincentivestotheagricultural

sectorwhichhasreallybeenthebackboneoftheruraleconomyisboundto

favourablyanddirectlyimpactgrowthoftheruralsector.

Changing Infrastructural Scenario

Thefocusedmarketattentionontheruralmarketsisaidedbytheslowlybut

surelychanginginfrastructuralscenarioinruralIndia.Thebudgetproposalsarean

acknowledgementofthefactthatIndia’spoorinfrastructureneedsurgent

attention,whichinturnislikelytoaddressmanyoftheillsbesiegingthe

country’svastagriculturesectorandthebottlenecksfacingruralmarketingin

generalandorganizedruralretailinspecific.

IthasbeenalsobeenobservedthatIndia’sruralmarketsaregrowingatdouble

therateofurbanmarkets.Moreover,thetotalnumberofruralhouseholdsis

expectedtorisefrom135millionin2001-02to153millionin2009-10.ThisislikelytoresultinruralIndiabecomingthelargestpotentialmarketintheworld.







Table of Contents

1. Executive Summary 01

2. Background 06

3. Rural Markets and Agriculture 08

4. Indian Agricultural Linkages 10

4.1 Pre-Harvest Infrastructure 11

4.1.1 Agri-Inputs 11

4.1.2 Agri-Inputs Distribution 174.1.3 Soil and Water Management 19

4.1.4 Crop Selection 24

4.1.5 Crop Diversification 26

4.1.6 Irrigation 28

4.2 Harvest and Post-Harvest Infrastructure 31

4.2.1 Harvesting 31

4.2.2 Packaging and Processing 33

4.2.3 Logistics & Storage 39

4.2.4 Basic Infrastructure - Power, Roads, Water 42

5. Marketing Infrastructure 45

5.1 Marketing Intelligence / Marketing Information 45

5.2 Marketing Supply Chain 52

6. Soft Infrastructure 55

6.1 Research and Development 55

6.2 Human Resource Development 56

6.3 Support Infrastructure 58

7. Agricultural Policy 61

8. Recommendations 65

9. Conclusion 67



Why do we need to look at Indian agriculture?

Indiahasexperiencedstrongeconomicgrowthinrecentyearsfueledbya

boomingservicessectorandincreasedindustrialproduction.However,agriculture

continuestoremainthemainstayoftheIndianeconomy-engagingnearly58

percentoftheworkforceandcontributingtoaboutaquarterofIndia’sGDP.India

hasadominantpositioninworldagriculture,withthesecondlargestarableland

bankintheworldandrankinginthetopthreeproducersofrice,wheat,coarse

grains,fruitsandvegetables,tea,coffee,andjute.Indiaalsohassomeofthe

largestlivestockpopulations,whichcombinedwiththelargefarmingsectorhelp

ensuresthatagri-businessremainstheoverwhelmingcontributortotheeconomy

frombothamonetaryandemploymentperspective 1.

What are the main challenges? How are they being tackled? Are there any

success stories to learn from?

Theopportunitypresentedbytheruraleconomyissignificant.Accordingtoa

McKinseysurveyconductedin2007 2,theruralIndiamarketwouldgrowalmost

fourtimesfromitsexistingsizein 2007,whichwasestimatedatUSD577 billion.

However,thegrowthoftheruraleconomyisstronglycoupledwithadvancesin

agriculture,asectorwhichisblockedbyvarousissuesrangingfrompooruseofwaterontheinputsidetopoorpackagingandstorageontheoutputside,leading

tosub-optimalproductivityinvariousstagesoftheagriculturalsupplychain.

Thus,agriculturalsupplychainhasbeenexaminedthoroughlytoidentify

challengesundereachstep,studysuccessfulexamples(bothdomesticand

international)andtorecommendpotentialsolutions&interventions.

1. Executive Summary

1 Agribusiness,CLSA,2006

2 The'BirdofGold':TheRiseofIndia'sConsumerMarket,2007

1

Source:KPMGAnalysis





Thepre-harvestsegmentoftheagri-valuechainhasseensomesuccesses

especiallyintheareasofhorticulture,whereinprivatesectorinvolvementhas

resultedinsignificantgainstofarmers.Thereisaneedtoapplythelearningsfromtheseventureswhichhavenegotiatedtheexistingchallengestoother

agriculturalareassuchasfoodgrains.

Inthepost-harvestsegment,therehavebeensomerecentdevelopments

includingthelaunchofterminalmarketsinvariouspartsofthecountry,which

couldprovideablueprintforthereformoftheinfrastructurethatiscurrentlyin

place.Further,thereisanurgentneedtoensureauniformpolicyframework

acrossthecountrywhileensuringholisticdevelopmentofinfrastructureas

opposedtotheskewednatureofexistinginfrastructurewhichisunderutilizedin

certainsegmentsofthevaluechainsuchascoldstoragesbutsimplyinadequate

inothersegments.

2

Agri-ValueChainpresence Challenges SelectCases Recommendations

• Pre-Harvest

Infrastructure

•Poorcropselectionand

diversification

•LowSeedreplacementrate

•Lowqualityseeds

•Extinctionoftraditionalvariety

•Poorandunbalanceduseof

chemicals(fertilizers&pesticides)

•Protectingtraditionalvarietiesof

ricethroughseedbanksinOrissa

•DCMShriram’snetwordof

HariyaliKisaanBazaarsforinputdistribution

•Conservationtechnologieslike

laserleveler,zerotilage,dryseeding

•TataKisanSansarusingprecisionfarming

•McCainFoodsprocessof

growingshepodypotatoes

•PPPbetweenPunjabgovernment

andPepsicoforcitrusfruits

•JainIrrigationdripirrigation

network

•Chinareplacingfloodirrigation

withdripirrigation

•Inclusivegrowthandgroup

approach

•Rationalizationofsubsidies

•ModernizingIrrigationSystem

&Techniques

•Agriculturalextensioninfilling

informationgaps

•PPPsincontractfarming,drip

irrigationprojects


• Harvest &

Post-Harvest

Infrastructure

•Poorandinadequate

mechanization

•Poorpackaging,sorting,

grading&processing

•Poorlogistics,storageand

coldstorageinfrastructure

•Inadequatebasic

infrastructuresuchasPower,

RoadsWater

•Mechanizationofprocessing

technologyinVietnam-developed“Coversplit

technology”designedto

generateahigherratioof

wholeseed

•Sugunapoultry’sunique

integrationmodelconnecting

processorstoframers•ChordiaFoodpark’s

contributiontoinfrastructure

integration

•USA’sWarmerdamCenter

usingsolarpowerforcoldstorage&packing

•PPPsinTerminalMarkets

•UniformPolicyframework

•Holisticinfrastructure

development





Whilethereareafewexamplesofstatesponsoredinitiativesintheareaof

marketing,thisvitalareaofinterventionremainslargelyunaddressed.Several

studieshaveshownthelowerrealizationtofarmersfromthepricepaidbytheendconsumer,demonstratingtheneedforreductioninthenumberof

intermediariesintheagri-supplychaintherebyimprovingefficiencies.

Thelastsegmentoftheagri-valuechainthatmeritsattentioniscertainlynotthe

leastimportantandisperhapsthekeytounlockingthepotentialofIndian

agriculture.Theneedforasecondgreenrevolutionhaslongbeenfeltandthis

couldbeusheredinbyresearchfacilitieswithclosertieswiththeagri-business

industries,developmentofhumanresourcesemployedintheareaofagriculture

aswellasenablingbettersupportinfrastructurefortheruralpopulation,

especiallyinhealthcare.

3


• Marketing

Infrastructure

•Inaccessible,incompleteand

delayedmarketinginformation

•Presenceoftoomany

intermediaries

•EVKI-Ane-AgricultureMarketing

projecttakenupbythe

GovernmentofMadhyaPradesh

executedonBuild-Own-Operate(BOO)basiswithaconsortiumof

vendors.

•FOODNET:Transformingthelives

offarmersinUgandathrough

powerofinformation

• GrameenDanoneFoodsLtd,

Bangladesh:Successstoryofa

co-operative

•RythuBazaar(FarmersMarket)-A

directmarketinginitiativebythe

GovernmentofAndhraPradesh

•Brazil-Directfarmerprocessor

linkagesandfreemarketsystem

• PPPsinTerminalMarkets

• PromotionofRuralKnowledgeCentres,ICT-basedextension,

andtheprivatesector.

Agri-ValueChainPresence

Challenges SelectCases Recommendations

• Soft Infrastructure •Inadequatereturnson

investmentinresearchanddevelopment

•Lackoftrainedhumanresources

•Lackofefficientruralsupport

infrastructureparticularlyeducationandhealthcare

infrastructure

• Brazil’sSENAR-combining

literacyeducationwithoccupationaltraining

• Inclusivegrowthand

approach

• Holisticinfrastructure

development

• Leveragingpartnerships

suchasIBSAineducation,

researchandtraining

• PPPsineducation,research

andtraining





What needs to be done?

WhilewehavelookedatthevarioussegmentsofIndianagriculture,tryingtofind

solutionstotacklevariouschallenges,itisclearthatsomeofthesector’s

problemscanbesolvedbyaddressingissueswhicharenotuniquetothesector

butareinhibitingIndia’sgrowthingeneral–healthcareandroadsbeingtwokey

areasforintervention.

Severalglobalexamplesdiscussedinthereportprovidepotentialmodelswhich

couldbeusedtodevelopsolutionstothevariouschallengesinIndianagriculture.Oneofthepossiblesolutionavenuescouldbetheuseofpublic-private

partnershipsacrosssegmentsfromseedresearchtohumanresource

development,fromruralhealthcaretobetterinformationnetworksforfarmers.

Thekeywouldbecollaborationbetweenprivateandpublicagencies.

India’sagriculturesectorpresentsimmenseopportunitiesforinvestmentsif

variousstakeholderscollaborateanddevelopinnovativeandeffectivemodelsthat

notonlylookataddressingtheissuesinIndia’sagricultureset-upbutalso

introducebestagriculturalpractices.

4





5





AlotofbuzzhassurroundedtheIndianruralmarketinrecenttimes,especiallyin

thecontextofagriculture,whichcontinuestoremainthebackboneoftheIndian

economy.DespiteagricultureplayingakeyroleinIndia’seconomy,ithasbeen

sufferingfrommajorroadblockswhichhavehindereditsgrowth.Problemshave

existedateachstageofthevaluechain.

Issuesconcerningagri-infrastructureareoneofthemostprominentchallenges

thatneedtobeaddressedwithimmediateaffect.Lackofproperirrigationand

watermanagement,environmentalconcernsrelatedtopoorsoilmanagement,

inadequateandpoorfertilizerandpesticiderequirementscoupledwithscanty

post-harvestinfrastructureincludingshortageofproperwarehousesandstorage

facilities,poorgrading,sortingandpackagingofyieldarehurtingtheagricultural

baseofoureconomy.Problemsexisteveninmarketingofproduceasfarmers

arehandicappedbythelackofinformationonpricesandforecasts.Government

policiesandregulationhavealsocreatedalotofunneededcomplexityinthe

systemwhichhasdiscouragedinvestmentinthissector.Thelackofagri-support

infrastructurehasalsoplayedspoilsport.Absenceofproperresearchand

developmentinstitutes,ruraltransportinfrastructure,ruralhealthcareand

educationalfacilitieshavestifledthissector.

2. Background

Challenges in Agriculture Infrastructure

Pre-Harvest InfrastructureHarvest & Post- Harvest

InfrastructureMarketing Infrastructure Soft Infrastructure

•Lowseedreplacement

rate

•Hybridseedproduction

stilllacking

•Lowqualityseeds

•Extinctionoftraditionalvariety

•Poorandunbalanceduse

ofchemicals(fertilizers&

pesticides)

•Lackofinputdistribution

infrastructure

•Erosionofnatural

resources

•Poorcropselectionand

diversification

•Poorirrigationtechniques

andoverrelianceon

monsoons

•Poorandinadequate

mechanization

•Transportationgaps

•Poorpackaging,sorting,

grading&processing

•Poorlogistics,storageandcoldstorage

infrastructure

•Inadequatebasic

infrastructuresuchas

Power,RoadsWater

•Inaccessible,incomplete

anddelayedmarketing

information

•Presenceoftoomany

intermediaries

•Inadequatereturnson

investmentinresearch

anddevelopment

•Lackoftrainedhuman

resources

•Lackofefficientruralsupportinfrastructure

particularlyeducationand

healthcareinfrastructure

6





Anumberofinnovativemeasureshavebeenundertakenbythepublicandprivate

sectorstotackletheseissuesandimprovethestateofIndia’sagrarianmarket.

TheseinitiativeshavehelpedtransformthelandscapeofruralIndiainsomeparts

ofthecountryanditwillbetheeffortintheremainingsectionsofthisreportto

usetheseasillustrationstoprovideinsightsonovercomingpolicyandstructural

challengesfacingagricultureinIndia.Thefocuswillprimarilybeonhighlighting

andovercomingchallengeswiththeagriculturalsupplychainandissuesrelated

tomanagementofresources–humancapital,R&Dandpolicytoprovidepossible

solutionsfromaproductivityandmodernizationperspective.Globalcasestudieshavealsobeenusedtosuggestmechanismstotransformspecificsub-sectors

withintheagrarianeconomy.

7





Indiahasemergedasamajorglobaleconomicpowerwiththeeconomy

registeringhighgrowthratesintherecentpast.PartsofIndiahavestartedto

displaysignsofaffluence,butthisprogresshasnotbeenuniform.Therural

regionshavenotbeenabletomatchtheirurbancounterparts.Withmorethan70

percent1 ofIndia’spopulationlivinginvillages,thebenefitsofeconomicgrowth

havefailedtopercolatetomorethantwo-thirdsofthepeople.

Evenwithincreasingurbanizationandmigrationitisestimatedthat

63percentofIndia'spopulationwillcontinuetoliveinruralareas

in2025.2

ThedevelopmentofruralIndiaisessentialforsustainingthe

growthlevelsinthecountry.Withagriculturebeingtheprimary

employerofmorethanhalfofIndia’spopulation,particularlythe

underprivileged,improvementsinthesectorcouldgoalongwayinenhancing

thestandardoflivingofthepoor.However,inrecentyears,agriculturalgrowth

hasdropped.Thegrowthrateinagriculturesectorinvestmentandprofitability,

netsownareaundercrops,andtheareaunderirrigationhavealsodropped.

“The agrarian crisis has its roots in the collapse of the rural economy...

Unemployment leading to out-migration of the asset-less is growing. At every level of the livelihood security system, there is a tendency to make profit out of

poverty. Something is terribly wrong in the countryside... " -Dr. M.S. Swaminathan3

AgriculturebeingthemainstayofIndia’seconomy,itisimperativethat

considerableeffortsaremadetoextricatethesectorfromstagnation.Larger

irrigationfacilities,betterseedsandagri-inputsatreasonablecostswillhavetobe

providedtofarmers.Theaccesstoimprovedinputsandtechnologieswillhaveto

becoupledwithprovisionoffinance,infrastructuralandmarketingfacilities.

Agricultureneedstobecomeanincomeproducingactivityandfarmersshould

notbelefttotheuncertaintyofweather,financialresources,andmarkets.

OneofthekeyreasonsforthestagnationofIndia’sagricultureisthefalling

productivityrootedfromstructuralchallengesthathaveseepedintothebaseof

thesector.Challengeswithhardandsoftinfrastructurecoupledwithpoor

sourcesofinformationandfinancinghavecreatedalotofdistressinthesector.

3. Rural Markets and

Agriculture

(%) Top20cities Others Rural Total

Population 10 20 70 100

Income 31 13 56 100

Expenditure 21 15 64 100

Savings 60 8 32 100

2008-09 was the poorest

year in the last 5 years,

with the agricultural sector

growing at 1.6 percentSource:EconomicSurveyofIndia,2008-09

1 ForANewDealToTheRuralPoor,TheHindu,12thMarch2008

2 Afruitfulinvestmentopportunity,expresshospitality,March2008

3 Farmers'distress:causes&cures,TheHindu,10thSeptember2004

8





Hurdlesintheagri-supplychainwithrespecttopoorseeddevelopment,poor

cropselectionandmanagementtechniques,inadequateirrigationandwater

conservationmeasures,poorcoldchainandprocessinginfrastructure,lackof

researchanddevelopmentandpoorextensionofcurrenttechnologieshave

resultedinwastagesto the tune of INR 500 billion.Lackofbasicinfrastructure

suchpoorroads,inadequateeducationandhealthcarefacilitieshavealsoinhibited

thegrowthofthissector.Onlyabout48percentvillagesarecoveredwithroads.

Thetotalroadlengthinthecountryisabout33lakhkm,ofwhichonly58

thousandKmisNationalHighway.Theexistingrailfacilitiesinthecountryarealsoinadequate.Therailwayroutelengthinthecountryisonlyabout70lakhkm

andtheelectrifiedtrackisnotevenbareminimum.4 Raillinesdonoteven

connectsomeofthedistrictsinthecountry.Besidesthetransport,thestateof

infrastructureforhorticulturalproduceaswellasmeatproductsleavesmuchto

bedesired.Indiahasaround5000 5 coldstoragefacilities,ofwhich90percentare

privatelyowned.Alargenumberoftheseareofthesinglechamberandsingle

producttype.Nearly80percentofthecoldstoragefacilitiesareaccountedforby

asinglecommoditynamelypotatoandtheyhaveautilizationofonlyaround50

percent.Further,thecoldstoragecapacityisskewedtowardsthenorthernand

easternregionswhichwith65percentofthecoldstoragesconcentratedinUttar

PradeshandWestBengal.6

Addressingthesestructuralchallengesthroughinnovativemeasuresand

technologieswhicheffectivelylinkproductionsystemswithprocessingand

consumptioncanleadtoselfsufficiencyinfoodaswellasimprovementinrural

welfare.Theprosperityachievedbyaugmentingagriculturalgrowthcouldhelpto

addresstheissuesofalargefractionatthebottomofthepyramid.

Inordertoachievethis,weneedtoworkonresolvingsomeoftheself-made

problemsaswellasbuildmechanismstoaddressexternalproblemssuchas

climatevariabilityanderosionofnaturalresources.

Byanalyzingthevariouslinkagesintheagriculturevaluechainandidentifyingthe

challengeswithineach,wecouldcomeupwitheffectivesolutions.Thiscouldnot

onlyunearthnewopportunitiesbutcouldalsotransformthesechallengesinto

potentiallyprofitableinvestments.

“There is a need for new

technologies, new

organizational structures,

new institutional responses

and, above all, a new

compact between farmers,

technologists, scientists,administrators,

businessmen, bankers and

consumers. Hence, there is

a need for creative and

imaginative solutions that

increase agricultural

productivity, farm

incomes, food production

and, at the same time, also

contribute to greater

purchasing power for the

poor” ManmohanSingh,Prime

MinisterofIndiaatGAIF,April2008

4 ‘SomepotentialforagriculturalmarketinginfrastructureprojectsinIndia’-PaperpresentedintheGeneralBodyMeetingofNationalCouncilofState

Agricultural,MarketingBoards,heldatGuwahation3rdto4thApril2008.

5 ReportoftheTaskForceonDevelopmentofColdChaininIndia,Dept.ofAgricultureandCooperation,MinistryofAgriculture,Govt.ofIndiaAug2008

6 AgricultureInformaticsDivision,NationalInformaticsCenter,Agmark

9





India’sagriculturesectorneedstorevampandmodernizeitsbackwardand

forwardlinkages.Poorpre-harvestinputmanagement,suchastheuseofinferior

seeds,skewedfertilizerapplicationandimproperwatermanagementpractices,

havetakenatollonyields.Further,almostathirdoftheagri-produceiswasted 1

duetopoorpost-harvestinfrastructureandimproperhandlingandstorage.Both

thegovernmentandthecorporatesectorneedtofocusonstreamliningand

aligningtheseagri-linkagestomeetbestpractices.Apartfromensuringshort-

termmeasuressuchasremunerativesupportpricesandcheapagriculturalcredit,

thereisaneedtomakesubstantiallongterminvestmentsinirrigation,waterconservation,buildingruralroadsandmarkets,providingrobustprimary

educationandhealthfacilitiesintheruralareas.

Theschematicbelowsummarizesvariouslinkagesintheagriculturalecosystem,

eachofwhichisdiscussedsubsequently.

4. Indian Agricultural Linkages

1 IndianAgribusiness,CLSA,2006

Pre-Harvest Post-Harvest

Soilandwater

management

Storageandmarketing

Infrastructure

ResearchandDevelopment

SupportInfrastructure-transport,

electricity,education,healthcare

Opportunitiesexistacrossthevaluechain

(PPPisanemergingoption)PrivatePlayers PublicParticipation

AgriFinancing

Agri-input Agri-outputAgro-

processing

Agri-distribution

sub-system

Productionand

marketingof

agricultural

inputssuchas

seeds,

fertilizers,etc

Productionof

crops,

poultry&

dairying,etc

Pulping

industries,

beverage

industries,etc

Storage,

transportationand

marketingof

variousgoods,etc

10

Source:KPMGAnalysis





4.1 Pre-Harvest Infrastructure

Improvingproductivityisnotaneasytaskandrequiresconsiderablechangesin

pre-harvestinfrastructure.Adoptionofbetterinputscanimproveoutput

significantly.Newtechnologiesareneededtopushtheyieldfrontiers,utilize

inputsmoreefficientlyanddiversifytomoresustainableandhighervalue

croppingpatterns.Therightcropselectiontechniquescanconsiderablyinfluence

thechancesofobtainingthedesiredoutput.Innovativesolutionstoinput

distributionandusageextensioncouldgoalongwayincreatingasustainable

farmingsystem.Thefollowingsectionunderlinesthedifferentissuesoftheback-

endsupplychainthatneedtobeaddressedandalsohighlightsexamplesof

innovativesolutionsandpracticesadoptedbypublicandprivateplayerstotapthe

back-endagri-infrastructureopportunity.

4.1.1Agri-Inputs

4.1.1.1 Seeds

Thereisaneedtoensureadequateandtimelysupplyofqualityinputsofwhich

thesupplyandqualityofseedneedsthemosturgentattention.

• Lowseedreplacementrate(SRR)

PoorfarmerawarenessandthelackofadequatecredithavekeptSRRat2-10

percentlevelsforkeycropsversusamoreappropriate20-25percent.

Furthermore,thereispracticallynochangeintheSRRinmoststatesof

NorthernandEasternIndia.

Seedisoneofthemostcriticalinputsforafarmertogethigherproductivity

peracreandconstitutesonly5-10percentofthetotalcultivationcost,exceptvegetativelypropagatedcropssuchaspotatoorgarlic.However,inIndia,due

tolowawareness,misconceptionsoncultivatingnewseedseveryseason

andinsufficientmoney,farmersresorttoplantingsavedseedseveryyear2.

Seedssavedfromthecropoveratime,tendtolosetheirvirilityandpotency,

thusresultinginlowerproductivityofupto20-25percentinself-pollinated

cropsandashighas50percentincross-pollinatedcrops 3.

2 InterviewwithMrSekharNatarajan,IndiaRegionLead,Monsanto

3PlanningCommission11th5yearplan

11





• Poorqualityof seeds

Oneofthemajordeterrentstohighproductivityandresultantlowyieldsin

Indiaistheuseofpoorqualityseedsbyfarmers.Lessthan12percentofthe

farmersinIndiausequalityseeds,whiletherestcultivatesavedseedsfrom

theircropsorbuyinginferiorqualityseedsfromnearbyruralmandis 4.Alotof

thefarmerantipathyforseedreplacementhasresultedfromdistrustin

governmentchannels,whichhaveoftenpeddledlow-qualityseedsat

premiumprices5.

• Hybridseedproductionstilllacking

Therealsoexistsmissinglinksintheseedproductionsystem.Thereisvery

littlefocusonhybridseedproductioninpublicsector.Howevertheprivate

sectorhasexpandedtofillthegap.

Inspiteofthisimprovement,India’ssuccesswith

high-yieldingseedvarietieshasbeenlargelyconfined

tofoodgrains.Advancedseedresearchand

propagationintoothercropsisalmostnon-existent.

Chinaproduces40percentmorericethanIndiawith

about33percentlowercropplanted.Theyieldsin

Chinaatover200kg/hectareareabouttwicethan

thatofIndia’s.Betterimplementationofhighyield

varieties,adequatemaintenanceofirrigationfacilities

andconsistentinvestmentsindevelopingnewer

seedsandagri-researchhavecontributedtothe

sustenanceofhighyieldsinChina 6.

ChangingShareofPrivateandPublicSectorin

SeedsProduction

Year Private(percent) Public(percent)

2004 49.11 50.89

2005 58 42

2006 57.75 42.25

Theprivatesectorseedindustry

inIndiaisgrowingappreciably

andhasmadesignificant

contributionstoBTcotton,

hybridsofmaize,rice,sunflower,etc.

Source:PlanningCommission

Source:FAO,TheGravyTrain,KotakSecurities,August2008

4 InterviewwithMr.SekharNatarajan,IndiaRegionLead,Monsanto

5 PlanningCommission11th5yearplan

6 GravyTrain,KotakSecurities,August2008

Rice yields in India are one-half of that of other major producers

12





• MediocreimprovementsinSeedproduction

Theimprovementsinseedproductionaremediocrebyworldstandards;

India’spaddyandwheatyieldsarestillathirdofbestin-classworld

standards.Muchofthesametrendsaretrueforothercrops 7

• Extinctionoftraditionalvariety

Withtheadventofthegreenrevolution,theemphasisonagricultureinIndia

shiftedawayfrombiodiversitytoincreasedyield.Asaresult,thegeneticbase

ofricevarietiesisbeingreducedconsiderablyandseveraltraditionalseed

varietiesarenowfacingextinction.

Source:RBI,FAO,CLSAAsia-PacificMarkets


Paddy yields are a third of best-in-class

Paddy(kg/ ha)

Wheat yields also similarly low

Wheat yields (kg/ ha)

13





Source-M.S.SwaminathanFoundation

4.1.1.2 Chemicals

• Fertilizers

India’spastresearchanddevelopmenteffortstoincreaseproductionfocused

onuseofinputsformaximizingproduction.Thisfocuswillnowhavetoshift

toincreasetheefficiencyofinputsforoptimumandsustainedproduction.The

firststepistoratinalizethecurrentfertilisersubsidy,whichhasbeenan

importantcauseofdeterioratingsoilquality.

14

Thereisaneedforseedproductionanddistributionsystemtoberevampedbystrengtheningpublicsector

seedagenciesandbyinvolvingprivatetradeinseedmultiplicationanddistributionsystem.Statesmustsimultaneouslystrengthentheirsystemstocheckqualityofinputs.InformationonimportanceofSRRalso

needstobecommunicatedtothefarmersandeffortstosavetraditionalvarietiesarerequired.





AccordingtotheUnionBudget,thebudgetaryfertilizersubsidyisINR758

billion.Thisamountisfourtimestheinvestmentinagriculturesector.

However,thismoney,ifinvesteddirectlyinagriculture,infrastructureor

educationcouldgivebetterreturnsandcouldbesociallymoreproductive.

Thefollowingpresentthemajordrawbacksofthefertilizersubsidies:

• Thefertilizersubsidyprimarilybenefitsstatesanddistrictsthathave

abundantwaterresourcesasavailabilityofwaterisarequirementforthe

useoffertilizers.Thisresultsinlesssignificantgainstothesmallandmarginalfarmerswhichresideinsemi-aridandaridregions

• Itencouragesover-useofchemicalsleadingtolong-termsoildegradation

andwaterpollution;thisisworsenedbythecurrentsubsidypolicywhich

hasledtoaskewedusageofnitrogenous,potassiumandphosphates

fertilizers.Pricingdistortionsininputshasalsocontributedtothisskewed

development

• Almostathirdofthesubsidiesgotothefertilizerindustry,insteadofthe

truerecipientwhichisthefarmer

• Lastly,subsidizingfertilizerstotheextentof85percenthasalsoresultedin

theillegalflowofthesechemicalstoNepalandBangladesh,thereby

creatingartificialscarcityattheborders 8.Thus,thechallengeforstates

suchasBihar,Bengal,AssamandTripuraistoensurethatthesupplies

meantfortheirfarmersisnotdivertedtotheneighboringcountries.

Thus,thereisanurgentneedtorationalizesubsidiesandalsoexamine

methodsbywhichthedeliveryofsomepartofthepresentlyhugesubsidies

canbetransferredfromfertilizerproducerstofarmersdirectlyaswellasto

agriculturalresearchandextensionservices.

• Pesticides

Despitehavingthesecond-largestarablelandacreageintheworld,India’s

shareoftheINR1.5trillionglobalcropprotectionmarketisonly2-3percent 9.

Afocusonimprovingyields,aswellashighervalue-addedagriculture,islikely

tospurtheusageofagri-chemicals.Howevertheneedisnotonlytoincrease

thecropprotectionbutalsotosustainagriculturallandwhichcanbedoneby

providingtherightinformationonapplicationofinputsattherighttime.

8 Subsidiesandtrans-bordersmugglingoffertilizers,Merinews,2ndApril2009


15





CompanieslikeRallisandChambalFertilizersaresupplyingagri-chemicalsaswell

asknow-howtofarmerswhilealsoplayingtheroleofacoordinator.

Thereissignificantneedtoprovidetherightguidanceandtraininginorderto

developnecessaryskillsthatwouldleadtotheadvancementofIndia’sagriculture

base.Thisrequiresthedevelopmentofabroadrangeofskillsatalllevels.To

achievethis,networkingandthedevelopmentofpartnershipsbetween

academia,researchinstitutions,policy-makersandindustryarekeymechanisms

totransfertechnologiesandknowledge.Hands-onapproachestotrainingmust

bestrengthenedacrossabroadspectrum,beginningwiththefarmer,through

management,researchanddevelopment.Indianagriculturalinstitutionsneedto

workwithindustryplayersonnotjustdesignoftheircurriculabutalsoonareas

ofimmediaterelevancesuchasdevelopmentofcropvarietiesconduciveto

processing,waterconservationandcropmanagement.

Chambal Fertilizers and Chemicals - Creating demands through Facilitation

Inputs Uttam Technology Uttam BandhanExtensions Services uttamkrishi.com

& Hello Uttam

• CompanydealersprovideUrea

andotheragri-inputslikeDAP(Di-AmmoniumPhosphate),MOP

(MurateofPotash),SSP(Single

SuperPhosphate),pesticides,

herbicides,fungicidesandseeds

• Mostoftheseproductsare

sourcedfromreputedsuppliers

andsoldunderthe‘Uttam’

umbrellabrand

• Cropandproductdemonstrations

conducted

• Fielddemonstrationsandfarmer

meetsconducted

• Soiltestsaredoneformicro

nutrientsandbasedonthereportssoilmappingisdone

• Expertsemphasizethebalanced

useoffertilizers

• Unemployedyouthfromvillages

areenrolledas‘UttamKrishiSewaks’.

• TheSewaksaretrainedinthelatesttechniquesandprovide

specialisedservicestofarmers

• Website,‘uttamkrishi.com’,

providesinformationontheweather,suitablecropping

techniquesandmarkets.

• ‘HelloUttam’telephonichelp

lineshavebeensetuptoanswerthequeriesraisedbyfarmers

Source-Companywebsite

16





4.1.2Agri-InputsDistribution

Poormediareachandlackofcommunicationinfrastructurecreatesimpediments

forfarmerstoaccessthebestinputs.Theagri-inputsuppliersarealsosuffering

asthemeanstotaptheruralaudienceislimited.Lackoftechnologyandhigh

illiteracylevelsaddtotheroadblocksinthemarketingofagri-inputs.Accordingto

astudybyFICCI,55percentofthevillagesdonothaveaseedstoreandover80

percentdonothaverepairfacilitiesforagriculturalimplements.Poorroadsand

transportationfacilitiesmakeitdifficultforfarmerstotravelandprocuretheright

inputsrequiredforsustainableagriculturalpractices.Inaddition,farmersalso

needtobetaughthowtousetheinputssoastoreapoptimumbenefitsfrom

thesame.

Newplatformsformarketingofagriculturalinputsarerequired.Manyinput

distributorsarenowusinginnovativemodelsthatnotonlyprovideagri-inputsbut

alsoprovideawiderangeofagri-solutionswhichincludesoiltesting,seed

selection,awarenessonbalanceduseofinputsandonnewresearchand

products.Theseset-upsalsoprovidecredittofarmerstobuytheinputsandalso

imparttrainingonvariousagri-relatedpractices.

17





DCM Shriram’s network of Hariyali Kisaan Bazaar

DCMShriram’snetworkofHariyaliKisaanBazaarsisanidealplatformfor

marketingagri-inputs.Itisachainofruralcenterswhichprovidesvarious

encompassingsolutionstothefarmersunderoneroof.

Eachcentreprovides:

• 24x7supportthroughateamofqualifiedagronomistsbasedatthe

centre.

• Awiderangeofmulti-brandagri-inputslikefertilizers,seeds,pesticides,

farmimplements&tools,veterinaryproducts,animalfeed,irrigationitems

andotherkeyinputslikediesel,petrolatfairprices.

• Accesstomodernretailbanking&farmcreditthroughsimplifiedand

transparentprocessesaswellasotherfinancialserviceslikeinsuranceetc.

• Farmproducebuybackopportunities,accesstonewmarkets&output

relatedservices.

• OtherProductsandServices: Fuels,FMCG,ConsumerGoodsand

Durables,Apparelsetc.

Each"HariyaliKisaanBazaar"caterstoagriculturallandofabout50,000-70,000

acresandimpactsthelifeofapporximately15,000farmers.Sofarover302

Hariyalioutletshavebeensetupacrosseightstates-Haryana,Punjab,Uttar

Pradesh,Rajasthan,Chattisgarh,MadhyaPradesh,MaharashtraandAndhra

Pradesh10

10 Companywebsite

18





4.1.3SoilandWaterManagement

Thepressingneedtoaccelerateagriculturegrowthshouldnotbeatthecostof

sustainabilityofthenaturalresourcebase.Whilenotentirelyirreversible,

degradationhasaggravatedthechallengesfacingtheagriculturesectorinIndiain

itsfighttoimproveproductivity.

• Highsoilerosion,leading toreductioninfertilityandproductivityofland

• Salinityandalkalinityarecausingsoilstolosesoilcarbonandmicronutrients

duetoirrationalandunbalancedfertilizeruse

• Pressureonagriculturallandhasalsoincreasedwithcropsbeing sown

withoutanybreakswhichdestroyssoilnutrients

• Alarmingdegradationofforests&commons,aggravatingtopsoillossesand

surfacerun-off

• Groundwaterrechargedecliningdangerously

Theissueofnaturalresourcemanagementmustbeaddressedurgentlysince

nearly2/3rdofIndia’sfarmlandsareinsomewayeitherdegradedorsick11.

“In the face of growing demand, limited natural resources and climate change, we

need to increase yields sustainably by helping farmers produce more using less natural

resources, while also improving their lives.” SekharNatarajan-IndiaRegionLead,Monsanto

11 PlanningCommission11th5yeaplan

19





Region-specificfactorsCausingLowProductivity

Agro-climaticRegion States/PartsofStates Region-specificConstraints

WesternHimalayanregion-I J&K,HP,Uttaranchal

Severesoilerosion,degradationduetoheavy

rainfall/floodsanddeforestation,lowSRRs,poor

road,poorinputdelivery,inadequate

communicationinfrastructureandmarketing

EasternHimalayanregion-II Assam,NEStates,Sikkim

Aluminiumtoxicityandsoilacidity,soilerosionand

floods,shiftingcultivation,lowSRRs,non-availability

ofelectricity,poorroad,poorinputdeliverysystem

andcommunicationinfrastructure

Lowerandmiddlegangetic

plainsregions-IIIandIVWestBengal,Bihar,EasternUP

Flood/waterlogging,improperdrainage,

salinity/alkalinity,arseniccontamination,lowSRRs,

non-availabilityofelectricity,highpopulationgrowth,

poorroadandcommunicationinfrastructure

Upperandtrans-gangeticplains

region-VandVIWesternUP,Punjab,Har yana

Groundwaterdepletion,decreasingtotalfactor

productivity,micronutrientdeficiency,non-

availabilityofelectricity,andhighpopulationdensity

Easternplateauandhills

region-VIIOrissa,Jharkhand,Chhattisgarh

Moisturestress,drought,andsoilacidity,iron

toxicity,lowSRRs,non-availabilityofelectricity,high

populationgrowth,poorroad,poorinputdelivery

andcommunicationinfrastructure

Source:PlanningCommission11th5yearplan

20





Asustainablefarmingsystemneedstobepromotedinwhichnaturalresources

aremanagedinawaythatpotentialyieldandthestockofnaturalresourcesdo

notdeclineovertime.Soilhealthawarenessmustalsobepromotedthrougha

crediblesystemofsoiltestingandadviceonnutrientmanagementshouldbe

extended.InnovativeTechnologyandresearchextensionarecriticalinaddressing

theseissues.Amovetowardsorganicfarmingwouldalsohelpinaddressingthe

side-effectsofconventionalmethods.

The 16th IFOAM organic world conference on Organic agriculture and rural

livelihoods in Karnataka, India stated that the organic farmers perceived the

conversion from conventional to organic agriculture had improved their

livelihoods in multiple ways.

The above report pointed out that over the long term the conversion to

organic farming had improved the farmers net farm incomes, reduced the

risk of pesticide poisonings, led to more self-sufficiency, improved food

safety and reduced vulnerability, and improved the access to networks

supporting knowledge exchange and political participation.

However,riskanduncertaintyrelatedtotheconversionperiod,suchas

temporarilydecliningyieldsandthelackofexperiencesandinformationaremajorconstraintspreventingtheadoptionoforganicfarming.

Further,soilconservationpracticessuchaszerotillagewhichhavegained

immensepopularityincountriessuchasBrazilalsoneedtobeexploredona

largerscale.Techniquessuchassystemofriceintensification(SRI)whichaid

waterconservationwhileincreasingyieldsdramatically,meritlargescale

deploymenttovalidatetheireffectiveness.CurrentlySRIisrestrictedtoafew

experimentalfarmers.

21





Conservation agriculture

technologiesPotential benefits relative to transplanted rice

Laserleveler

Cutswateruse;fewerbundsandirrigationchannels;bettersoilnutrient

distribution;lessleachingofnitratesintogroundwater;moreefficienttractoruse

(reduceddieselconsumption);increasedareaforcultivation.

Zero-tillage

Lesslaborrequired;soilphysicalstructureismaintained(reducednutrientloss,

soilhealthmaintained);lesswaterrequired;avoidslargecracksinsoilafterdryperiods;cankeeppreviouscrop’sresidueinfieldformulch(ifappropriatedrill

seederisusedforseeding);subsoillayerisnotcompactedbytractors

(compactedsubsoilimpedesrootgrowth).

CropresiduemulchIncreasessoilwater-holdingcapacity,increasessoilquality,reducesweed

pressure,avoidsburning.

Dryseeding

Lesswaterrequired;lesslaborrequired(especiallyatpeaktransplantingtime);

postharvestconditionoffieldisbetterforsucceedingcrop;deeperrootgrowth

(meaningbettertoleranceofdryconditions,betteraccesstosoilnutrients).

Source:RiceTodayOctober-December2006

Newtechnologiesarerequiredtopushtheyieldgrowth,utilizeinputsoptimally

anddiversifytomoresustainableandmorevaluablecroppingpatterns.Theseare

allknowledgedrivenandrequirenotonlyastrongresearchandextensionsystem

withskilledmanpower,butalsoadynamicchannelforexchangeofinformation.

SomeoftheprivateplayerssuchasTataChemicalshavesetupefficient

informationextensionsystemsandintroducednewtechnologieswhichhavethe

potentialtoestablishasustainablefarmingsystem.

22





Tata Kisan Sansar – The rise of precision farming

Tata Chemicals introduced the concept of precision farming in Uttar Pradesh, Haryana and Punjab though its

network of Tata Kisan Sansar or farm centres, which provide end-to-end agri solutions. Currently, 40 TKVKs

and about 800 franchisee TKSs are in operation, catering to 27,200 villages and almost 25 lakh farmers

Precision farming leverages modern satellite and information technology to serve the needs of Indian

farmers to analyze soil, inform about crop health and pest attacks and predict the final output.

The TKS network runs crop clinics where agronomists use computers to access information from thegeographic information system (GIS). The agronomist at the Sansar uses analyzed information on

topography, soils, climate, hydrology, cropping systems and crop suitability to advise farmers on which crops

to grow, crop management, market trends, what kind of fertilizers to use and how much, etc

At the soil-testing laboratory, technicians analyze soil samples to determine their composition and confirm

what the satellite maps have indicated

Additionally, the TKS network operates experimental farms where scientists conduct agricultural research

and development.

Source: Company website

Role of Public-Private Partnerships in Natural resource conservation

PublicandPrivateplayersarenowcomingtogethertohelpfarmersinsoiland

watermanagementbyprovidingthemuchneededresearchextensionand

trainingtothem.

ThegovernmentofMadhyaPradeshandanagrochemicalandseedcompanyDhanukaAgri-TechLimited

havecometogethertoaddresstheissueoftechnologyextensionunderthe“Public-PrivatePartnershipin

AgriculturalExtensionManagementprogramme”.Theprogrammeaimstoworktogether inareaslikesoil

testing,training,farmers’tourprogrammes,demonstrationsandtransferoftechnologythroughcyber

dhabas,agriculturefortnights,establishmentofmarketsandprovidingcreditfacilitiestofarmers.

"Participation of private organizations in providing Agricultural Extension services

will naturally benefit farmers in using new technologies, cultivating cash crops to

maximize their profit, but also help scientists to carry the technologies to the rural

areas". -ShriDigvijaySingh,ChiefMinister,MadhyaPradeshin2001

23





4.1.4CropSelection

Theproblemofpoorcrop-choiceisprevalentacrossIndia.Theselectionofthe

rightcropisverycriticalinattainingthedesiredendproduct.Cropselectionhas

alsoassumedgreaterimportanceintermsofcurrenteconomicsustainability.

However,manyfarmersarenotawareofthecriticalityofcropselectionordon’t

haveenoughfundstoconductresearchaboutthechoiceofsuitablecrops,thus

requiringtheadviceandassistanceofmoreinformedplayers.

UnileverhelpsfarmersinUSAtocultivatetherightvarietyoftomatoes,which

wouldbeusedforitsfoodprocessingoperations.Unileverconductedresearch

onfourfarmsinUSA,whichhelpedittoselectawiderrangeofbeneficial

rotationcropsforsoilhealth;reducenutrientapplicationsandfurther

implementintegratedpestmanagement;andestablishbiodiversity

programmes.Thecompanyrunsseminarstoeducatefarmersonbestpractice

anditemploysadedicatedfieldagronomisttosupportfarmers.

Source:Unileversustainableagriculturereport

24





McCainFoodsenteredIndiain1997withanintenttoinvestINR1billion($25million)inpotatofrybusiness.Aftera

thoroughstudy,thecompanyconcludedthatIndianpotatowasnottheidealoneforthebusiness.Potatoes,whichwere

largerinsizeandhadlesswatercontent,wererequired.Forthekindofpotatoneeded,itwasnecessarytodevelopthe

seedincoldclimate.AteamofresearchersthentookupthetaskofdevelopingtheseedatLahulSpitiinHimachal

Pradesh.

Afterdevelopingtheseedthecompanystartedasearchforthebestareaforgrowingthenewbreeds.Thatsearchended

atMehasanainnorthGujarat,astheregionisblessedwithastretchedwintrycondition,whichwasvitalforpotatogrowth.

McCainpickedcontractfarmingasthebestoption,butdidnotaskthefarmerstogrowonlypotatoesaswellasdidn’t

promisetobuyout100percentoftheproduceeither.Asaresultthefarmerswerenotdependentonlyonthecompany.

Thecompanyworkedcloselywithfarmersandencouragedthemtosharethenewagronomypracticeslikerelyingon

qualityseed,dripandsprinklerirrigationsystems,newplantingtechniquesandadoptingcontemporarymethodsofpotato

storing.

Today,Deesa,Vijapur,Palanpur,HimmatnagarinnorthGujaratandAnandincentralGujarathaveemergedasIndia’shubs

ofnewbreedsofpotato.

Source:CompanyWebsite,Fromfieldtofries,BusinessToday,April2009

Come March, the

Shepody potatoes are

harvested and sent to

the McCain factory in

Mehsana, Gujarat

Master crop of potatoes

grown in Lahaul-Spiti

valley, Himachal

Pradesh, where the

weather is conducive

The crop is harvested in

September and rushed,

to farmers in Gujarat,

where the tubers

are replanted.

25

McCain Foods India’s process of growing Shepody potatoes-A Logistical Masterpiece

•Theyieldperhectarewith

McCain'svarieties,basedonits

technologyoflessertubersof

greatermass,hasincreasedbyas

muchas60-70percent.

•WhiletheIndianaverageyieldfor

potatoesisabout15tonnesper

hectare,inGujarat’sithas

increasedfromabout22to 27.5

tonnesperhectare.

•McCainFoodsIndiahasbegunsupplyingtomarketsinSriLanka,

Pakistan,BangladeshandNepal,as

wellasIndia.Thecompanyexports

10-15percentofitsoutputto

SouthandSouth-eastAsian

countriesandtheMiddleEast.

•By2010,allMacFriestobemadein

India





JainIrrigation:Supplyingfarmerswithspecificvarietyofhybridonionseedsthatsuitstheirprocessingneeds.

JainIrrigationSystemsLtd.(JISL)hasthelargestoniondehydrationunitinAsiawithanannualcapacityof120,000million

tones.Inordertoprocureonionsforprocessing,JISLhasadoptedcontractfarmingmodelwithnearly3,000farmers.Jain

Irrigationundertookastudytoidentifytherightvarietyofonionssuitableforitsprocessaswellasthecountry’sclimate.

Themainobjectiveofthestudywastoimproveproductionandproductivityofwhiteonionssuitablefordehydrationand

standardizeapackageofagronomicalpracticesundershort-daytropicalconditionsusinghigh-techinputs.Theother

objectivewastodisseminatetheimprovedtechnologythroughfarmers’participatorydemonstration,trainingandcontract

farming.Withtheseobjectivesinview,about43varietiesofwhiteonionincludingexoticvarietiessuitableforshort-day

conditionswereevaluatedduringthewinterseason1996-97.Afewcultivars/hybridswereshort-listedfordetailed

investigations.Theresultsshowedthat‘WhiteCreole’wassuitable,andwasselectedformulti-locationaltrialsbothinthe

ResearchandDevelopmentfarmsandinthefarmers’fields12.

Theselectionoftherightvarietyofcropscoupledwithaninnovativeproductionprocessandresearchextensionefforts

hasmadeJISLoneofthetrustedandlargestprovidersofwhiteonionsnotonlyinIndiabutalsoglobally.Thecompany

accountsforabout40percentofthedehydratedonionexportsfromIndia 13.Thecompanyisnowplanningtoenterinto

contractfarmingfortomatoinMaharashtraandAndhraPradesh14.

4.1.5CropDiversification

Anotherimportantfactorthatneedsemphasisiscropdiversification.Crop

diversificationisintendedtogiveawiderchoiceintheproductionofavarietyof

cropsinagivenareasoastoexpandproductionrelatedactivitiesonvarious

cropsandalsotolessenrisk.Thediversificationalsohelpsastatetoproduce

moreremunerativecropsandcanalsobeusedtoaddresstheproblemsofsoil

andwatermanagement.

Inrecenttimes,cropdiversificationhasgainedsignificanceascultivationof

traditionalvarietiesoveraprolongedperiodhadcauseddegradationofnatural

resourcestoagreatextent.Thegroundwaterlevelhadalsodeclinedduetoover

exploitationoftheseresources.

ThePunjabstategovernmenthasbeenoneofthefirstmoversinthisfield.

Punjab’sstatepromotedPunjabAgroFoodgrainsCorporation(PAFC)hasan

aggressivetargetofbringingafourthofitsacreageundernon-grains.The

governmenthastakenthesupportofprivateplayersthroughthecontractfarming

routetoachieveitstarget.Oneofthefirstventuresinthestatewasledby

PepsiCointomatocontractfarmingintheearly1990s;subsequentinitiatives

havealsoseencropslikebarley,potato,maize,cornandcottoncomeunder

contractfarming.

12 actahort.org

13 SupplyChainforExportsofDehydratedOnions:CaseStudyofJainIrrigationSystemsinIndia,Food

andAgriculturalOrganizationoftheUnitedNationsNewDelhi,Feb2008

14 JainIrrigationplanstoexpanddehydratedvegetablebusiness,HinduBusinessLine,March2009

26





Source:PAFC,ParmodKumarinContractFarminginIndia:OptionsandImplicationsforSmallandLargeFarmers(2005)

Himachal Pradesh is using crop diversification to fight climatic changes

HimachalPradesh,knownasthefruitbowlofthecountry,hasapproximately

200,000hectaresoflandunderhorticulturecultivationyieldingabouthalfa

milliontonsofdifferentkindsoffruit.ThestateearnsmorethanINR25billion

fromcultivationoffruitsandvegetables.Whileappleisthemainfruitcrop,other

fruitslikepears,peaches,cherries,apricots,almondsandplumsarethemajor

commercialcropsofHimachalPradesh.Recentlytheproductionofapplehas

beenseverelyaffectedbyadverseclimaticchanges.Asanalternate,farmersin

HimachalPradeshareincreasinglymovingtowardscommercialcultivation

amongstwhichkiwiisoneofthemostpreferredcrops.

Appleorchardsrequire1,000to1,600hoursofchill,whilekiwirequiresjust200

hoursofchillforafavourablecrop.Fruitgrowersintheareaswherethechilling

hoursarenotstaticnowhaveoptedforkiwicultivationasacashcrop.

Impact

• Asperhorticulturedepartmentestimates,atleast200farmersintheKullu

valleyalonehavetakenupkiwicultivation.

• In2008,thetotalkiwiyield inHimachalPradeshwas137tons

• DifferentvarietiesofkiwisuchasHayward,Abbot,AllisonandBrunoare

cultivatedonalmost120hectaresofland

• Kiwitypicallyneedstemperateclimatetogrow,butIndianfarmershave

beensuccessfulingrowingitevenatextremelylowtemperatures.Someof

thefarmersaregrowingkiwiatanaltitudeof8,500feet

PAFC targets of contract farming One-fourth of Punjab acreage to be

under non-grains

27





4.1.6Irrigation

India’sagricultureoutputremainsvolatileandhostagetothemonsoons,despite

havingthehighestamountoflandunderirrigationintheworld.Thegrowthin

irrigationcoveragehasslowedmarkedlyaftertheGreenRevolutionand60

percentofthegrosssownareastillremainsprimarilyrain-fed.Asurveybythe

MinistryofAgriculturealsofoundthathalfofthetotalfarmerholdingsinIndiaare

notirrigated,withanother20percentbeingonlypartlyirrigated 15.Thequalityof

irrigationfacilitiesandregularavailabilityofwaterarealsomajorconcerns.

Also,wateravailabilityforirrigationisincreasinglyconstrained.Irrigationaccounts

for85percentofwaterwithdrawalsindevelopingcountries,andtherapidgrowth

ofthesectorhasbeenbasedontheavailabilityofhugequantitiesoflow-cost

water.Foryears,groundwaterprovidedaprofitablenewresource,butinmany

basinsgroundwaterisnowbeingminedrapidly.Governmentshaveledthe

expansionoflarge-scaleirrigation,butperformancehasbeensuboptimal.

WateruseefficiencycanbeaddressedbyimprovementsinIrrigation

managementandpractices.Switchingfromsurface(alsocalledfloodirrigation)to

localizedirrigationcanresultinapproximately25percentwatersavingandgrowinghigh-value-addedcropscanimproveeconomicefficiency.Manyprivate

companiessuchasJainIrrigationhaveinvestedinnewirrigationtechniques

whichhaveimprovedtheefficiencyofwaterusageaswellasenhanced

productivity.

Jain’sdripirrigationsystemsdeliverwaterusinganetworkofpipesthathavea

seriesofoutletpoints.Eachpointdistributesapreciselycontrolleddoseof

waterandnutrientsdirectlyintotherootzoneoftheplant.Thedripirrigation

systemisexpectedtosaveupto70percentofthewaterwhencomparedwith

floodirrigationtechniques(Farmerstypicallyusefloodirrigation,which

consumeslargeamountsofenergytopumpwater,muchofwhichiswasted,

aswellas10kilowatt-hoursofelectricityperdayperarea).Dripsystemscan

providea30percentefficiencyimprovementintheuseoffertilizer,increasing

overallyieldsupto230percentaccordingtoEurope’sRenewableEnergyand

EnergyEfficiencyPartnership(REEEP)

Source:REEEPassists€15MdripirrigationbuyinIndia,CleantechGroupLLC,May2009


28





Chinahasalsoinvestedheavilyintodripirrigation.Thecountryrecentlypumped

inapproximatelyINR1billiontosetupadripirrigationsystempoweredbysolar

panelsinthearidXinjiangregion,whichproduces30percentofthecountry’s

cotton16.

Public-privatepartnerships,withtheirpromiseofsharedresponsibilityand

managedrisk,havealsobeenseenasmeansofcreatingtherightincentivesto

addresstheissuesofwatermanagement.Oneofthemostrecentinitiatives

addressingthisissueisthepublicprivatepartnershipbetweenNationalBankfor

AgricultureandRuralDevelopment(NABARD)andJainIrrigation.

UnileverhasalsoenteredintoaPPPwithMinistryofAgricultureandacademic

institutionstofindwaystofunddripirrigationsystemsinthestatesofKarnataka

andTamilNaduinSouthernIndia.Oneexperimentalfarmyieldedwatersavings

ofupto40percent,aswellasreducedtheamountofchemicalsneeded.UnileveroperatesinKarnatakaandTamilNaduthroughacontractfarmingmodel

foritssuppliesofgherkins.Unileverhashelpedtheindustryimproveyieldof

gherkinsbyupto60percentsinceitsinitialinvolvementin1998 17.

IntheChineseXinjiangregion,replacingfloodirrigationwithdripirrigationon

just5,000acresofcottonfarmlandhasthepotentialtoreducewateruseby22

percent,save6millionlitersayear,increasecultivableareaby5percentby

eliminatingditches,reducechemicalfertilizersby10percent,andimproveyield

by30percent

Source:Chinainvests$23Mindripirrigation,CleantechGroupLLC,Oct2008

NABARDhassignedamemorandumofunderstandingwithJainIrrigation

SystemsLtdforits‘VillageDevelopmentPlan’andimplementationofNaturalResourceManagementandDryLandAgriculture.Tobeimplementedin75

villagesacross31districtsinMaharashtra,theprojectinvolvesdevelopmentof

rainwaterharvestingandwaterstoragestructures,efficientwaterdistribution

andutilizationsystemsusingsolarpumps,developmentcroppingplanand

contractfarmingalongwithmodernagriculturalpractices

Source:JainIrrigationCompanywebsite

16 Chinainvests$23Mindripirrigation,CleantechGroupLLC,Oct2008

17 Unileversustainableagriculturereport

29





PPP - A solution to pre-harvest infrastructure challenge

Theissuesrelatedtopreharvestinfrastructurehavebeensuccessfullyaddressed

whenpublicandprivateplayershavecollaboratedtocomeupwiththesolutions

tobetteragriculturalpractices.Thecollaborationhasresultedinawin-win

situationforstakeholdersandassistedthefarmerstoimproveyieldsaswellas

enhancedtheirstandardofliving.ThePunjabgovernmentwiththesupportof

Pepsicoisoneofthebestexamplesofpublicprivatepartnerships.

Source:PepsicoInternationalPresentation,2008

PepsiCo PunjabGovernment

• Objective:Lookingfordiversificationof

theiragriculturalbaseandincreasefarm

incomes.

• Contribution:Facilitatedcreationof

NurseryInfrastructure,madeavailable

landfor“demonstrationplots”,bought

inmorepartners

• Objective:Interestedinlocalizingthe

supplybaseofCitrusJuice

• Contribution:Leveragedservicesof

internationalexperts,specialized

trainingongrafting&planting,provided

accesstovariousvarieties

•Heightenedfarmerinterest

•CreationofaworldclasssourceofplantingmaterialforthePunjabFarmers-

choicebasedonevaluationof34varitiesofcitrusand16rootstockssourced

fromInternationalqualitynurseryinfrastructure

•GearinguptodelivertoPunjabfarmers-Annualcapacityof4millionsaplings

30





4.2 Harvest and Post-Harvest Infrastructure

IfIndianagriculturehastobegloballycompetitive,itneedsinvestmentin

infrastructurethatcanpromoteefficiencybyreducingtransactioncostsand

marketrisks.Ithasbeenestimatedthatlossofprimaryproducebeforereaching

themarketduetolackofproperhandling,cleaning,sorting,gradingand

packagingfacilitiesatthevillagelevelisabout7percentforfoodgrainsand30

percentforfruitsandvegetables18.

4.2.1Harvesting

4.2.1.1 Mechanization

Agriculturalmachinesincreaseproductivityoflandandlabourbymeetingtimelinessoffarmoperationsandincreaseworkoutputperunittime.Besidesits

contributiontothemultiplecroppinganddiversification,mechanizationalso

enablesefficientutilizationofinputssuchasseeds,fertilizersandwater.Tokeep

pacewithimprovedproductionandproductivity,differentmachineshavebeen

developedforeffectivecultivationandinterculturaloperations.Machinessuchas

mangoharvesters,kinnowclippers,potatodiggers,coconutpeelers,etc.,are

beingadoptedbythegrowers.Machineshavealsobeendeveloped/installedfor

differentspecializedusessuchascoolsterilization(irradiation)forsproutingin

potatoandonion,dehydrationofdifferentproduce,vapourheattreatmentin

majormangogrowingbelts,packagingofcoconutwater,bananafig,andchip-

makingmachine,etc.


“The annual physical and value loss to

farmers due to lack of post harvest

infrastructure is estimated to be around

INR 500 billion”

- Ministry of Food Processing Industries

31





TheavailabilityanduseofimprovedequipmenthaveenabledstateslikePunjab

andHaryanatoachievehighlevelsoflandproductivity.However,theprogressof

mechanizationinmostotherstateshasbeenslowanditsbenefitsoftimelyand

preciseoperationsarenotreachingthemajorityoffarmersinfullmeasure.The

constraintsinpromotionofmechanizationincluderequirementofequipmentfor

eachagro-climaticzone,thesmallandfragmentedlandholding,lowinvestment

capacityofthefarmers,inadequateirrigationfacilities,know-howstatusofthe

farmers,repairs&maintenancefacilitiesetc.

4.2.1.2 Transportation

InIndia,ruralroadconnectivityhasoftenbeenignored.Onlyasmallnumberof

villagesarejoinedbyrailwaysandpuccaroads.Ruralroadsplayacrucialpartof

bringingtheproducefromthefieldtothetransportpointandthentothemandis.

Smallandmarginalfarmersoftenuseslowmovingtransportvehiclesliketractors

andbullockcartstocarrytheirproducetothemarket.Suchmeansoftransport

donotfacilitatetransportofgoodstofar-offmarketplaces;forcingthefarmerto

dumphisproduceinnearbymarketsevenifthepriceobtainedthereis

considerablylow.Manysmallfarmershaveturnedreluctanttomarkettheir

producetodistantmarketsconsideringthehighcostandpoorqualityoftransport

infrastructure,especiallyforperishableproducts.Poortransportinfrastructurenot

onlyaffectsthequalityofproducebutalsoleadstoextensivewastage.

Developmentofruralroadscancontributeupto36-68percentreductionin

transportexpenses20.

Mechanization of processing technology in Vietnam

VietnamisthelargestcashewproducerinSouthEastAsiaandthethirdlargest

cashewexporterintheworldafterIndiaandBrazil.Over90percentof

productionisexported.ThecashewprocessingindustryinVietnamhasmade

significantcontributionstoenhanceexports.Thedevelopmentsinprocessing

technologyhaveenabledVietnamtoexportcashewinprocessedform.Vietnam

hasdeveloped“Coversplittechnology”designedbyVietnamesetechnicians.

Thistechnologyischeapandisabletogenerateahigherratioofwholeseed.

Duetoeasyavailabilityofefficienttechnology,thenumberofprocessing

companiesincreasedfrom6in1986to30in1994(withtotalcapacityof75000

tons/year)to62in1999(withtotalcapacityof250000tons/year)toabout120in

200319.

19 RaboBankReport


32

India still suffers from lower mechanization

Source:WorldBank,KotakInstitutionalEquities





4.2.2PackagingandProcessing

4.2.2.1 Grading and sorting

TheexistinggradinginfrastructureinIndiaisfarfromadequate.Onlyaround7

percentofthetotalquantitysoldbyfarmersinIndiaisgradedbeforesale 21.

FarmersinIndiahavelittletonoinformationofgradinginfrastructureatprimary

levelandtheygenerallyselltheiragriculturalproducewithoutgrading.

Also,thesalespracticeusuallyprevalentatfarmlevelinIndiaincludesthesaleof

heapsofallqualitiesofproduceinonecommonlot.Thus,thefarmerproducing

betterqualityisdeprivedofahigherprice,therebyresultinginnoincentivetouse

superiorqualityinputsforproducingenhancedvarieties.

UndertheAgriculturalProduce(GradingandMarketing)Act,theGovernmenthas

setupgradingstationsforcommoditieslikeghee,flour,eggs,etc.Thegraded

goodsarestampedwiththesealoftheAgriculturalMarketingDepartment

–AGMARK.The“Agmark"goodshaveawidermarketandcommandbetterprices.

ACentralQualityControlLaboratoryhasbeensetupatNagpurandeightother

regionallaboratoriesindifferentpartsofthecountrywiththepurposeoftestingthequalityofagriculturalproductsandapplyingfortheGovernment's"Agmark".

TheGovernmentisfurtherstreamliningqualitycontrolenforcementand

inspectionandimprovementingrading.

4.2.2.2 Poor packaging

PackingandhandlingofperishablesisstillinprimitivestagesinIndia.Moreoften

farmerspacktheirgoodsinjutesacks(gunnybags)ortightlypackedboxes,

whicharestackedoneabovetheother,therebyleadingtosignificantdamageto

theproduce.Whilethelossesduetopoorpackagingaremorepronouncedforhorticulturalproducts,itisquitesubstantialforfoodgrainslikestaples,pulses

andoilseedsaswell.Majorityoffruitsandvegetablesarestilloutsidethe

purviewofproperpackaging.Efficientpackagingcanmakeasignificantdifference

inthemassivequantityoffoodgrainsIndialosesinthesupplychaineveryyear.

Terminal Markets- A solution to quality grading and better packaging

TerminalMarketshavesuccessfullyaddressedtheproblemsofpackagingand

gradingwhilealsohelpinginclosingthevariousgapsinpostharvest

infrastructure


33





TerminalMarketsareestablishedunderPublicPrivatePartnership(PPP)mode

andoperateonaHub-and-SpokeFormatwhereintheTerminalMarket(thehub)is

linkedtoanumberofCollectionCentres(thespokes).Thesemarketshelpin

realizingbetterreturnstothefarmersbyreducingpostharvestlossesof

perishablecommoditiesandreducingthenumberofmiddlemenaswellas

provideonestopshopfortheprocessorstoprocurequalityrawmaterials.

Theperishablehorticulturalproduceiscleanedatthecollectioncentresand

transportedtotheterminalmarketsthroughvanstherebyreducingpostharvest

losses.Theproducearrivingintheterminalmarketisgradedandstoredinthe

coldstoragetillitisauctionedthroughelectronicauctionsystemordirectselling.

Thecommoditiesmarketedincludeallkindsofperishablecommodities,suchas

fruits,vegetables,flowers,aromatics,herbs,meat,poultryetc.Non-perishables

arealsohandledintheTerminalMarket.However,theproportionofnon-

perishablescannotexceed15percentofthetotalthroughputofthemarket.

Similarly,theproportionofnon-horticulturalproductswithintheperishable

commoditiescannotexceed15percentofthetotalthroughputofthemarket.

TerminalMarketsisaPublic-privatepartnershipmodelthatlinksproductioncentretotheconsumptioncentre.TheGovernmentofIndiaislookingto

promoteterminalmarketsin8cities-Mumbai,Nashik,Nagpur,Chandigarh,

Rai,Patna,BhopalandKolkata22

Source:www.msamb.com,MaharashtraStateAgriculturalMarketingBoard

22IBEFfoodprocessingpresentation,December2008

34





4.2.2.3 Processing

Theopportunitiesinthefoodprocessingindustryaresignificant.Thelowshareof

processedfoodindomesticmarketsandtheexportdemandforprocessed

productsisanopportunitywaitingtobetapped.Increasingurbanisationandrise

indisposableincomesisexpectedtopushthedemandforprocessedfood.Also,

theFoodProcessingsectorhasthepotentialtoreducetheburdenofsubsidies

andraisethefarmers’incomesimultaneously.Agriculturalproducethatis

processedfordomesticconsumptioncannotonlyfetchhigherpricesandhence

higherincomeforthefarmers,butalsogeneratedirectandindirectemployment,

therebyhelpingtoalleviateruralpoverty.Thus,thegovernmentislikelytosupport

theindustrywithanenablingandgrowthorientedpolicy.Besidesgovernment

incentives,thereisaneedtorapidlydevelopqualitysupportinfrastructureforthis

industry,whichatpresentisinapoorstate.Theareaofconcernbeginsatthe

levelofproductionitself.DespiteIndiabeinganagrarianeconomyandoneofthe

largestproducersofvegetables,fruits,spices,milk,eggs,potatoes,wheat,meat

etc.23,theproductivityofcropsisquitelowwhencomparedwithinternational

standards.Theproblemoflowproductivityiscompoundedbypoorqualityoffood

produce,lackofgradingandsorting,limitedmarketinginfrastructureandresearch

anddevelopmentfacilities.Newtechnologies,innovativebusinessmodels,governmentincentives,contractfarminginitiativesandcollaborativeeffortsby

publicandprivateplayerswillhelptoaddressthesechallengesandstirthe

growthofthissector.

New Technologies

Foodprocessorsneedtodelivertasteandqualitydemandedbyconsumersof

bothdomesticaswellasinternationalmarkets.Hence,theplayersneedto

deviseatwinprongedstrategyofimprovingagriculturalyieldscoupledwith

deliveringtherightqualitytodifferentmarkets.Agriculturalyieldscanimprove

onlywhenIndiaadoptsinnovativetechnologiestoboostcropproductivity.New

technologiesinpost-harvestinfrastructurealsoneedtobeadopted.Pre-cooling

andpostharvestchillingfacilitiesplayaveryimportantroleinprocessingof

perishablegoods.PlayerslikeAdaniFreshinHimachalPradeshandDesaifruits

andvegetablesinGujarathavesetupcontrolledatmosphere(CA)chambersto

storetheproduceappropriatelyandavoidanywastage.

23 FAOSTAT

35





Integration by players

Increasingdemandforprocessedfoodandincreasinglystringentquality

parameterswilldrivegrowthforintegratedplayers,weedingoutunorganizedand

non-integratedplayers.LowerpricesforpoultryinSouthIndiacanbeattributed

tothehighlevelofintegrationinthesemarkets.Integratorsincludelargeregional

firmsthatincorporatethevariousaspectsofproduction,includingtheraisingof

grandparentandparentflocks,rearingday-old-chickens(DOC),contracting

production,compoundingfeed,providingveterinaryservicesandwholesaling.

Smallunitscouldprobablyfindthemselvesatacostdisadvantagebecauseof

higherfeedandtransportcosts,expensivevaccinesandveterinarycareservices

andconstraintsinaccessingcheapandeasycredit.

Suguna’s poultry integration model

Themodelhascreatedawin-winsituationforboththefarmerandtheintegrator.

Farmersareprovidedwithday-oldchicks,feedandhealthsupport.The

performanceismonitoredonadailybasiswithSugunafieldstaffvisitingthe

farmstocheckonthehealthofthebirds,feedintake,growthandmortality

levels.Insixweekstime,thebirdsareweighedandarereadytobesoldby

Sugunathroughitsownretailoutletsaswellasotherretailersandexporters.The

farmersarepaidagrowingchargeforthebirdsattheendoftheperiod.

Post-harvest chilling by Adani Fresh - Controlled Atmosphere Chambers

AdaniFreshhassetupthreelargeCAfacilitiesof6,000MTeachatRewali(Rampur),Senj(Theog)andRohru.Itoperates

onanintegratedapproachfromfarmtomarket.IthascreatedlinkageswithfarmersinthecatchmentsofitsthreeCA

facilitiesandprovidesplasticcratesformovementofproducefromfieldlevelaggregationpointstoitsCAfacilities.

AdaniFreshconductsqualitytestingtochecktheorchardsandtreeswhichwouldsupplytheapplesfortheirfacilities.

Oncethefieldtestingisdone,theapprovedorchardownersbringtheirproducetothecollectioncenterwherethey

transfertheirproducetotheplasticcratesprovidedbyAdani.Thefarmersarethenrequiredtotransporttheproduceto

thenearestfacility.

TheapplesareonceagaintestedattheCAfacilityandpaymentsaremadebasedonvariousgradesandotherparameters

likecolours,size,shineandappearance.

TheapplesarethenstoredinthevariousCAchambersbasedonthestorageplanandthenmovedoutoftheCA

chambersaspermarketingplan.#

# ReportoftheTaskForceonDevelopmentofColdChaininIndia,Dept.ofAgricultureandCooperation,MinistryofAgriculture,Govt.ofIndiaAug2008

36





SugunahasemergedastheleaderintheIndianpoultrybroilersegmentwithits

uniquebusinessmodel.Thecompanyisplanningtoexpandacrossthecountry

andalsoincreaseitsexportsinthenearfuture.Sugunahasalsobeenexceptional

inintroducingorganizedpoultryfarminginnorthIndia.Poultryfarmshave

traditionallybeenconcentratedinsouthernIndiawithnearly60-70percenttotal

outputcomingfromthesouthernstates,butSuguna’ssuccessfulforayinnorth

IndianstateslikePunjabandDelhihashelpedlinkfarmersinamarketinwhich

80percentofpoultryfarminguntilrecentlyhasbeeninthenon-organisedsector.

Suguna’sentryhasalsoledtoanorganisedmethodofproducing,procuringand

saleofbroilerchickensinnorthIndia.24

Mega Food Parks- Infrastructure Integration

ManystategovernmentshaveplannedtosetupMegaFoodparkswhichare

aimedatbringingtogetherallplayersinthevaluechainsoastominimise

wastagesandfacilitatebetterinventorymanagementandproductionplanning.

Theproposedmega-foodparkswillbebetween10and100hectaresinsizeand

30locationsacrossIndiahavealreadybeenidentified.Theparkswouldbesetup

throughprivateconsultantswiththegovernmentprovidinggrantsofuptoRs500

millioneach.

Eachmegafoodparkwillcatertoaminimumcatchmentoffivedistrictsandwill

provideallfacilitiesrightfromthefarmgatetotheretailshelves,including

collectionanddistributionandcentralprocessingcentres.Functionslikesorting,

gradingandpackagingalongwithirradiation,foodincubation-cum-development

willtakeplaceinthesefoodparks. 25

24 TheGreatIndianChickenRun,Tehelka.com,July2009&MOFPI

25 SEZstatusformegafoodparksontheanvil,Financialexpress,Nov,2006

Centrereceives40EoIstosetupRs2,500-crmegafoodparks,Financialexpress,Nov,2008

Source:Companywebsite

37





Uttarakhand is emerging as a favourite destination for setting up food parks

AmegafoodparkisbeingsetupatHaridwarwithprocessingunitsmainlyformanufacturingjuices,herbalproductsand

fruitpulpbyBabaRamdev

TheherbalandjuiceparkisexpectedtoattractinvestmentstothetuneofRs5billion.Inthefirstphase,factoriesfor

processingjuicesofbottlegourd,bittergourd,carrot,Amla,AloeVera,mint,tulsi,tomato,cucumberandwheatgrassare

proposedtobeestablished.

Thepark,spreadover95acresofland,willbeaboonforthegrowersofthesefruitsandvegetables.Withthelaunchofa

megafoodparkatHaridwar,farmersinthestatewillbecomefinanciallyindependentastheirproducewillbesourcedfor

processing.ThegrowerswillalsobetrainedhowtogrowAmlaandAloeVeracropsonbarrenlands.Also,theparkwill

generateasmanyas20,000jobsintheinitialphase.

JainIrrigationSystemsisalsofollowingsuitandisscoutingfor300acresoflandinUttrakhandforsettingupafoodpark

andirrigationsystemswithaninvestmentofINR4billion.

State Government’s role in attracting investments

TheUttrakhandgovernmentisexpectingmoresuchproposals,especiallyinthehillswherethestategovernmentlastyear

declaredahilldevelopmentpolicyunderwhichitisofferingaslewofsopsincludingtransportandpowersubsidy.The

governmentisalsotakingpro-activestepslikeasinglewindowsystemtoattractmoreinvestments.Thestategovernment

alsowantstotakebenefitsfromthecentralschemewhichisofferingheavysubsidysuchasprovidingasubsidyofINR

500millionperparktoprivateinvestors.Thestategovernmentisalsoaimingatincreasingfoodprocessingexport

businessinthehillstate.

Source:Uttrakhand,hotdestinationforfoodparks,BusinessStandard,June,2009

TheChordiaFoodParkinMaharashtraisalsosmallsteptowardsalevelplayingfieldforthesmallandmediumfood

processingindustry.Itaimstoachievethisbyofferinginfrastructure,incubation&therightmarketingstrategies.Someof

theinfrastructuralamenitiesincludeProductDevelopmentCentre,PilotPlant,AnalyticalandQualityControlLaboratories

andColdStorageandWarehouse.

Source:Companywebsite

38





Contract Farming - Closing the gap between farmer and processor

Inordertobridgethegapbetweenfarmerandprocessor,someoftheprivate

playerssuchasPepsiCo,RelianceLifeSciencesandMcDonaldshavemodified

theirsourcingchannelstoincludecontractfarming.Typically,thefarmeragreesto

providecertainquantitiesofaspecificagriculturalproductwhichshouldmeetthe

qualitystandardsofthepurchaserandbesuppliedatthetimedeterminedbythe

purchaser.Inturn,thebuyercommitstopurchasetheproductand,insome

cases,tosupportproductionthrough,forexample,thesupplyoffarminputs,

landpreparationandtheprovisionoftechnicaladvice 26.Someoftheclear

benefitsofcontractfarmingwhichcreatesabeneficialsituationforbothfarmers

andprocessorsare:

• Integrationofthesupplychaintohelp ensuretimelyavailabilityofqualityand

quantityofrawmaterialforprocessors

• Significantreductionoftheprocurementcost forfoodprocessorsby

removingthemiddlemen

• Foodprocessorscansourcerawmaterialas pertheirrequirementsatlow

costs

• Privatesectorparticipationincreasesthescopeoftechnologytransfers,

capitalinflowandalsoleadstoassuredmarketsforcropproduction

4.2.3Logistics&Storage

IndiasuffersanestimatedfoodgrainandagricultureproducelossofoverINR5

billionduetothelackofadequatepostharvestinfrastructureandinefficient

supplychainmanagement27.Themagnitudeofthewastageandconsequent

losseslendsitselftoinitiativeswhichcanbringaboutmassiveimprovementsinthesupplychainasincreasedincometofarmers.

FoodGrainprocurementanddistributioninIndiaisstilllargelyundergovernment

control.TheFCIremainsthenodalagencyforprocurementanddistribution.The

CentralWarehousingCorporation(CWC)whichisthebiggestwarehousing

infrastructureintheworldremainsgrosslyunder-utilizedwithaverageannual

occupanciesoflessthan72percent.Inadditiontothis,ithasbeenobservedthat

overthepastdecade,about1milliontonesoffoodgrainsrottedintheFCI

godownsraisingquestionsoverthestorageandtransportinfrastructure.28

26 FoodandAgricultureOrganizationoftheUnitedNations 27 GovernmentBureau2007

28 DepartmentofFoodandPublicDistribution,MinistryofConsumerAffairs,PresntationonTheChallengesinFarmFreshBusinessVinodSawhnyPresident

andCOO,BhartiRetail

39





In2007,aUSDAERSstudy29 foundthatdecentralizationoffoodgrain

procurementwouldhavemarginalimpactonpricesofwheatandrice,butcould

helpincreaseefficienciessignificantly.FCIhastakenthefirststeptowardsbetter

managementoffoodprocurementanddistributionbyawardingacontractfor

bulkmovementtoaprivateplayerAdaniAgri-Logisticsin2008,butmoreneeds

tobedone.PrecedentsforsuchpolicyexistinChina,whoselargepopulation

underlinestheneedforefficientmanagementoffoodsecurity.

FurtherinnovationsintechnologysuchasIntegratedInformationSystemforFood

grainsManagement(IISFM),fortheFCIneedtoberolledouttoawidernetwork

thanthecurrentreach,tohelpensuretransparencyininformationandprovide

visibilityonstockaroundthecountry.

Thereisanurgentneedforotherinnovationsintransportandhandling.Awell-

developedandefficientsystemoftransportationhelpsintheexpansionof

markets,reducesthetransporttimeandcostsoftransportationofthe

commodities.Onlyabout48percentvillagesarecoveredwithroads.Thetotal

roadlengthinthecountryisabout33lakhkm,ofwhichonly58thousandKmis

NationalHighway.Thegovernmentconcernhasbeenmainlytodevelopsingle

laneroads.Thelackofdoublelaneroadshasanegativeeffectonthespeedof

transportmeans.Thenumberofgoodscarriervehicles,althoughincreasing,is

inadequatefortransportinggoodsbyroad.Railwaywagonsarealsousedfor

transportationofagriculturalcommoditiesfromwholesalemarketsto

consumptioncenters.Howeverrailwayroutelengthinthecountryisonlyabout

70lakhkmandtheelectrifiedtrackisnotevenbareminimum.Theexistingrail

facilitiesinthecountryarehighlyinadequate.Raillinesdonotevenconnect

someofthedistrictsinthecountry.Theaircargofacilitiesarealsoavailablein

limitednumberofstates.Existingaircargofacilitiesareinpoorconditionand

muchbelowtheinternationalstandards.30

Besidesthetransport,thestateofinfrastructureforhorticulturalproduceaswell

asmeatproductsleavesmuchtobedesired.Indiahasaround5000 31 cold

storagefacilities,ofwhich90percentareprivatelyowned.Alargenumberof

theseareofthesinglechamberandsingleproducttype.Nearly80percentofthe

coldstoragefacilitiesareaccountedforbypotato.Further,theyhaveautilization

ofonlyaround50percent.ThecoldstoragefacilitiesformeatinIndiaarealmost

negligibleandinstateslikeWestBengal,thereisnoneforacommonly

consumedproductsuchasfish32.

29Indianwheatandricesectorpoliciesandtheimplicationsofreform,Economicresearchreport(UnitedStates.Dept.ofAgriculture.EconomicResearch

Service);no.41)30‘SomepotentialforagriculturalmarketinginfrastructureprojectsinIndia’-PaperpresentedintheGeneralBodyMeetingofNationalCouncilofState

Agricultural,MarketingBoards,heldatGuwahation3rdto4thApril200831 ReportoftheTaskForceonDevelopmentofColdChaininIndia,Dept.ofAgricultureandCooperation,MinistryofAgriculture,Govt.ofIndiaAug2008

32 ReportoftheTaskForceonDevelopmentofColdChaininIndia,Dept.ofAgricultureandCooperation,MinistryofAgriculture,Govt.ofIndiaAug2008

40





ThetaskforcesetupbytheIndiangovernmentin2007tostudythecoldchain

infrastructuresituationinIndiapublishedareportmakingahostof

recommendationstoremedythecoldchaininfrastructureinthecountry.Someof

themare

• SettingupSpecialPassagesforvehicleswithperishablegoodsakintothose

inChinaintheGreenCorridor,anagriculturalnetworkspreadalong27,000

km.

• Allowingcoldchainreceiptsasnegotiableinstrumentssimilartowarehousingreceipts

• Providingfinancialincentivesforinvestmentsincoldchaininfrastructure

includingsubsidiesandinterestratesubventions

Inthe2009budgetthegovt.hasannounced100percenttaxdeductionon

investmentsincoldchainfacilities.Thisneedstobesupportedwithother

interventionstohelpensureacomprehensivecoldchainnetworkwhichcovers

transportvehicles,creationofcontrolledatmospherefacilitiesincoldstorages,

etc.Factorssuchascostefficiencyandenvironmentsustainabilityalsoneedto

beaccountedforwhiledevelopingandmodernizingexistingstorageand

packaginginfrastructure.Developedcountrieshaveusedalternatesourcesof

energytodevelopcostefficientandenvironmentfriendlyagriculture

infrastructure.Theuseofalternatesourcesofenergysuchassolarpowerforcold

storage&packingfacilitiescouldplayasignificantroleinIndianAgricultural

infrastructurewhichfacesanacutepowerdeficitsituation.

USA’sWarmerdamCenterisoneofthelargestsolarenergysystemsinthe

agricultureindustry

TheWarmerdamfruitpackingfacility,locatedinCalifornia’sSanJoaquinValley

(USA),hostsoneofthelargestsolarenergysystemsintheUSagriculture

industry.Theinstallationcommissionedinearly2008,isanticipatedtoproduce

1.2MWhperyear.TheWarmerdamplantisknownforinnovativehandling,

coolingandpackagingofproducesuchascherriesandkiwis.Tosupportthis

operation,thesolarinitiativewilloffset60percentoftheelectricalpowerneeds

oftheirpackinghouseandcoldstoragefacilities

Source:Conergy,Companywebsite

41





4.2.4BasicInfrastructure-Power,Roads,Water

Theroleofphysicalinfrastructureintheeconomyhasmeritedandreceivedalot

ofattentionfrompolicymakers.Howeversignificantinvestmentshavebeen

devotedtopower,roads,highways,etcnotallofthemdirectlyservingtherural

areasoragriculture.Whiletheagriculturalsectorenjoyssubsidized(orfreein

somecases)electricity,otherinfrastructuresuchasroadsandirrigationremains

low.Further,Indiahasapowerdeficitofover20GW(18percentpeakdeficit)33.

Thereisanurgentneedtonotonlyreducethedependenceofthesectoron

powerfromfossilfuelsbutalsoincreasethecontributionofrenewablesources

tothetotalinstalledcapacityforgeneration,currentlybelow10percent 34.This

wouldhavethewelcomeside-effectofprovidingcontinuouspowersupplyto

ruralareaswhichcurrentlydon’treceive24hrsofsupplyinmostpartsofthe

country.

Oneofthereasonsforloss/wastageofagriculturalproduceistheconditionof

theroadsthatconnectfarmerstomarketingcentres.Itisbelievedthataround7-

10percentofproduceislostinTransportationandWarehousingintheagricultural

supplychain35.Whilethe2009budgetaugmentsthefundingfornationalhighway

infrastructure,muchneedstobedonetoimprovetheconditionofroadswhich

connectIndia’svillagestotherestofthecountry.

India’sdependenceonthemonsooniswidelydocumented.Howeverdespitethe

factthatitispublicknowledgethatIndia’swatersupplyisnotadequateinsome

areas,mostoftheworkinwaterconservationforagriculturehasbeenrestricted

toprivateenterprisesortheworkofNGOs.Innovativetechniqueslikedrip

irrigationhavenotmadeinroadsintoIndianagriculturedespitethefactthatthe

twomainstaplecrops–riceandwheatconsumehighquantitiesofwaterper

unitareaofcultivationwhencomparedtoothercropssuchassorghumandbeet.

In2005,aWorldBankreport36 examinedIndia’swatersituation,forecastinga

grimpictureby2020,bywhenIndia’sdemandisexpectedtoexceedallknown

sourcesofsupply.TheWorldBankhasinrecentyearssponsoredanumberof

focusedprojectsdesignedtoalleviateIndia’swatersituationbyrevivingIndia’s

crumblingtanksystemsinstatessuchasOrissaandKarnatakawhereinlessthan

50percentofthestate’slandisirrigated.Theseprojectsalsoaimtoincrease

farmerincomesthroughaparticipatoryapproachthatencouragesdiversification

intohighervalueandlesswater-intensivecrops.Thegovt.needstobetaking

largerscaleactionbasedonexperiencesgainedfromsuchactionstohelpensure

Indiadoesnotendupwitha‘dry’future.

33CentralElectricityAuthority

34 HydroPowerwhichaccountsforroughly25percentofinstalledcapacityisnotincludedhere.

35 TransportSysteminFoodGrainSupplyandChallenges,HDGujrati,GM-Concor,May2008

36 India’sWaterEconomy:BracingforaTurbulentFuturebyJohnBriscoe,SeniorWaterAdvisorattheWorldBank

42





Role of Organized retailing in improving Agri-infrastructure

Theemergenceoforganizedretailinginrecentyearshasincreaseddemandfor

qualityproduceleadingtorisingprivatesectorinvestmentinsupplychain

infrastructure.Backwardintegrationbyorganizedretailersisexpectedtohave

positiveimplicationsontheentireagri-valuechain.Organizedretailingcan

empowerfarmerswithtechnologyandprovidethembettermarketaccess.Itcan

helptolowermarketingcostsbybringingthefarmersandretailerscloser,leading

tolowerpricesforconsumersandhigherrealizationforfarmers.Manyretail

playerssuchasRelaice,Bharti-Walmartretail,AdityaBirlaretail,etc.have

investedinimprovingtheback-endprocessesofthesupplychain.

Thegrowthoforganizedretailingislikelytoincreaseprivateinvestmentandlead

toimprovedcapital,infrastructureandhumanresourceformationinthe

agriculturesector.

Reliance Farm to Fork Model

Contractfarming

Integratedruralhubsfor

procurementandprocessing

Coldchainand

warehousesTransportation FoodRetai ling

• Contractfarmingfor

fruitsandvegetablesalongwithintegrated

production

management

•Fruitsandvegetables

tobefocusareasbutothercashcropsand

grainsalsoonthe

radar

• Acquiringtractsoflandin

severalstatestoserveasintegratedruralprocurement

andprocessinghubsfor

aggregationandsegregation

•Alreadyinadvancednegotiation

for700acresinPunjab

• Similarplanstobereplicatedin

4-6statesacrossIndia

• Modeledalongthetraditional

villagemarts,thesewillalsoserveasretailingpointsselling

agri-inputsanddeliveringcredit

andfinancialservices

• Alsoinvestinginfoodparksand

processinghubsinPunjabandHaryanatoenhancevalue

addition

•Hubandspoke

modelwithlargewholesale

terminalsfeeding

into

distributioncenters

•Focusoncold

chainaswellas

greenhouses

•Integratedlogistics

servicesacrossroad,rail,seaandair

•Anetworkof

discountstores,hypermarkets,

supermarketsand

conveniencestoresto

catertoboththe

urbanandruralpopulation

•Largelyownedbut

conveniencestores

underfranchisee

modelforquickrollout

•Drygroceries,fruits

&veg,dairytobe

focusareas

•Exportopportunities

toEuropeandMiddle

East

43

Source:KPMGReport‘ProcessedFoodandAgribusiness-OpportunitiesforInvestmentinIndia’2007





44





Inadditiontodirectphysicalinfrastructurerequiredtosupporttheagricultural

sector,thereisastrongneedtosupplementitwithmarketinginformation/

intelligencewhileaddressingvariouschallengesinthesupplychain.

5.1 Marketing Intelligence / Marketing

Information

Eventhoughtherehasbeenconsiderableprogresstoprovidefarmerswith

marketinformationrelatingtoprices,farminputsandweatherforecast,such

informationinremoteruralvillagesisnoteasilyaccessible.Smallandmarginal

farmersinIndiagenerallyhavelimitedaccesstopricinginformationand

knowledgeregardingimprovedandmechanizedfarmtechniques,whichcould

improvetheirproductivity.Farmersalsolackreadyaccesstoqualityinputsand

criticalinformationsuchasweatherforecaststhatcouldhelpthemimprovethe

qualityoftheirproduce.

Informationaccessisoftenatediousandtimeconsumingprocessforfarmers

duetolessdevelopedmedia&communicationinfrastructureinruralregions.

AlthoughtheGovernmentusestheradioandtelevisiontobroadcastmarket

prices,thelowpenetrationofradioandtelevisionmediaat19percentand41

percentrespectivelyinruralareasbeatsthepurpose 1.Penetrationofprintmedia

isequallylow;28percentinruralregions,duetolowrateofliteracyratein

5. Marketing Infrastructure

1RKSwamyBBDOguidetoMarketPlanning,VolumeII,2007

45





remoteruralvillages.However,ontheotherhand,thepricequotationsarealso

sometimesnotreliableowingtothetime-lag.

Duetoimproperaccesstomarketintelligenceandpricingtrends,farmersreadily

acceptwhateverpriceisofferedtothembythemanditraders.Asaresult,

tradersarewell-positionedtoexploitthefarmersthroughpracticesthatsustain

system-wideinefficiencies.Farmershavelimitedornilknowledgeoftheprice

obtainedbyintermediariesinthewholesalemarket.Suchinefficienciesdrastically

increasetransactioncostsandslashpotentialprofitsfortheruralIndianfarmers.

Hence,thereisanurgentneedtomakethefarmerawareofpricetrendsfor

variouscropssothathecanaccordinglyplanhischoiceofproduce.

Inrecenttimes,privateplayershavewellsupportedtheGovernmenteffortsto

spreadmarketingintelligenceamongfarmers.ITC’se-choupalandtheoperations

ofotherplayerslikeTata’sKisanSansarhavestrengthenedthecompetitiveability

ofsmallfarmersinIndia.Co-operativefarmingisconsideredtobeaboonina

countrywherelandholdingsaremarginalandfarmersareexploitedtoselltheir

produceatapricewhichdoesnotevenrecovertheircost.

e-choupal – Private sector initiative connecting farmers electronically

e-choupalisaoneofitskindinitiativelaunchedbyITC,whichassistsfarmersin

makinginformeddecisionstoselltheirproduceatanappropriateprevailing

marketprice.

46





ITC e-Choupal Business Model

Thee-ChoupalmodelrequiresITCtomakesignificantinvestmentstocreateandmaintainitsownITnetworkinruralIndia

andtoidentifyandtrainalocalfarmertomanageeache-Choupal.Thecomputer,typicallyhousedinthefarmer’shouse,is

linkedtotheInternetviaphonelinesor,increasingly,byaVSATconnection,andservesanaverageof600farmersin10

surroundingvillageswithinabouta5kilometerradius.Eache-ChoupalcostsbetweenUSD3,000andUSD6,000toset

upandaboutUSD100peryeartomaintain.Thecostofusingthesystemisnegligible,butthehostfarmer,calleda

sanchalak,incurssomeoperatingcostsandisobligatedbyapublicoathtoservetheentirecommunity;thesanchalak

benefitsfromincreasedprestigeandacommissionpaidtohimforalle-Choupaltransactions.Thefarmerscanusethe

computertoaccessdailyclosingpricesonlocalmandis,aswellastotrackglobalpricetrendsorfindinformationabout

newfarmingtechniques—eitherdirectlyor,becausemanyfarmersareilliterate,viathesanchalak.Theyalsousethee-

Choupaltoorderseed,fertilizer,andotherproductssuchasconsumergoodsfromITCoritspartners,atpriceslowerthan

thoseavailablefromvillagetraders;thesanchalaktypicallyaggregatesthevillagedemandfortheseproductsand

transmitstheordertoanITCrepresentative.Atharvesttime,ITCofferstobuythecropdirectlyfromanyfarmeratthe

previousday’sclosingprice;thefarmerthentransportshiscroptoanITCprocessingcenter,wherethecropisweighed

electronicallyandassessedforquality.Thefarmeristhenpaidforthecropandatransportfee.“Bonuspoints,”whichare

exchangeableforproductsthatITCsells,aregivenforcropswithqualityabovethenorm.Inthisway,thee-Choupal

systembypassestheGovernment-mandatedtradingmandis.

Source:digitaldividend.org

Source:DevelopingaRurale-hub.Thecasestudyofe-choupalexperienceofITC-B.Bowonder,VinayGuptaandAmitSingh

Value Chain

47

C o n v e n t i o n a l

e -

C h o u p a l





EKVI (e-agricultural marketing) - An initiative by Madhya Pradesh Government

Background

EKVI(e-KrishiVipanan)isthee-AgricultureMarketingprojecttakenupbytheGovernmentofMadhyaPradeshasapartof

itse-GovernanceinitiativetofacilitatethefarmersoftheStateintakinginformeddecisionsforsellingtheirproduce 2.The

projectisexecutedonBuild-Own-Operate(BOO)basiswithaconsortiumofvendors.

Objectives

TheprojectwasimplementedtoformalizeandreorganizetheagriculturetradingbusinessofMandiBoardbyinstallingcosteffectivedigitalinfrastructureusingthelatestinformationandcommunicationtechnologytocollectanddeliverreal

timeinformationonline;tomaketheoperationsmoreeffectiveandcompletelytransparent,thusbenefitingall

stakeholders(Farmers,TradersandtheGovernment);andempoweringthemthroughaccurateandtimelyinformationfor

effectivedecisionmaking.Theinfrastructuredevelopedwouldeventuallyleadtograin-lessMandisandobviatetheneed

forphysicalmovementofagricultureproducefromthefarmers'premisestotheMandis.3

Business Model

TheMadhyaPradeshGovernmentadoptedtheBOOmodeltoacceleratetheprojectforconservingpublicresourcesand

securebesttechnicalsupportinafastchangingtechnologicalworld.TheprojectwasrolledoutbyvendorsonaBOObasis

andwasresponsiblefordevelopingandmaintainingnecessaryinfrastructure.Inreturn,thevendorsreceivedremuneration

asapercentageofmandifees.AdditionalreturnscouldalsobegeneratedwithwrittenapprovalfromtheMandiBoardfromtheadvertisementsmadeatmandisabouttheagriculturalproduceandrelateditemssuchasfertilizer,seeds,

pesticides,farmpractices,agricultureproduceexportorder,etc.2

• Availabilityoflatestinformationonrates,arrivalsetc.invariousmandis

• Choicetodecidewhenandwheretosell

• Selltheproduceatdoorthroughe-Trading

• Reductioninlossesduetotransportationandhandling

Farmers

Traders

Mandis

Government

• Transparentproceduresandsinglewindowdisposal

• Reconciliationofdailysales,accounts,transitpermit

• Availabilityofratesinvariousmandiswillhelpinofferingcompetitiveratestofarmers

• Reductionintransportationlosses

• Instantreconciliationofaccounts,transitpermitsreceivablesandpayables

• Effectivelymonitoritsactivities

• Facilitateimplementationofcontractfarming

• Ensuretransparencyinoperations

• Speedycollection,analysisanddisseminationofinformationtofarmersandtraders

• Improvedtaxrevenuecollectionbycollatingthisdatawithcommercialtax,incometax,etc.

• InstantaneousaccesstoevenremotelocationsthroughVSATconnectivity,whichcan

effectivelyleadtogoodgovernancethroughdisseminationofinformation

B e n e f i t s

Source:www.mit.gov.in

2www.mit.gov.in/download/e-ready/Chap4.PDF3 www.iimahd.ernet.in/egov/ifip/dec2006/article1.htm

48





FOODNET: Transforming the lives of farmers in Uganda through power of information

ThefarmersinUgandawereatthemercyoftraderswhenitcametosellingtheirproduce,justliketheircounterpartsin

India.Duetolittleknowledgeaboutpricemovements,farmerswereexploitedbytraders,whowereabletoforcedown

thepricesandwereabletopocketexcessivecommissions.However,withtheintroductionofFOODNET,aregional

agriculturalnetworkthefarmers,traders,andconsumersareabletoobtainaccuratemarketinformationwheneverthey

needit.FOODNETprovidesservicethroughFMradioandmobilephones.EveryweekFOODNETbroadcastsa15minute

radioprogrammetothenationvia12FMradiostationsineightlocallanguages.Alternatively,anSMSbasedprice

databasecanbeaccessedbyjusttypingakeyword.Fore.g.typingakeywordsuchas‘Maize’willprovideaninstant

updateonthepricesofmaizeonmarketsacrossthecountry.FarmersinUgandahavefoundthisquiteusefulandare

believedtorealize10-15percenthigherfarmgateprices.

Source:May2004,‘FOODNET:informationischangingthingsinthemarketplace’

49





The AMUL (Anand Milk Union Limited) Model - Marketing information through co-operative farming

Indiahaswitnessedsomesuccessinco-operativefarminginareasofmilk,fertilizer,andsugarbuttheprimaryareaof

grainfarmingisstillfarfromwitnessingsuccess.CompanieslikeAmulhaveachievedconsiderablesuccessadoptingthis

modeoffarming.

TheAmulModelisanintegratedco-operativestructurethatprocures,processesandmarketsmilkandmilkproducts.

Amulwasformedin1946asadairyco-operativemovementandismanagedbytheGujaratCo-operativeMilkMarketing

FederationLimited(GCMMF).

Amulisregardedasanepitomeoffaithwhichenabledfarmerstoliftthemselvesfrompovertyandcreatedasocio-

economicrevolutioninthecountry.ThesuccessofAmulliesinitsbusinessmodelwhereproducersareinvolvedatevery

stageofoperationinadditiontoprofessionalmanagementwhichensuresitsworkingsimilartothatofaprivate

corporation.

TheAmulStatistics 2007-08

MembersUnion 13

No.ofvillagesocieties 13,141

Totalmilkhandlingcapacity(million

litresperday)10.21

Milkcollection(bill ionlitres) 2.69

Milkdryingcapacity(mtsperday) 626

Cattlefeedmanufacturingcapacity 3090

Source:AmulIndia:Thetasteofsuccess,BusinessOutlook,February,2007

The AMUL Model - A Three Tier Structure

3StateFederation

2DistrictUnion

1VillageSociety

Thedistrictunionsinstatecomprisethestatefederation,whichisresponsiblefor

marketingmilkandmilkproductsofthememberunions

Adistrictunionisownedbydairyco-operativesociety(DCS)whichbuysthemilk

fromallthesocieties,andprocessesandmarketsthefluidmilkandproducts

AvillageDCSisformedbymilkproducersandanyproducercanbecomea

memberbybuyingashareandcommittingtosellhisstockofmilkexclusivelytoit

50





Grameen Danone Foods Ltd, Bangladesh: Success story of a co-operative

GrameenDanoneFoodsLtd.wasstartedbyacollaborationofGroupeDanoneandGrameenbanktoproduceahealthy

andaffordableyogurttargetedtothepoorfamilies.Tokeepcostslow,GrameenDanonecreatedalocalsupplychainfrom

scratch.ThemilkwasprocuredfromlocalfarmerswhoweretrainedbyGrameenDanone.Themilkprocessingfactory

reliedmoreonlowcostlaborandlessontechnology.Fordistributionandmarketing,localwomenwereemployedwho

wentdoortodoorinordertoselltheproducts.

Today,GrameenDanoneismarketinga60gcupofyoghurtat6cents,whichissubstantiallylessthanotherproductsin

themarket.Asinglecupisfortifiedwithsufficientnutrientstomeet30percentofachild’sdailyrequirements.Thesuccesscanbeattributedtothefollowingfactors–

• Holisticvaluechainapproach–GrameenDanone’svaluechainwassimpleandinvolvedlocalcommunity.Themodel

benefitslocalproducersandentrepreneurswhilekeepingproductionanddistributioncostslow.

• Environmentalsustainability–Thefactorywasdesignedtouse harvestedrainwater,solarpowerandbiogas.Alsothe

cupsforyogurtweremadeofbiodegradablecornstarchtoreduceenvironmentalimpact.

Source:GrameenBankWebsite

51





5.2 Marketing Supply ChainPresence of too many intermediaries

TheagriculturalmarketinIndiatodayisdominatedby7,500Government

authorizedmarketplacesormandis,whicharegovernedbystatespecificAPMC

Acts.Mandisaresecondarywholesalemarketslocatedinmajortradingcentres

thatgatherlargepartoffarmproducefromvariousruralprimarymarkets.

However,smallfarmershavelimitedaccesstothesewholesalemarketsandthey

largelyrelyuponmiddle-manorcommissionagentsinlocalruralmarketsto

markettheirproducegiventhepriceriskandtimeriskofperishableproducts.

Thisprevailingenvironmentleadstoasupplychainthathasseveral

intermediariesfromthefarmtotheconsumer.Theunreasonablylongsupply

chainresultsinsteepescalationinthetotalcostowingtoprocurement,transit

andothertaxesandservicechargesleviedatvariouslayers.

Thedirectimpactoftheemergenceofintermediariesislowpricerealizationbythefarmers.Theintermediariesappropriateasizableproportionofthefinalsales

52

Source:KPMGReport‘ProcessedFoodandAgribusiness-OpportunitiesforInvestmentinIndia’2007







Rythu Bazaar (Farmers Market)5

RythuBazaarwasconceptualizedbytheGovernmentofAndhraPradeshin1999withthefollowingobjectives:

• Providedirectinterfacebetweenfarmersandconsumers-eliminatingintermediariesintrade

• Toensureremunerativepricestothe farmersandprovidefreshvegetablestotheconsumersatreasonableratesfixed

everyday

• Facilitatepromptrealizationofsaleproceedstothefarmerswithoutanydeductions

• Curbmalpractices

The Rythu Bazaar Model

Inthismarket,farmersbringvegetablesandselldirectlytotheconsumers,therebyeliminatingmiddlemenwhoexploit

bothfarmersandconsumersalike.Thus,theproduceavailableiseconomicalandfarmfresh.Ithashelpedinreductionof

pricesinothervegetablemarketsandvendors.

Brazil – Direct farmer processor linkages and operational efficiency

Brazilisanoutstandingsuccessstoryinagriandfoodexports,havingachievedleadershipstatusinawiderangeofagriproductsincludingsugar,orangejuice,meat,oilseedsetc.ThekeyunderlyingfactorswhichhaveenabledBraziltoachieve

thispositionareasfollows:

• Directfarmerprocessorlinkages:Thishashadmulti-foldbenefitsincludingenablingprocessorstoachievescalein

operationswhichhasledtodevelopmentofsustainablebusinessmodels,helpingensurefarmersadoptbestpractices

toenhancecropproductivity

• Theotherkeyenableristhefreemarketsystemwhichhasensuredthatprocessorsandfarmersaimtomaximize

operationalefficiencies.Fore.g.onetonofsugarcaneproduces140KgofSugar 6 (visavis100kginIndia,85kgin

Argentina)inBrazilwhichisamongthehighestintheworld.

BrazilsPerformanceintheExportmarket(2005)

CommodityWorldrank Marketshareof

globalexports

Exportgrowth

rates,2000-05Exports Production

Ethanol 1 1 51 79

Beef 1 2 24 32

Poultry 1 3 35 31

Corn 4 3 35 48

Pork 4 4 13 40

5en.wikipedia.org/wiki/Rythu_bazaar

6 RaboBankReport,MinistryofFoodProcessingIndustries

54





6.1 Research and Development

ResearchandDevelopment(R&D)isanotherlinkintheagriculturalecosystem,

whichhasseenmixeddevelopment.Whilethegreenrevolutionusheredin

remarkablechangesinIndia’sagriculture,nothingonthatscalehasbeen

achievedsince,exceptperhapsintheareaofdairyfarmingthanksinlargepart

duetoco-operativessuchasAMUL.Severalexpertshavearguedfortheneedfor

asecondgreenrevolutionespeciallyintheareaofhorticulturalproducts,but

Indianagricultureisyettoseesomethingonthatfront.

Inordertoimprovefarmproductivities,continuousintroductionand

implementationofinnovativetechnologiescallsforexistenceofastrongR&D

network.Whilesubstantialinvestmentismadeinthisregard,theeffortshavenot

beenrewarding.Thisispurelybecauseoflackofaclearlystatedstrategythat

assignsdefiniteresponsibilities,prioritizestheresearchagendarationally,and

recognizesthattheresearchmodeisnotalwaysbestsuitedforproduct

developmentanddelivery.Someofthecommonproblemsailingtheagri-R&Din

Indiaare:

• Commodity-centric R&D: Lackofaholisticapproachinvolvingamatrixoffarmenterprises

• Compartmentalization of R&D agencies: Lackofeffectivebilateralflowof

informationamongstresearch,extension,andimplementationdepartments

• Poor validation and feedback mechanisms: Lackoflarge-scaleon-farm

validationoftechniquesandfeedbackthereon,leadingtopracticallynoscope

forenhancement

Anexemplaryshiftisrequiredtotransformthepresentcommodity-centric

researchtoasystemsapproach.Sincefarm-levelproblemsarespecifictoagro-

climaticzones(ACZs),aconvergencebetweenR&Dagencieswithinindividual

ACZsisrequired.Thiscanhelpbringregion-specificityintechnologiesandtheir

time-boundassessment.Aseven-stepmechanismisrequiredtoset-upa

research-development-technologytransfercontinuuminvolvingallstakeholders:

• Problemidentificationandprioritization

• Convergenceofexistingtechnologiestomatchtheneed

• Generationofneed-basedviabletechnologiesusingtheholisticfarming

systemapproach

• On-farmassessmentandevaluation

• Feedbackonthetechnologies

• Refinementoftechnologies,ifnecessary

• Helpingensuretimelyavailabilityofinputs

6. Soft Infrastructure

55





WhiletheabovediscussedR&Dfromasystemicstandpoint,Indianagriculture

alsofacesissueswhichrelatetothedevelopmentofhumanresources.

6.2 Human Resource Development

Advancementofanyindustrydependsuponavailabilityofskilledhumanresource

andtheagricultureindustryisindireneedofhighlyskilledandtrainedmanpower

acrossdifferentlevelstohandlevariousoperations.Humanresource

developmentneedstocovertheentirerangefrombasicinfrastructure,

education,vocationalandtechnicalguidancetoprofessionalqualifications.

Attainingcompetitivenessintheagro-industrialsectornecessitatesthe

developmentofabroadrangeofskillsatalllevels.Toachievethis,networking

andthedevelopmentofpartnershipsbetweenacademia,researchinstitutions,

policy-makersandindustryarekeymechanismstotransfertechnologiesand

knowledge.Hands-onapproachestotrainingmustbestrengthenedacrossa

broadspectrum,beginningwiththefarmer,throughmanagement,researchand

development.Publicpolicyshouldprioritizehumanresourcedevelopmentatall

levels,startingfromthedevelopmentofbasicliteracyskills.Publicpoliciesmust

alsoseektopromotelinkagesbetweenacademia,researchinstitutions,policy-

makersandagro-industrialstakeholders.

56





Theneedforcontextappropriatetrainingandcapacitybuildingatalllevelsstartingwithfarmersisessential,asistheneed

toputknowledgeintopractice.

57





6.3 Support Infrastructure

TheroleofsupportinfrastructurealongsideHumanresourcedevelopmentin

enablingthegrowthofthesectorisignoredoftenbybothpolicymakersand

sectorpractitioners,withattentionbeingpaidtoactivitiesdirectlyrelatingto

agriculturesuchaspre-harvestorpost-harvest.Educationisonesuchcomponent

ofsupportinfrastructureforagricultureandalsoavitaldriverofhumanresource

development.

Education

Halfofthoseengagedinagriculturearestillilliterateandjust5percenthave

completedhigherSecondaryeducation.Incomesandeducationareofcourse

leastamongagriculturallabourers.Ensuringfoodsecurityandfarmerwelfare

thusrequiresupportsystemstoextendtechnologyandscalebenefitsina

sustainablemannertoahugeexistingworkforceinagriculturethatlacksnon-

farmskillsandisalsoageing.

Source:GlobalEconomicsPaperNo:169,June,2008

Graduation Rates by Fields

58





India’sstatesupportedagriculturaleducationsystemconsistsofoneCentral

AgriculturalUniversity,forty-fiveStateAgriculturalUniversities(SAUs)andfour

NationalInstitutesofIndianCouncilofAgriculturalResearchhavingthestatusof

deemeduniversities.Thereareothereducationinstitutesandresearchcentres

whicharededicatedtocertainnichessuchasveterinarysciences,vegetables,

foodgrains,etc.Indiahas,duetovarioushistoricreasons,developedan

agriculturaleducationsystemwhichissomewhatisolatedfromtherestofthe

educationdisciplines1.Thus,notonlyaretheresourcesengagedinagriculture

under-educated,eventheeducatedstudentsareremovedfromthebenefitsofinter-disciplinaryinteractions,commoninothernations.Further,thelinkagesto

industry,notjustintermsofplacementofthestudents,butalsoinengagingin

industrysponsoredresearchprogrammes-avitalfeatureoftheuniversity

systeminothercountries,arenotverystrong.

Inadditiontotheinstitutesengagedinagriculturaleducation,thereare

institutes/programsdedicatedtoagri-businessmanagementsuchasIRMA

(Anand),MANAGE(Hyderabad)andAgribusinessManagement(ABM)programs

atIIMAandIIML,amongothers.

Howeveragapremainsforeducatingpeopleatthebasiclevel,especiallyinrural

areas.

Brazil’s SENAR

Brazilwhichalsofacedtheproblemofloweducationinpeopleemployedintheagriculturalsector,establishedanagency,

SENARdevotedtotheruralsectorin1991.ThestatedmissionforSENAR(NationalServiceforRuralApprenticeship)was

todevelopruraloccupationaltrainingandsocialpromotionactivitiesformenandwomenwhoworkinruralareas.The

majorityofworkersreachedbySENARtodateworkincattleraising,extractiveexploitationofanimalandvegetable

resources,agro-industryandagriculture.Inmanyinstances,SENARcombinesliteracyeducationwithoccupational

training.Anotherfocusisthepreparationofworkers,particularlymediumandsmallproducers,toimproveproductivityand

expandoutput.Inthiscontext,SENARhasformedaneffectivepartnershipwithSEBRAE(BrazilianMicroandSmallBusinessSupportService)apublic,non-governmentalorganizationthatsupportssmall,medium,andindividual

businesses.

Sources:TrainingforRuralDevelopmentinBrazil:SENAR,FAO2004,ABlueprintforGreenEnergyintheAmericas2007,GartenRothkopf

1SureshKSinha’sB.P.PalMe morialLectureat theNati onalAcademyofScien ces,Allah abad,1999

59





Aholisticapproachtoagriculturaleducationinplanningfutureprogrammesmay

yieldbetterresultsthantheskewedstateweseeinIndiatoday.TheIndian

agriculturalinstitutionswoulddowelltoworkwithindustryplayersonnotjust

designoftheircurriculabutalsoonareasthatmeritimmediateattentionsuchas

cropvarietiesthatalsoaidinwaterconservation.Variousopportunitiestodevelop

resourcesexistinareassuchasfoodprocessinginIndiawhichitselfremainsat

woefullevels.

Health Infrastructure

HealthcareinIndiahasnotreceiveditsfairshareofattentionfrompolicymakers

andasaresult,itsroleasafundamentalelementofthesupportinfrastructurein

contributingtothedevelopmentoftheeconomy(theagriculturalsectorincluded)

hasnotreceivedmuchattention.Thehealthofthehumanpopulationisintimately

connectedtothehealthoftheanimalwithseveralfatalanddebilitatingdiseases

beingcommontobothmanandanimal.Seriousattentiontoanimalhealthcare,

diseasediagnosis,andprophylacticswillgoalongwayinensuringhumanhealth

also.

Whiletheinterventionsrequiredinhealthcareinfrastructureforhumansarenot

specifictotheresourcesengagedinagriculture,beingrelevanttotherestofthepopulationaswell,itiswidelyknownthatinfrastructureforsecondaryand

tertiaryhealthcareisinadequateinIndia.Thesewouldneedtobeaddressedas

partofeffortstoimprovegeneralhealthandwellbeingoftheIndianpopulace.

WhileIndiahasnotbeensubjecttonationalepidemicsofthescaleoftheMad

CowdiseasethatsweptacrosstheUKandotherpartsoftheworldinthepast,

responsestorecentthreatssuchasthebirdfludiseaseshowsthatIndia’s

preparednessandinfrastructureislowwithrespecttothehealthofanimalsand

otherorganismswhicharepartofIndianagriculture.

60





TheroleofpolicyinunlockingthepotentialofIndianagriculturecan’tbe

overstated.AgriculturalPolicybynaturehaslinkageswithnotjusttheagricultural

sectorbutalsowithindustrialpolicypromotinginvestmentsacrossvarious

sectorsincl.retail,roads,financing,etc.

Asdiscussedunderpostharvestsection,FCI’sroleinprocurementand

distributionoffoodgrainsneedsarethink.Asthegraphbelowshows,whilethe

governmenthasconstantlyincreaseditsexpenditureonfoodsubsidythegrowth

inofftakes(Rice&Wheat)hasnotalwaysincreased.

ThiscouldhavebeenduetohostofreasonsincludingFooddiversion,Leakage 1,

Pilferage&theft,IrregularitiesinidentificationofBPLfamilies,Lossesdueto

poorqualityofpackingmaterialandDamagedfoodgrains 2.Inatellingcomment

ontheinefficiencyplaguingthePDS,in2008,overtenlakhtonneoffoodgrain

worthmillionsofrupeeswasfounddamagedoverthelastdecadeand

additionallyFCIspentaroundINR25milliontodisposetheserottenfoodgrainsin

additiontoaroundINR2.4billiontopreventthelossoffoodgrainsduring

storage.FCIandStategodownswillhavetoimprovestoringfacilitiesand

checkingmethods.Thestoragecapacitywillalsohavetobeincreasedtoachieve

thetargetortheexistingfacilitieswillhavetobescaledup.Moreover,controlled

procurementofthegrainsneedstobeensuredtoavoidoverstocking.

AlternativelywhileFCIcancontinuetosetpolicies,thelogisticscanbe

outsourcedtoprivateplayerswhiletargetingthedualbenefitsofreducedinvestmentforFCIaswellasincreasedefficienciesduetomarketforces.

7. Agricultural Policy

1www.indianexpress.com/news/house-panel-finds-over-50-leakage-in-pds/303392/0

2 www.financialexpress.com/news/10-lakh-tonnes-of-food-grains-damaged-in-fci-godowns/330283/

Growth in Off take of Rice & Wheat vis-à-vis Food Subsidy

Source:DepartmentofFood&PublicDistribution

61





TheroleofthecentralgovernmentinfixingMSPcouldbere-examinedinthe

lightoffindingsoftheHighLevelCommitteeonLong-TermGrainPolicy3.Further

pricingcontrolcouldbedevolvedtothestates&FCIinterventioncouldbe

selectivewherestatesaren’tadequatelygearedup4.

Technologyneedstobeleveragedtobringaboutgreaterdisciplineinthesystem

beginningfromtrackingstatusoftruckstransportingstockstoensuringrealtime

stockstatusatFCIdepots.TheIntegratedInformationSystemforFoodgrains

Management,discussedearlier,isastepintherightdirectionandcouldbe

extendedtofreightaswellandnotjuststocks,providingatooltoauditaswellas

trackfoodstocks.

Anotherkeypieceofregulationintheagriculturalsectorespeciallyfor

horticulturalproduceistheAPMCAct.TheGovernmentofIndiahascirculated

modellegislationtitled“TheStateAgriculturalProduceMarketing(Development

andRegulation)Act,2003”tobringaboutreformsinagriculturalmarketing.

Contractfarming,directmarketingandpublic-privatepartnershipinmanagement

anddevelopmentofagriculturalmarketsarethemajorinstrumentsofchange

amongothers.Twenty-fivestates/UTshavealreadyamendedtheirAPMC

Acts/madevaryingprovisionsforthepurpose,whileotherstatesareinthe

processofamendingtheirrespectiveAPMCActs(seetablebelowfordetails) 5

Someofthenorthernstateshavealsotriedtoboostthedevelopmentof

agricultureandagri-businessindustriesthroughvariouspoliciesovertheyears

andalsothroughproposedmeasures.Thestateshavealsoattractedconsiderable

attentionduetotheincentivestheyoffertoattractinvestment.BaddiinHimachal

Pradeshforinstance,hasdevelopedintoahubforfoodprocessingindustriesin

particular.Thetablebelowprovidesasnapshotofpoliciesacrossfourkeynorthernstates.

5EconomicSurveyofIndia,2008-09,Statusason31stMar09

Sl.No. Stageofreforms NameofState/UnionTerritory

1States/UTswherereformstoAPMCActhasbeendonefordirectMarketing;ContractFarmingandMarketsinPrivate/

CoopSectors.

AndhraPradesh,ArunachalPradesh,Assam,Chattisgarh,

Goa,Gujrat,HimachalPradesh,Jharkhand,Karnataka,

MadhyaPradesh,Maharashtra,Nagaland,Orissa,Rajasthan,

SikkimandTripura.

2States/UTswherereformstoAPMCActhasbeendone

partially.

a)DirectMarketingNCTofDelhi

b)ContractFarming:Haryana,Punjab,andChandigarh.

c)PrivateMarkets:PunjabandChandigarh

3States/UTswherethereisnoAPMCActandhencenot

requiringreforms.

Bihar*,Kerala,Manipur,Andaman&NicobarIsland,Dadra&

NagarHaveli,Daman&Diu&Lakshadweep

4States/UTs,whereAPMCActalreadyprovidesforthe

reformsTamilNadu

5States/UTswhereadministrativeactionisinitiatedforthe

reforms.

Mizoram,Meghalaya,Haryana,J&K,Uttarakhand,West

Bengal,Puducherry,NCTofDelhiandUttarPradesh

62





Punjab HimachalPradesh Uttarakhand Rajasthan

Newpolicies NewAgroIndustrialPolicy-

2009tobeannounced,to

beimplemented-Punjab

AgroIndustriesCorpLtd

(PAIC)(stategovt'snodal

agency),toachieverapid

industrializationinthefield

ofagricultureandagro-

processing.

Planstoconvertstateintoa

‘HerbalBiobusinessValleyof

India’.Theareasidentifiedas

prioritybiobusinessinclude

commercialmicropropagation,

bio-businessthroughhigh

valueindustrialcashcrops,

organicfarming,

vermicompost,mushrooms,

fermentation,nutraceuticals

andotherprocessedproducts

whichhaveimmensescopein

thefirstphase.

Planningtogiveinterest-free

loansforsettingupself-

employmentagriculture

industry(SAI)unitsunderthe

specialagriculturezones

(SAZs)schemewhichislikely

toprivatisemandisinthenew

MandiAct.

UndertheSAZprogramme,

thegovernmentproposesto

haveagro-basedunitslike

fisheries,teagardens,dairy

farmingandvariousother

agricultureandhorticulture

activities.

New“RajasthanAgribusiness

andAgroIndustries

DevelopmentPolicy”drafted

forthefocusedgrowthof

agrosector.

Encouraging

more

partnerships

Dialogueinitiatedwiththe

provinceofManitoba,

Canadatosetupajoint

taskforcetoexplorenew

avenuesofinvestmentin

agriculturesectorin

Punjab.

- Govt.HorticultureFarmshave

beenleasedouttoprivate

sectorentrepreneursinorder

toattracttechnologyand

investmentinproductionof

plantingmaterial.

Sericulturefarmtransferredto

primaryco-operativesocieties

forbettermanagement.

Amedicinalandaromatic

plantsexportzonehasbeen

establishedcoveringseven

districtsandspecialised

herbalparksareintheoffing

Proposestoencourageprivate

sectorindustries,apexco-

operativesinstitutions,

APMCsetc.tocomeforward

andsetupsuchcentres/

institutes.TheState

Governmentwillsupportsuch

projectsbyprovidinglandat

concessionalrateand50

percentinitialseedcapital

matchingtheindustry

contributionwithinaceilingof

INR60millions.

Singlewindow

schemes

AspecialcellcalledUdyog

Sahayak(industry

facilitator)setuptohelp

entrepreneursobtain

speedyclearancesfor

settingupindustriesin

Punjab.Allknowledge

drivenindustriessuchasIT,

electronicsand

biotechnologyhavea

separatesinglewindow

servicemechanismunder

PunjabInformationand

CommunicationTechnology

CorporationLtd.

SettingupofSingleWindow

ClearanceAgencyand

MonitoringAuthorityunder

thechairmanshipoftheChief

Minister,alongwithsingle

windowagenciesatmajor

industrialtownslike

Parwanoo,Baddi,Paonta

Sahib,GoalthaiandSansarpur

Terrace

Thesinglewindowcontract

facilitywouldbeavailableat

theDistrictIndustrialCentres

attheDistrictlevelandState

IndustrialDevelopment

CorporationofUttarakhandat

thestatelevel.Apartfrom

providinginformationand

escortservicestothe

entrepreneurs,thecentres

willalsobemaintainingadata

bank

StateGovernmenthas

constitutedanEmpowered

Committeeconsistingof

Secretaries,inchargeof

DepartmentsofFinance,

Industries,Agricultureto

provideSingleWindow

ClearancetoAgricultureand

FoodProcessingIndustry

63





Punjab HimachalPradesh Uttarakhand Rajasthan

Financial

assistance/

Subsidy

RuralDevelopmentFund,

MarketDevelopmentFund

havebeencreatedto

providefinancialassistance

NABARDsanctionedan

assistanceofINR188mllion

for19minorirrigation

(comprising12flowirrigation

schemes,5liftirrigationand2

deeptubewellschemesfor

Bilaspur,Kangra,Kullu,Mandi,

Shimla,SirmaourandSolan

districts)and15ruraldrinking

waterschemesinthestate.

Theassistancetothehill

statecameunderRural

InfrastructureDevelopment

Fund(RIDF).

AprovisionofINR100million

isbeingmadeforthesoil-

testingprojectwiththe

governmenttakingthehelpof

scientistsofreputednational

institutionsforthispurpose.

TheStateGovernmentwill

reimburse50percentcostof

preparationoftheproject

reporttosetupnewagro

industrialunitssubjectto

ceilingofINR0.6million.

FinancialAssistancewillbe

releasedaftertheUnitisset

upandcommencesits

operations.

Interest

Subsidyand

exemptions

5percentbackended

interestsubsidyfor5yrs

(proposed).Infrastructure

DevelopmentCessand

othertaxes/levieswould

berationalisedandchange

inlandusechargeswould

bewaivedoffwhile

ExternalDevelopment

Chargeswouldbe

reviewedintheproposed

newagro-policy

Interestsubsidyof10percent

forfiveyearsforfood-

processingunits.Salestax

exemptionforfood

processingunitsfor10years.

Salestaxrelief&electricity

dutywaiverfor

12years(Category-A):

9YearsCategory-B)&

7Years(Category-C).

ReduceVatfrom4percentto

1percentonallfoodproducts

andonpackagingmaterial.3

percentperannumback

endedinterestsubsidyfor

first7years.Thestate

governmentisalsoproviding

subsidyforprojectsunder

variousschemesof

AgriculturalandProcessed

FoodProductsExport

DevelopmentAuthority

(APEDA),NationalHorticulture

Board(NHB),MinistryofFood

ProcessingIndustry(MFPI)

andtheNaturalMedicinal

PlantBoard(NMPB)subject

toamaximumlimitofINR2

million

6percentbackendedinterest

subsidyfor7yrs(proposed)

64

Source:Pressreleases,IBEF,Stategovernmentwebsites,StatedraftAgriculturepolicyplans,publicprivatepartnershipstatewebsites





Ourdiscussionofvariousissuesandchallengesplaguingthesector,aswellas

thesuccessofvariousprogrammesbothpublicandprivate,incl.international

examples,yieldafewkeyrecommendationsforthesector.

Inclusive growth and group approach

Forgrowthtobeatallinclusive,theagriculturalstrategymustfocusonthe85

percentoffarmerswhoaresmallandmarginal.Itisnowwellrecognizedthatthe

poorarebestempowerediftheyfunctionasagroupratherthanasindividuals

andthatthisisalsothebestwaytosecureeconomiesofscale.Agroupapproachcouldalsoimprovethebargainingpowerofsmallcultivators.The

approachcouldrangefromlowlevelsofcollectivefunctioningsuchasjoint

investmentsinlumpyinputssuchastubewellsorco-operativesforinput

purchaseandmarketing,tohighlevelsofcollectivefunctioningsuchasland

poolingorevenjointpurchaseorleasingoflandandjointfarming.

Thefewexampleswheresmallandmarginalfarmershavebenefitedfrom

contractfarmingarethosewheretheyhaveenteredintocontractscollectively

ratherthanindividually.

Onewaytopossiblyencouragemarginalfarmersandwomentoformgroupsfor

purposesoffarmingwouldbetoshiftatleastsomeofthecurrentsubsidiesto

beavailableonlytogroupsofsuchfarmersratherthantoindividuals.

Holistic infrastructure development

Infrastructuredevelopmentneedstotakeasystems-approachthataddressesall

roundneedsratherthancreateskewedresourceswhichareeitherunder-utilized

orwasted.Infuture,ifaregionistargetedforaspecificcrop,theinfrastructure

creation/developmentforthatcropneedstoaddressallneedsfromcropresearch

toirrigationneedsforthatcroptostorage(forbothseedsandharvest)and

transportinfrastructureforthesamecrop.

Soilhealthawarenessmustbepromotedthroughacrediblesystemofsoil

testingandofadviceonnutrientneedsbasedonsoiltests.

Uniform Policy Framework

AstheAPMCActimplementationhasshown,therearedifferencesbetween

statesinregulationwhichcouldcreateimbalancesintheagriculturalecosystem,

promotinggrowthinonestateduetofavourablepolicieswhileanother

stagnates.Statesshouldlearnfromoneanotheratthetimeofpolicy

development,emphasizingsustainablecropsandtechniques.Theprivatesector

shouldalsobeengagedatthetimeofpolicyformulationthroughindustrialbodies

suchasCIIandASSOCHAMtoensurepolicesaretunedtobusinessrealities.

8. Recommendations

65





Modernizing Irrigation Systems & Techniques

Greateremphasisisrequiredoninvestmentsinphysicalrehabilitationofexisting

waterreservesandonmodernizationofirrigationsystems-essentialfor

improvingtheefficiencyofwateruse.

Rationalization of subsidies

Thereisanurgentneedtorationalizesubsidiesacrossnutrientsandalso

examinemethodsbywhichthedeliveryofsomepartofthepresentlyhuge

subsidiescanbetransferredfromfertilizerproducerstofarmersoragroupof

farmersdirectly.

Filling information gaps

Agriculturalextensioniscriticalfornarrowingthemoregeneralknowledgegaps

thatexistsinouragriculture.Statesmustbeginbyfillingupfield-levelvacancies

inextensionandprovidemuchbettertraining,includingatSAUs.Atthesame

time,theCentre’splantosupporttheKVKsandATMAsshouldbesynergizedand

madepartofacomprehensiveandparticipatorydistrictplanningprocess.

AlternatedeliverychannelsspanningRuralKnowledgeCentres,ICT-based

extension,farmer-to-farmerextension,NGOs,andtheprivatesectorshouldalso

bepromotedsimultaneously.ATMA’scapacityin relativelyneglectedareas,such

asanimalhusbandrymustbeincreasedandthescopeofStrategicResearch

ExtensionPlans(SREP)enlarged.

Education, Research & Training

IndiawoulddowelltolearnfrominternationalexamplessuchasSENAR,Brazil.

PartnershipssuchasIBSA1 couldbeleveragedonsettingupasimilarscheme.

Thatwouldhavetheusefulby-productofimprovinginclusionwhilefurtheringthe

causeofIndianagriculture.

Public Private Partnerships (PPPs)

PPPscouldbeausefultooltoacceleratedevelopmentinvariousareasofagri-

business.CurrentlytherearePPPsintheareasofcontractfarming,dripirrigation

projectsandterminalmarketsamongothers.Howeverthescopeofthese

projectsisstilllimitedandtheyserveasexamplesormodelsratherthanbethe

norm.IndustrybodiessuchasASSOCHAM,CII,FICCIandIBEF(itselfaPPP)

couldhelpfacilitateinteractionswithbothdomesticandinternationalcompanies

andagenciestoensurewidespreaduseofbestpracticesandexpandthescaleof

privateparticipationtoresultinperformanceimprovementoftheagricultural

sector.

1IBSAisatrilateral,developmentalinitiativebetweenIndia,BrazilandSouthAfricatopromoteSouth-

Southcooperationandexchange.

66





Indiahasemergedasamajorglobaleconomicpowerwiththeeconomy

registeringhighgrowthratesintherecentpast.PartsofIndiahavestartedto

displaysignsofaffluence,butthisprogresshasnotbeenuniform.Ruralregions

havenotbeenabletomatchtheirurbancounterparts.Withmorethan70

percent1ofIndia’spopulationlivinginvillages,thebenefitsofeconomicgrowth

havefailedtopercolatetomorethantwo-thirdsofitspeople.

ThedevelopmentofruralIndiaisessentialforsustainingthecurrentgrowth

levelsinthecountry.Withagriculturebeingtheprimaryemployerofmorethan

halfofIndia’spopulation,particularlytheunderprivilegedruralpeasantry,

improvementsinthesectorcouldgoalongwayinenhancingthestandardsof

livingintheruralhinterland.

Itisimperativethatconsiderableeffortsaremadetoextricatethesectorfrom

stagnation.Largerirrigationfacilities,betterseedsandagri-inputsatreasonable

costswillhavetobeprovidedtofarmers.Theaccesstoimprovedinputsand

technologieswillhavetobecoupledwithprovisionoffinance,infrastructuraland

marketingfacilities.Agricultureneedstobecomeanincomegeneratingactivity

andfarmersshouldnotbelefttotheuncertaintyofweather,financialresources,

andmarkets.

OneofthekeyreasonsforthestagnationofIndia’sagricultureisfalling

productivitylevelsrootedinstructuralchallengesthathaveseepedintotheentire

ruralsupplychain.Challengeswithhardandsoftinfrastructurecoupledwithpoor

communicationandfinancinghavecreatedalotofdistressforstakeholdersin

agricultureparticularlythemarginalizedsubsistencefarmer.

Advancementofanyindustrydependsuponavailabilityofskilledhumanresource

andtheagricultureindustryisindireneedofhighlyskilledandtrainedmanpower

acrossdifferentoperationallevels.Humanresourcedevelopmentneedstocover

theentirerangefrombasicinfrastructure,education,vocationalandtechnical

guidancetoprofessionalqualifications.

India’sagriculturesectorpresentsimmenseopportunitiesforinvestmentsif

variousstakeholderscollaborateanddevelopinnovativeandeffectivemodelsthat

notonlylookataddressingtheissuesinIndia’sagricultureset-upbutalso

introducebestagriculturalpractices.Publicandprivateplayersincollaboration

withpolicyneedtoplayapivotalroleinpromotinginvestmentsinagri-

infrastructureandthroughthistransformationenableruralIndiatogrowand

prosper.

9. Conclusion

1ForANewDealToTheRuralPoor,TheHindu,12thMarch2008

67





Ramesh Srinivas is an Executive

Director in KPMG's Consumer

Markets and Retail practice.

Based in the firm’s Bangalore

office he can be reached at

[email protected]

Anand Ramanathan is a

Manager in KPMG's Consumer

Markets and Retail practice.

Based in the firm’s Bangalore

office, he can be reached at

[email protected]

D. Dharmendra is a Senior

Consultant in KPMG’s Consumer

& Industrial Markets practice.

Based in the firm’s Mumbai

office, he can be reached at

[email protected]

Sonia Topiwala is a Consumer

Markets and Retail Analyst in

KPMG’s Research, Analytics and

Knowledge practice. Based in

the firm’s Mumbai office, she

can be reached at

[email protected]

The Authors wish to acknowledge the contributions of Preeti Sitaram, Shilpa Taneja, Simrat Singh, Upasana Juneja, Sachiv Mehta, Ananya Shah, Kunal

Jain, Rajiv Parekh, Ashish Punjabi, Jiten Ganatra and Nisha Fernandes.

Acknowledgements







in.kpmg.com

Pradip Kanakia

Executive Director

Head - Markets

[email protected]

+91 80 3980 6100

Ramesh Srinivas

Executive Director

Head - Consumer Markets Sector

[email protected]

+91 80 3065 4300

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Infrastructure Development in Agriculture - Route to Rural Transformation