Infrastructure Development in Agriculture - Route To Rural Transformation

InfrastructureDevelopmentin
Agriculture
RoutetoRuralTransformation
7August2009,NewDelhi
KPMG IN INDIA
©2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwiss
cooperative.Allrightsreserved.
About the study
ThisisabriefingpaperwrittenbyKPMGinIndiathatanalysestheopportunities
presentedbytheIndianAgriculturemarketwithrespecttoitsinfrastructural
shortcomings.
ThestudybeginsbyexplainingtheroleofagricultureinIndia’sruralmarketsand
highlightstheneedtoimmediatelyaddressthechallengesfacedbythesector;it
goesontoexplainthevariouschallengesentailedintheagriculturalsupplychain-
rightfromissuesinpreandpostharvestingtoconcernsaboutresearchand
development,humanresourcedevelopmentaswellasinadequaciesofrural
infrastructure.
Whilehighlightingthechallenges,thepaperusesvariousexamplesofsuccessful
andinnovativecasesthatbringtolightthekeyopportunitiesforplayersacrossthe
agriculturalvaluechain.
Thestudyconcludeswithourlearningsandrecommendations.
Foreword from KPMG India
Thepopularadage“Mayyouliveininterestingtimes”couldnothaveperhaps
foundabettercontextintheglobaleconomy.TheIndianeconomytoohasnot
beencompletelyimmuneintheaftermathoftheglobalfinancialcrisiswhichhas
hitmostsectorsandgrewatamuchslowerrateof6.7percentin2008-09
comparedtoitsperformanceinrecentyears.TheUnionBudget(2009-10)has
revealedtheIndiangovernment’splanstogettheeconomybacktoahigher
growthrateof9percent,includinggettingtheagriculturesectorto4percent
growthrate.Agriculturepresentsanexcellentplatformforthegovernmentto
driveitsinclusivegrowthagendaforruralIndia.Ruraldemandisincreasinglyan
Ramesh Srinivas areaoffocusforcorporateIndiaandpresentsopportunitiesthathavehithertonot
Executive Director and beenfullyexploited.1

Head - Consumar Markets Sector
KPMG in India Thereisalotthatmustbedoneifsuchambitioustargetshavetobemet,
particularlyinmodernizingtheagriculturalsectorandensuringitssustainability.
Thisreportaddressesafewkeyinterventionsthatareneededforthegrowthof
theIndianagriculturalsectorspanningvariouslinkages–bothpreandpost
harvestinfrastructure,marketinginfrastructureaswellassofteraspectsofthe
infrastructuresuchashumanresourcedevelopment.Thelatterdoesnotusually
meritmuchattentioninagriculturalpolicy,itselfanareawhichneedsarethink.
1 UnionBudget2009-10
Thereportmakesafewrecommendationstoaddressthegapsininfrastructure
supportingtheagriculturalsector,basedonanalysisofkeychallengesacross
varioussegmentsoftheagri-businesssupplychain.Severalsuccessfulefforts,
bothdomesticandinternational,havebeenusedtoshowcasepossiblesolutions
totheissuesinIndianagriculture–includingpublicprivatepartnerships.Sectors
thatderivetheirdemandfromagriculturesuchasfoodprocessingandfood
logisticscanalsobenefitfromtheserecommendationsandtheseshouldhave
importantimplicationsfortheruraleconomyfrombothanemployment
generationandsocialdevelopmentperspective.
Theanalysesandpointofviewpresentedinthereporthavebeengatheredand
validatedthroughdiscussionswithvariousindustryplayersandexperts.Wetake
thisopportunitytothanktheindustryplayersformakingthisendeavorpossible.
WealsothankCIIforhavinggivenusthisopportunitythroughknowledge
partnershiptoparticipateinthedevelopmentofagri-infrastructureandthe
harnessingoftheuntappedpotentialofruralIndia.
Foreword from CII
TheconceptofRuralMarketinginIndiaEconomyhasalwaysplayedaninfluential
roleinthelivesofpeople.InIndia,leavingoutafewmetropolitancities,allthe
districtsandindustrialtownshipsareconnectedwithruralmarkets.
TheruralmarketinIndiaisnotaseparateentityinitselfanditishighlyinfluenced
bythesociologicalandbehavioralfactorsoperatinginthecountry.Therural
populationinIndiaaccountsforaround627million,whichisexactly74.3percent
ofthetotalpopulation.
TheconceptofruralmarketinginIndiaisoftenbeenfoundtoformambiguityin
Tarun Sawhney themindsofpeoplewhothinkruralmarketingisallaboutagriculturalmarketing.

However,ruralmarketingdeterminesthecarryingoutofbusinessactivities
Conference Chairman &
Chairman, Agriculture Competitiveness bringingintheflowofgoodsfromurbansectorstotheruralregionsofthe
Sub-Committee, CII NR & countryaswellasthemarketingofvariousproductsmanufacturedbythenon-
Executive Director,
agriculturalworkersfromruraltourbanareas.
Triveni Engineering & Industries Ltd.
TheruralmarketinIndiaisundergoingasilentbutdefiniterevolutionontheback
ofenhancedpurchasingpowerofruralconsumers,thechangingconsumption
patternsandincreasingoverallvalueofconsumptionofgoodsandservices.The
sheersizeoftheruralmarketwhichhaswitnessedtremendousgrowthinthe
recentyearsaslargesectionsofruralpopulationtransformedintodiscerning
consumershascaughttheimaginationandincitedbusinessinterestofthetop
conglomeratesinthecountry.
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.Thisis
likelytoresultinruralIndiabecomingthelargestpotentialmarketintheworld.
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 17
4.1.3 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
1
1. Executive Summary
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
frombothamonetaryandemploymentperspective1.
What are the main challenges? How are they being tackled? Are there any
success stories to learn from?
Theopportunitypresentedbytheruraleconomyissignificant.Accordingtoa
McKinseysurveyconductedin20072,theruralIndiamarketwouldgrowalmost
fourtimesfromitsexistingsizein2007,whichwasestimatedatUSD577billion.
However,thegrowthoftheruraleconomyisstronglycoupledwithadvancesin
agriculture,asectorwhichisblockedbyvarousissuesrangingfrompooruseof
waterontheinputsidetopoorpackagingandstorageontheoutputside,leading
tosub-optimalproductivityinvariousstagesoftheagriculturalsupplychain.
Source:KPMGAnalysis
Thus,agriculturalsupplychainhasbeenexaminedthoroughlytoidentify
challengesundereachstep,studysuccessfulexamples(bothdomesticand
international)andtorecommendpotentialsolutions&interventions.
1 Agribusiness,CLSA,2006
2 The'BirdofGold':TheRiseofIndia'sConsumerMarket,2007
2
Agri-ValueChainpresence Challenges SelectCases Recommendations
• Pre-Harvest •Poorcropselectionand •Protectingtraditionalvarietiesof •Inclusivegrowthandgroup

diversification ricethroughseedbanksinOrissa approach
Infrastructure
•LowSeedreplacementrate •DCMShriram’snetwordof •Rationalizationofsubsidies
•Lowqualityseeds HariyaliKisaanBazaarsforinput •ModernizingIrrigationSystem
distribution &Techniques
•Extinctionoftraditionalvariety
•Conservationtechnologieslike •Agriculturalextensioninfilling
•Poorandunbalanceduseof laserleveler,zerotilage,dry
chemicals(fertilizers& informationgaps
seeding
pesticides) •PPPsincontractfarming,drip
•TataKisanSansarusingprecision irrigationprojects
farming
•McCainFoodsprocessof
growingshepodypotatoes
•PPPbetweenPunjabgovernment
andPepsicoforcitrusfruits
•JainIrrigationdripirrigation
network
•Chinareplacingfloodirrigation
withdripirrigation
Thepre-harvestsegmentoftheagri-valuechainhasseensomesuccesses
especiallyintheareasofhorticulture,whereinprivatesectorinvolvementhas
resultedinsignificantgainstofarmers.Thereisaneedtoapplythelearnings
fromtheseventureswhichhavenegotiatedtheexistingchallengestoother
agriculturalareassuchasfoodgrains.
• Harvest & •Poorandinadequate •Mechanizationofprocessing •PPPsinTerminalMarkets

mechanization technologyinVietnam- •UniformPolicyframework
Post-Harvest developed“Coversplit
•Poorpackaging,sorting, •Holisticinfrastructure
Infrastructure grading&processing technology”designedto
generateahigherratioof development
•Poorlogistics,storageand wholeseed
coldstorageinfrastructure
•Sugunapoultry’sunique
•Inadequatebasic integrationmodelconnecting
infrastructuresuchasPower, processorstoframers
RoadsWater
•ChordiaFoodpark’s
contributiontoinfrastructure
integration
•USA’sWarmerdamCenter
usingsolarpowerforcold
storage&packing
Inthepost-harvestsegment,therehavebeensomerecentdevelopments
includingthelaunchofterminalmarketsinvariouspartsofthecountry,which
couldprovideablueprintforthereformoftheinfrastructurethatiscurrentlyin
place.Further,thereisanurgentneedtoensureauniformpolicyframework
acrossthecountrywhileensuringholisticdevelopmentofinfrastructureas
opposedtotheskewednatureofexistinginfrastructurewhichisunderutilizedin
certainsegmentsofthevaluechainsuchascoldstoragesbutsimplyinadequate
inothersegments.
3
• Marketing •Inaccessible,incompleteand •EVKI-Ane-AgricultureMarketing • PPPsinTerminalMarkets

delayedmarketinginformation projecttakenupbythe • PromotionofRuralKnowledge
Infrastructure GovernmentofMadhyaPradesh
•Presenceoftoomany Centres,ICT-basedextension,
intermediaries executedonBuild-Own-Operate andtheprivatesector.
(BOO)basiswithaconsortiumof
vendors.
•FOODNET:Transformingthelives
offarmersinUgandathrough
powerofinformation
• GrameenDanoneFoodsLtd,
Bangladesh:Successstoryofa
co-operative
•RythuBazaar(FarmersMarket)-A
directmarketinginitiativebythe
GovernmentofAndhraPradesh
•Brazil-Directfarmerprocessor
linkagesandfreemarketsystem
Whilethereareafewexamplesofstatesponsoredinitiativesintheareaof
marketing,thisvitalareaofinterventionremainslargelyunaddressed.Several
studieshaveshownthelowerrealizationtofarmersfromthepricepaidbythe
endconsumer,demonstratingtheneedforreductioninthenumberof
intermediariesintheagri-supplychaintherebyimprovingefficiencies.
Agri-Value
Challenges SelectCases Recommendations
ChainPresence
• Soft Infrastructure •Inadequatereturnson • Brazil’sSENAR-combining • Inclusivegrowthand

investmentinresearchand literacyeducationwith approach
development occupationaltraining • Holisticinfrastructure
•Lackoftrainedhuman development
resources • Leveragingpartnerships
•Lackofefficientruralsupport suchasIBSAineducation,
infrastructureparticularly researchandtraining
educationandhealthcare • PPPsineducation,research
infrastructure andtraining
Thelastsegmentoftheagri-valuechainthatmeritsattentioniscertainlynotthe
leastimportantandisperhapsthekeytounlockingthepotentialofIndian
agriculture.Theneedforasecondgreenrevolutionhaslongbeenfeltandthis
couldbeusheredinbyresearchfacilitieswithclosertieswiththeagri-business
industries,developmentofhumanresourcesemployedintheareaofagriculture
aswellasenablingbettersupportinfrastructurefortheruralpopulation,
especiallyinhealthcare.
4
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.
5
6
2. Background
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.
Challenges in Agriculture Infrastructure
Harvest & Post- Harvest

Pre-Harvest Infrastructure Marketing Infrastructure Soft Infrastructure
Infrastructure
•Lowseedreplacement •Poorandinadequate •Inaccessible,incomplete •Inadequatereturnson
rate mechanization anddelayedmarketing investmentinresearch
•Hybridseedproduction •Transportationgaps information anddevelopment
stilllacking •Poorpackaging,sorting, •Presenceoftoomany •Lackoftrainedhuman
•Lowqualityseeds grading&processing intermediaries resources
•Extinctionoftraditional •Poorlogistics,storageand •Lackofefficientrural
variety coldstorage supportinfrastructure
•Poorandunbalanceduse infrastructure particularlyeducationand
ofchemicals(fertilizers& •Inadequatebasic healthcareinfrastructure
pesticides) infrastructuresuchas
•Lackofinputdistribution Power,RoadsWater
infrastructure
•Erosionofnatural
resources
•Poorcropselectionand
diversification
•Poorirrigationtechniques
andoverrelianceon
monsoons
7
Anumberofinnovativemeasureshavebeenundertakenbythepublicandprivate
sectorstotackletheseissuesandimprovethestateofIndia’sagrarianmarket.
TheseinitiativeshavehelpedtransformthelandscapeofruralIndiainsomeparts
ofthecountryanditwillbetheeffortintheremainingsectionsofthisreportto
usetheseasillustrationstoprovideinsightsonovercomingpolicyandstructural
challengesfacingagricultureinIndia.Thefocuswillprimarilybeonhighlighting
andovercomingchallengeswiththeagriculturalsupplychainandissuesrelated
tomanagementofresources–humancapital,R&Dandpolicytoprovidepossible
solutionsfromaproductivityandmodernizationperspective.Globalcasestudies
havealsobeenusedtosuggestmechanismstotransformspecificsub-sectors
withintheagrarianeconomy.
8
3. Rural Markets and

Agriculture
Indiahasemergedasamajorglobaleconomicpowerwiththeeconomy
registeringhighgrowthratesintherecentpast.PartsofIndiahavestartedto
displaysignsofaffluence,butthisprogresshasnotbeenuniform.Therural
regionshavenotbeenabletomatchtheirurbancounterparts.Withmorethan70
percent1 ofIndia’spopulationlivinginvillages,thebenefitsofeconomicgrowth
havefailedtopercolatetomorethantwo-thirdsofthepeople.
(%) Top20cities Others Rural Total Evenwithincreasingurbanizationandmigrationitisestimatedthat

Population 10 20 70 100 63percentofIndia'spopulationwillcontinuetoliveinruralareas
in2025.2
Income 31 13 56 100
Expenditure 21 15 64 100 ThedevelopmentofruralIndiaisessentialforsustainingthe

growthlevelsinthecountry.Withagriculturebeingtheprimary
Savings 60 8 32 100
employerofmorethanhalfofIndia’spopulation,particularlythe
underprivileged,improvementsinthesectorcouldgoalongwayinenhancing
thestandardoflivingofthepoor.However,inrecentyears,agriculturalgrowth
2008-09 was the poorest hasdropped.Thegrowthrateinagriculturesectorinvestmentandprofitability,
year in the last 5 years, netsownareaundercrops,andtheareaunderirrigationhavealsodropped.
with the agricultural sector “The agrarian crisis has its roots in the collapse of the rural economy...
growing at 1.6 percent Unemployment leading to out-migration of the asset-less is growing. At every
Source:EconomicSurveyofIndia,2008-09 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.
1 ForANewDealToTheRuralPoor,TheHindu,12thMarch2008
2 Afruitfulinvestmentopportunity,expresshospitality,March2008
3 Farmers'distress:causes&cures,TheHindu,10thSeptember2004
9
Hurdlesintheagri-supplychainwithrespecttopoorseeddevelopment,poor
cropselectionandmanagementtechniques,inadequateirrigationandwater
conservationmeasures,poorcoldchainandprocessinginfrastructure,lackof
researchanddevelopmentandpoorextensionofcurrenttechnologieshave
resultedinwastagesto the tune of INR 500 billion.Lackofbasicinfrastructure
suchpoorroads,inadequateeducationandhealthcarefacilitieshavealsoinhibited
thegrowthofthissector.Onlyabout48percentvillagesarecoveredwithroads.
Thetotalroadlengthinthecountryisabout33lakhkm,ofwhichonly58
thousandKmisNationalHighway.Theexistingrailfacilitiesinthecountryare
alsoinadequate.Therailwayroutelengthinthecountryisonlyabout70lakhkm
andtheelectrifiedtrackisnotevenbareminimum.4 Raillinesdonoteven
“There is a need for new connectsomeofthedistrictsinthecountry.Besidesthetransport,thestateof
technologies, new infrastructureforhorticulturalproduceaswellasmeatproductsleavesmuchto
bedesired.Indiahasaround50005 coldstoragefacilities,ofwhich90percentare
organizational structures,
privatelyowned.Alargenumberoftheseareofthesinglechamberandsingle
new institutional responses producttype.Nearly80percentofthecoldstoragefacilitiesareaccountedforby
and, above all, a new asinglecommoditynamelypotatoandtheyhaveautilizationofonlyaround50
percent.Further,thecoldstoragecapacityisskewedtowardsthenorthernand
compact between farmers,
easternregionswhichwith65percentofthecoldstoragesconcentratedinUttar
technologists, scientists, PradeshandWestBengal.6
administrators,
Addressingthesestructuralchallengesthroughinnovativemeasuresand
businessmen, bankers and technologieswhicheffectivelylinkproductionsystemswithprocessingand
consumers. Hence, there is consumptioncanleadtoselfsufficiencyinfoodaswellasimprovementinrural
a need for creative and welfare.Theprosperityachievedbyaugmentingagriculturalgrowthcouldhelpto
addresstheissuesofalargefractionatthebottomofthepyramid.
imaginative solutions that
increase agricultural Inordertoachievethis,weneedtoworkonresolvingsomeoftheself-made
problemsaswellasbuildmechanismstoaddressexternalproblemssuchas
productivity, farm
climatevariabilityanderosionofnaturalresources.
incomes, food production
Byanalyzingthevariouslinkagesintheagriculturevaluechainandidentifyingthe
and, at the same time, also
challengeswithineach,wecouldcomeupwitheffectivesolutions.Thiscouldnot
contribute to greater onlyunearthnewopportunitiesbutcouldalsotransformthesechallengesinto
purchasing power for the potentiallyprofitableinvestments.
poor” ManmohanSingh,Prime
MinisterofIndiaatGAIF,April2008
4 ‘SomepotentialforagriculturalmarketinginfrastructureprojectsinIndia’-PaperpresentedintheGeneralBodyMeetingofNationalCouncilofState
Agricultural,MarketingBoards,heldatGuwahation3rdto4thApril2008.
5 ReportoftheTaskForceonDevelopmentofColdChaininIndia,Dept.ofAgricultureandCooperation,MinistryofAgriculture,Govt.ofIndiaAug2008
6 AgricultureInformaticsDivision,NationalInformaticsCenter,Agmark
10
4. Indian Agricultural Linkages
India’sagriculturesectorneedstorevampandmodernizeitsbackwardand
forwardlinkages.Poorpre-harvestinputmanagement,suchastheuseofinferior
seeds,skewedfertilizerapplicationandimproperwatermanagementpractices,
havetakenatollonyields.Further,almostathirdoftheagri-produceiswasted1
duetopoorpost-harvestinfrastructureandimproperhandlingandstorage.Both
thegovernmentandthecorporatesectorneedtofocusonstreamliningand
aligningtheseagri-linkagestomeetbestpractices.Apartfromensuringshort-
termmeasuressuchasremunerativesupportpricesandcheapagriculturalcredit,
thereisaneedtomakesubstantiallongterminvestmentsinirrigation,water
conservation,buildingruralroadsandmarkets,providingrobustprimary
educationandhealthfacilitiesintheruralareas.
Theschematicbelowsummarizesvariouslinkagesintheagriculturalecosystem,
eachofwhichisdiscussedsubsequently.
Pre-Harvest Post-Harvest
Soilandwater Storageandmarketing
management Infrastructure
ResearchandDevelopment
SupportInfrastructure-transport,
electricity,education,healthcare
Opportunitiesexistacrossthevaluechain PublicParticipation
PrivatePlayers
(PPPisanemergingoption)
Agro- Agri-distribution
Agri-input Agri-output
processing sub-system
Productionand
marketingof Productionof Pulping Storage,
agricultural crops, industries, transportationand
inputssuchas poultry& beverage marketingof
seeds, dairying,etc industries,etc variousgoods,etc
fertilizers,etc
AgriFinancing
Source:KPMGAnalysis
1 IndianAgribusiness,CLSA,2006
11
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,except
vegetativelypropagatedcropssuchaspotatoorgarlic.However,inIndia,due
tolowawareness,misconceptionsoncultivatingnewseedseveryseason
andinsufficientmoney,farmersresorttoplantingsavedseedseveryyear2.
Seedssavedfromthecropoveratime,tendtolosetheirvirilityandpotency,
thusresultinginlowerproductivityofupto20-25percentinself-pollinated
cropsandashighas50percentincross-pollinatedcrops3.
2 InterviewwithMrSekharNatarajan,IndiaRegionLead,Monsanto
3PlanningCommission11th5yearplan
12
• Poorqualityofseeds
Oneofthemajordeterrentstohighproductivityandresultantlowyieldsin
Indiaistheuseofpoorqualityseedsbyfarmers.Lessthan12percentofthe
farmersinIndiausequalityseeds,whiletherestcultivatesavedseedsfrom
theircropsorbuyinginferiorqualityseedsfromnearbyruralmandis4.Alotof
thefarmerantipathyforseedreplacementhasresultedfromdistrustin
governmentchannels,whichhaveoftenpeddledlow-qualityseedsat
premiumprices5.
• Hybridseedproductionstilllacking
Therealsoexistsmissinglinksintheseedproductionsystem.Thereisvery
littlefocusonhybridseedproductioninpublicsector.Howevertheprivate
sectorhasexpandedtofillthegap.
ChangingShareofPrivateandPublicSectorin Theprivatesectorseedindustry
SeedsProduction inIndiaisgrowingappreciably
Year Private(percent) Public(percent)
andhasmadesignificant
contributionstoBTcotton,
2004 49.11 50.89 hybridsofmaize,rice,
sunflower,etc.
2005 58 42
2006 57.75 42.25
Source:PlanningCommission
Rice yields in India are one-half of that of other major producers Inspiteofthisimprovement,India’ssuccesswith
high-yieldingseedvarietieshasbeenlargelyconfined
tofoodgrains.Advancedseedresearchand
propagationintoothercropsisalmostnon-existent.
Chinaproduces40percentmorericethanIndiawith
about33percentlowercropplanted.Theyieldsin
Chinaatover200kg/hectareareabouttwicethan
thatofIndia’s.Betterimplementationofhighyield
varieties,adequatemaintenanceofirrigationfacilities
andconsistentinvestmentsindevelopingnewer
seedsandagri-researchhavecontributedtothe
sustenanceofhighyieldsinChina6.
Source:FAO,TheGravyTrain,KotakSecurities,August2008
4 InterviewwithMr.SekharNatarajan,IndiaRegionLead,Monsanto
5 PlanningCommission11th5yearplan
6 GravyTrain,KotakSecurities,August2008
13
• MediocreimprovementsinSeedproduction
Theimprovementsinseedproductionaremediocrebyworldstandards;
India’spaddyandwheatyieldsarestillathirdofbestin-classworld
standards.Muchofthesametrendsaretrueforothercrops7
Paddy yields are a third of best-in-class Wheat yields also similarly low
Paddy(kg/ ha) Wheat yields (kg/ ha)
Source:RBI,FAO,CLSAAsia-PacificMarkets
• Extinctionoftraditionalvariety
Withtheadventofthegreenrevolution,theemphasisonagricultureinIndia
shiftedawayfrombiodiversitytoincreasedyield.Asaresult,thegeneticbase
ofricevarietiesisbeingreducedconsiderablyandseveraltraditionalseed
varietiesarenowfacingextinction.
14
Source-M.S.SwaminathanFoundation
Thereisaneedforseedproductionanddistributionsystemtoberevampedbystrengtheningpublicsector
seedagenciesandbyinvolvingprivatetradeinseedmultiplicationanddistributionsystem.Statesmust
simultaneouslystrengthentheirsystemstocheckqualityofinputs.InformationonimportanceofSRRalso
needstobecommunicatedtothefarmersandeffortstosavetraditionalvarietiesarerequired.
4.1.1.2 Chemicals
• Fertilizers
India’spastresearchanddevelopmenteffortstoincreaseproductionfocused
onuseofinputsformaximizingproduction.Thisfocuswillnowhavetoshift
toincreasetheefficiencyofinputsforoptimumandsustainedproduction.The
firststepistoratinalizethecurrentfertilisersubsidy,whichhasbeenan
importantcauseofdeterioratingsoilquality.
15
AccordingtotheUnionBudget,thebudgetaryfertilizersubsidyisINR758
billion.Thisamountisfourtimestheinvestmentinagriculturesector.
However,thismoney,ifinvesteddirectlyinagriculture,infrastructureor
educationcouldgivebetterreturnsandcouldbesociallymoreproductive.
Thefollowingpresentthemajordrawbacksofthefertilizersubsidies:
• Thefertilizersubsidyprimarilybenefitsstatesanddistrictsthathave
abundantwaterresourcesasavailabilityofwaterisarequirementforthe
useoffertilizers.Thisresultsinlesssignificantgainstothesmalland
marginalfarmerswhichresideinsemi-aridandaridregions
• Itencouragesover-useofchemicalsleadingtolong-termsoildegradation
andwaterpollution;thisisworsenedbythecurrentsubsidypolicywhich
hasledtoaskewedusageofnitrogenous,potassiumandphosphates
fertilizers.Pricingdistortionsininputshasalsocontributedtothisskewed
development
• Almostathirdofthesubsidiesgotothefertilizerindustry,insteadofthe
truerecipientwhichisthefarmer
• Lastly,subsidizingfertilizerstotheextentof85percenthasalsoresultedin
theillegalflowofthesechemicalstoNepalandBangladesh,thereby
creatingartificialscarcityattheborders8.Thus,thechallengeforstates
suchasBihar,Bengal,AssamandTripuraistoensurethatthesupplies
meantfortheirfarmersisnotdivertedtotheneighboringcountries.
Thus,thereisanurgentneedtorationalizesubsidiesandalsoexamine
methodsbywhichthedeliveryofsomepartofthepresentlyhugesubsidies
canbetransferredfromfertilizerproducerstofarmersdirectlyaswellasto
agriculturalresearchandextensionservices.
• Pesticides
Despitehavingthesecond-largestarablelandacreageintheworld,India’s
shareoftheINR1.5trillionglobalcropprotectionmarketisonly2-3percent9.
Afocusonimprovingyields,aswellashighervalue-addedagriculture,islikely
tospurtheusageofagri-chemicals.Howevertheneedisnotonlytoincrease
thecropprotectionbutalsotosustainagriculturallandwhichcanbedoneby
providingtherightinformationonapplicationofinputsattherighttime.
8 Subsidiesandtrans-bordersmugglingoffertilizers,Merinews,2ndApril2009
16
CompanieslikeRallisandChambalFertilizersaresupplyingagri-chemicalsaswell
asknow-howtofarmerswhilealsoplayingtheroleofacoordinator.
Chambal Fertilizers and Chemicals - Creating demands through Facilitation
Extensions Services uttamkrishi.com

Inputs Uttam Technology Uttam Bandhan
& Hello Uttam
• CompanydealersprovideUrea • Cropandproductdemonstrations • Website,‘uttamkrishi.com’,

andotheragri-inputslikeDAP(Di- conducted providesinformationonthe
AmmoniumPhosphate),MOP weather,suitablecropping
(MurateofPotash),SSP(Single • Fielddemonstrationsandfarmer techniquesandmarkets.
SuperPhosphate),pesticides, meetsconducted
herbicides,fungicidesandseeds • ‘HelloUttam’telephonichelp
• Soiltestsaredoneformicro lineshavebeensetuptoanswer
• Mostoftheseproductsare nutrientsandbasedonthe thequeriesraisedbyfarmers
sourcedfromreputedsuppliers reportssoilmappingisdone
andsoldunderthe‘Uttam’
umbrellabrand • Expertsemphasizethebalanced
useoffertilizers
• Unemployedyouthfromvillages
areenrolledas‘UttamKrishi
Sewaks’.
• TheSewaksaretrainedinthe
latesttechniquesandprovide
specialisedservicestofarmers
Source-Companywebsite
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.
17
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.
18
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
19
4.1.3SoilandWaterManagement
Thepressingneedtoaccelerateagriculturegrowthshouldnotbeatthecostof
sustainabilityofthenaturalresourcebase.Whilenotentirelyirreversible,
degradationhasaggravatedthechallengesfacingtheagriculturesectorinIndiain
itsfighttoimproveproductivity.
• Highsoilerosion,leadingtoreductioninfertilityandproductivityofland
• Salinityandalkalinityarecausingsoilstolosesoilcarbonandmicronutrients
duetoirrationalandunbalancedfertilizeruse
• Pressureonagriculturallandhasalsoincreasedwithcropsbeingsown
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
20
Region-specificfactorsCausingLowProductivity
Agro-climaticRegion States/PartsofStates Region-specificConstraints
Severesoilerosion,degradationduetoheavy
rainfall/floodsanddeforestation,lowSRRs,poor
WesternHimalayanregion-I J&K,HP,Uttaranchal
road,poorinputdelivery,inadequate
communicationinfrastructureandmarketing
Aluminiumtoxicityandsoilacidity,soilerosionand
floods,shiftingcultivation,lowSRRs,non-availability
EasternHimalayanregion-II Assam,NEStates,Sikkim
ofelectricity,poorroad,poorinputdeliverysystem
andcommunicationinfrastructure
Flood/waterlogging,improperdrainage,
Lowerandmiddlegangetic salinity/alkalinity,arseniccontamination,lowSRRs,
WestBengal,Bihar,EasternUP
plainsregions-IIIandIV non-availabilityofelectricity,highpopulationgrowth,
poorroadandcommunicationinfrastructure
Groundwaterdepletion,decreasingtotalfactor
Upperandtrans-gangeticplains
WesternUP,Punjab,Haryana productivity,micronutrientdeficiency,non-
region-VandVI
availabilityofelectricity,andhighpopulationdensity
Moisturestress,drought,andsoilacidity,iron
Easternplateauandhills toxicity,lowSRRs,non-availabilityofelectricity,high
Orissa,Jharkhand,Chhattisgarh
region-VII populationgrowth,poorroad,poorinputdelivery
andcommunicationinfrastructure
Source:PlanningCommission11th5yearplan
21
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
temporarilydecliningyieldsandthelackofexperiencesandinformationaremajor
constraintspreventingtheadoptionoforganicfarming.
Further,soilconservationpracticessuchaszerotillagewhichhavegained
immensepopularityincountriessuchasBrazilalsoneedtobeexploredona
largerscale.Techniquessuchassystemofriceintensification(SRI)whichaid
waterconservationwhileincreasingyieldsdramatically,meritlargescale
deploymenttovalidatetheireffectiveness.CurrentlySRIisrestrictedtoafew
experimentalfarmers.
22
Conservation agriculture
Potential benefits relative to transplanted rice
technologies
Cutswateruse;fewerbundsandirrigationchannels;bettersoilnutrient
Laserleveler distribution;lessleachingofnitratesintogroundwater;moreefficienttractoruse
(reduceddieselconsumption);increasedareaforcultivation.
Lesslaborrequired;soilphysicalstructureismaintained(reducednutrientloss,
soilhealthmaintained);lesswaterrequired;avoidslargecracksinsoilafterdry
Zero-tillage periods;cankeeppreviouscrop’sresidueinfieldformulch(ifappropriatedrill
seederisusedforseeding);subsoillayerisnotcompactedbytractors
(compactedsubsoilimpedesrootgrowth).
Increasessoilwater-holdingcapacity,increasessoilquality,reducesweed
Cropresiduemulch
pressure,avoidsburning.
Lesswaterrequired;lesslaborrequired(especiallyatpeaktransplantingtime);
Dryseeding postharvestconditionoffieldisbetterforsucceedingcrop;deeperrootgrowth
(meaningbettertoleranceofdryconditions,betteraccesstosoilnutrients).
Source:RiceTodayOctober-December2006
Newtechnologiesarerequiredtopushtheyieldgrowth,utilizeinputsoptimally
anddiversifytomoresustainableandmorevaluablecroppingpatterns.Theseare
allknowledgedrivenandrequirenotonlyastrongresearchandextensionsystem
withskilledmanpower,butalsoadynamicchannelforexchangeofinformation.
SomeoftheprivateplayerssuchasTataChemicalshavesetupefficient
informationextensionsystemsandintroducednewtechnologieswhichhavethe
potentialtoestablishasustainablefarmingsystem.
23
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 the
geographic 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”.Theprogrammeaimstoworktogetherinareaslikesoil
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
24
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
25
McCain Foods India’s process of growing Shepody potatoes-A Logistical Masterpiece
McCainFoodsenteredIndiain1997withanintenttoinvestINR1billion($25million)inpotatofrybusiness.Aftera
thoroughstudy,thecompanyconcludedthatIndianpotatowasnottheidealoneforthebusiness.Potatoes,whichwere
largerinsizeandhadlesswatercontent,wererequired.Forthekindofpotatoneeded,itwasnecessarytodevelopthe
seedincoldclimate.AteamofresearchersthentookupthetaskofdevelopingtheseedatLahulSpitiinHimachal
Pradesh.
Afterdevelopingtheseedthecompanystartedasearchforthebestareaforgrowingthenewbreeds.Thatsearchended
atMehasanainnorthGujarat,astheregionisblessedwithastretchedwintrycondition,whichwasvitalforpotato
growth.
McCainpickedcontractfarmingasthebestoption,butdidnotaskthefarmerstogrowonlypotatoesaswellasdidn’t
promisetobuyout100percentoftheproduceeither.Asaresultthefarmerswerenotdependentonlyonthecompany.
Thecompanyworkedcloselywithfarmersandencouragedthemtosharethenewagronomypracticeslikerelyingon
qualityseed,dripandsprinklerirrigationsystems,newplantingtechniquesandadoptingcontemporarymethodsofpotato
storing.
Today,Deesa,Vijapur,Palanpur,HimmatnagarinnorthGujaratandAnandincentralGujarathaveemergedasIndia’shubs
ofnewbreedsofpotato.
•Theyieldperhectarewith
McCain'svarieties,basedonits
Master crop of potatoes technologyoflessertubersof
grown in Lahaul-Spiti
valley, Himachal greatermass,hasincreasedbyas
Pradesh, where the
weather is conducive
muchas60-70percent.
•WhiletheIndianaverageyieldfor
Come March, the potatoesisabout15tonnesper
Shepody potatoes are
harvested and sent to
hectare,inGujarat’sithas
the McCain factory in increasedfromabout22to27.5
Mehsana, Gujarat
tonnesperhectare.
•McCainFoodsIndiahasbegun
The crop is harvested in supplyingtomarketsinSriLanka,
September and rushed,
Pakistan,BangladeshandNepal,as
to farmers in Gujarat,
where the tubers wellasIndia.Thecompanyexports
are replanted.
10-15percentofitsoutputto
SouthandSouth-eastAsian
countriesandtheMiddleEast.
•By2010,allMacFriestobemadein
Source:CompanyWebsite,Fromfieldtofries,BusinessToday,April2009 India
26
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
accountsforabout40percentofthedehydratedonionexportsfromIndia13.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
27
PAFC targets of contract farming One-fourth of Punjab acreage to be

under non-grains
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,thetotalkiwiyieldinHimachalPradeshwas137tons
• DifferentvarietiesofkiwisuchasHayward,Abbot,AllisonandBrunoare
cultivatedonalmost120hectaresofland
• Kiwitypicallyneedstemperateclimatetogrow,butIndianfarmershave
beensuccessfulingrowingitevenatextremelylowtemperatures.Someof
thefarmersaregrowingkiwiatanaltitudeof8,500feet
28
4.1.6Irrigation
India’sagricultureoutputremainsvolatileandhostagetothemonsoons,despite
havingthehighestamountoflandunderirrigationintheworld.Thegrowthin
irrigationcoveragehasslowedmarkedlyaftertheGreenRevolutionand60
percentofthegrosssownareastillremainsprimarilyrain-fed.Asurveybythe
MinistryofAgriculturealsofoundthathalfofthetotalfarmerholdingsinIndiaare
notirrigated,withanother20percentbeingonlypartlyirrigated15.Thequalityof
irrigationfacilitiesandregularavailabilityofwaterarealsomajorconcerns.
Also,wateravailabilityforirrigationisincreasinglyconstrained.Irrigationaccounts
for85percentofwaterwithdrawalsindevelopingcountries,andtherapidgrowth
ofthesectorhasbeenbasedontheavailabilityofhugequantitiesoflow-cost
water.Foryears,groundwaterprovidedaprofitablenewresource,butinmany
basinsgroundwaterisnowbeingminedrapidly.Governmentshaveledthe
expansionoflarge-scaleirrigation,butperformancehasbeensuboptimal.
WateruseefficiencycanbeaddressedbyimprovementsinIrrigation
managementandpractices.Switchingfromsurface(alsocalledfloodirrigation)to
localizedirrigationcanresultinapproximately25percentwatersavingand
growinghigh-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
29
Chinahasalsoinvestedheavilyintodripirrigation.Thecountryrecentlypumped
inapproximatelyINR1billiontosetupadripirrigationsystempoweredbysolar
panelsinthearidXinjiangregion,whichproduces30percentofthecountry’s
cotton16.
IntheChineseXinjiangregion,replacingfloodirrigationwithdripirrigationon
just5,000acresofcottonfarmlandhasthepotentialtoreducewateruseby22
percent,save6millionlitersayear,increasecultivableareaby5percentby
eliminatingditches,reducechemicalfertilizersby10percent,andimproveyield
by30percent
Source:Chinainvests$23Mindripirrigation,CleantechGroupLLC,Oct2008
Public-privatepartnerships,withtheirpromiseofsharedresponsibilityand
managedrisk,havealsobeenseenasmeansofcreatingtherightincentivesto
addresstheissuesofwatermanagement.Oneofthemostrecentinitiatives
addressingthisissueisthepublicprivatepartnershipbetweenNationalBankfor
AgricultureandRuralDevelopment(NABARD)andJainIrrigation.
NABARDhassignedamemorandumofunderstandingwithJainIrrigation
SystemsLtdforits‘VillageDevelopmentPlan’andimplementationofNatural
ResourceManagementandDryLandAgriculture.Tobeimplementedin75
villagesacross31districtsinMaharashtra,theprojectinvolvesdevelopmentof
rainwaterharvestingandwaterstoragestructures,efficientwaterdistribution
andutilizationsystemsusingsolarpumps,developmentcroppingplanand
contractfarmingalongwithmodernagriculturalpractices
Source:JainIrrigationCompanywebsite
UnileverhasalsoenteredintoaPPPwithMinistryofAgricultureandacademic
institutionstofindwaystofunddripirrigationsystemsinthestatesofKarnataka
andTamilNaduinSouthernIndia.Oneexperimentalfarmyieldedwatersavings
ofupto40percent,aswellasreducedtheamountofchemicalsneeded.
UnileveroperatesinKarnatakaandTamilNaduthroughacontractfarmingmodel
foritssuppliesofgherkins.Unileverhashelpedtheindustryimproveyieldof
gherkinsbyupto60percentsinceitsinitialinvolvementin199817.
16 Chinainvests$23Mindripirrigation,CleantechGroupLLC,Oct2008
17 Unileversustainableagriculturereport
30
PPP - A solution to pre-harvest infrastructure challenge
Theissuesrelatedtopreharvestinfrastructurehavebeensuccessfullyaddressed
whenpublicandprivateplayershavecollaboratedtocomeupwiththesolutions
tobetteragriculturalpractices.Thecollaborationhasresultedinawin-win
situationforstakeholdersandassistedthefarmerstoimproveyieldsaswellas
enhancedtheirstandardofliving.ThePunjabgovernmentwiththesupportof
Pepsicoisoneofthebestexamplesofpublicprivatepartnerships.
PepsiCo PunjabGovernment
• Objective:Lookingfordiversificationof • Objective:Interestedinlocalizingthe
theiragriculturalbaseandincreasefarm supplybaseofCitrusJuice
incomes.
• Contribution:Leveragedservicesof
• Contribution:Facilitatedcreationof internationalexperts,specialized
NurseryInfrastructure,madeavailable trainingongrafting&planting,provided
landfor“demonstrationplots”,bought accesstovariousvarieties
inmorepartners
•Heightenedfarmerinterest
•CreationofaworldclasssourceofplantingmaterialforthePunjabFarmers-
choicebasedonevaluationof34varitiesofcitrusand16rootstockssourced
fromInternationalqualitynurseryinfrastructure
•GearinguptodelivertoPunjabfarmers-Annualcapacityof4millionsaplings
Source:PepsicoInternationalPresentation,2008
31
4.2 Harvest and Post-Harvest Infrastructure

IfIndianagriculturehastobegloballycompetitive,itneedsinvestmentin
infrastructurethatcanpromoteefficiencybyreducingtransactioncostsand
marketrisks.Ithasbeenestimatedthatlossofprimaryproducebeforereaching
themarketduetolackofproperhandling,cleaning,sorting,gradingand
packagingfacilitiesatthevillagelevelisabout7percentforfoodgrainsand30
percentforfruitsandvegetables18.
“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
4.2.1Harvesting
4.2.1.1 Mechanization
Agriculturalmachinesincreaseproductivityoflandandlabourbymeeting
timelinessoffarmoperationsandincreaseworkoutputperunittime.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.
32
India still suffers from lower mechanization TheavailabilityanduseofimprovedequipmenthaveenabledstateslikePunjab

andHaryanatoachievehighlevelsoflandproductivity.However,theprogressof
mechanizationinmostotherstateshasbeenslowanditsbenefitsoftimelyand
preciseoperationsarenotreachingthemajorityoffarmersinfullmeasure.The
constraintsinpromotionofmechanizationincluderequirementofequipmentfor
eachagro-climaticzone,thesmallandfragmentedlandholding,lowinvestment
capacityofthefarmers,inadequateirrigationfacilities,know-howstatusofthe
farmers,repairs&maintenancefacilitiesetc.
Mechanization of processing technology in Vietnam
VietnamisthelargestcashewproducerinSouthEastAsiaandthethirdlargest
Source:WorldBank,KotakInstitutionalEquities cashewexporterintheworldafterIndiaandBrazil.Over90percentof
productionisexported.ThecashewprocessingindustryinVietnamhasmade
significantcontributionstoenhanceexports.Thedevelopmentsinprocessing
technologyhaveenabledVietnamtoexportcashewinprocessedform.Vietnam
hasdeveloped“Coversplittechnology”designedbyVietnamesetechnicians.
Thistechnologyischeapandisabletogenerateahigherratioofwholeseed.
Duetoeasyavailabilityofefficienttechnology,thenumberofprocessing
companiesincreasedfrom6in1986to30in1994(withtotalcapacityof75000
tons/year)to62in1999(withtotalcapacityof250000tons/year)toabout120in
200319.
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.
19 RaboBankReport
33
4.2.2PackagingandProcessing
4.2.2.1 Grading and sorting

TheexistinggradinginfrastructureinIndiaisfarfromadequate.Onlyaround7
percentofthetotalquantitysoldbyfarmersinIndiaisgradedbeforesale21.
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
regionallaboratoriesindifferentpartsofthecountrywiththepurposeoftesting
thequalityofagriculturalproductsandapplyingfortheGovernment's"Agmark".
TheGovernmentisfurtherstreamliningqualitycontrolenforcementand
inspectionandimprovementingrading.
4.2.2.2 Poor packaging

PackingandhandlingofperishablesisstillinprimitivestagesinIndia.Moreoften
farmerspacktheirgoodsinjutesacks(gunnybags)ortightlypackedboxes,
whicharestackedoneabovetheother,therebyleadingtosignificantdamageto
theproduce.Whilethelossesduetopoorpackagingaremorepronouncedfor
horticulturalproducts,itisquitesubstantialforfoodgrainslikestaples,pulses
andoilseedsaswell.Majorityoffruitsandvegetablesarestilloutsidethe
purviewofproperpackaging.Efficientpackagingcanmakeasignificantdifference
inthemassivequantityoffoodgrainsIndialosesinthesupplychaineveryyear.
Terminal Markets- A solution to quality grading and better packaging
TerminalMarketshavesuccessfullyaddressedtheproblemsofpackagingand
gradingwhilealsohelpinginclosingthevariousgapsinpostharvest
infrastructure
34
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-privatepartnershipmodelthatlinksproduction
centretotheconsumptioncentre.TheGovernmentofIndiaislookingto
promoteterminalmarketsin8cities-Mumbai,Nashik,Nagpur,Chandigarh,
Rai,Patna,BhopalandKolkata22
Source:www.msamb.com,MaharashtraStateAgriculturalMarketingBoard
22IBEFfoodprocessingpresentation,December2008
35
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
36
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
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.
37
Source:Companywebsite
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
38
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
39
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,
landpreparationandtheprovisionoftechnicaladvice26.Someoftheclear
benefitsofcontractfarmingwhichcreatesabeneficialsituationforbothfarmers
andprocessorsare:
• Integrationofthesupplychaintohelpensuretimelyavailabilityofqualityand
quantityofrawmaterialforprocessors
• Significantreductionoftheprocurementcostforfoodprocessorsby
removingthemiddlemen
• Foodprocessorscansourcerawmaterialaspertheirrequirementsatlow
costs
• Privatesectorparticipationincreasesthescopeoftechnologytransfers,
capitalinflowandalsoleadstoassuredmarketsforcropproduction
4.2.3Logistics&Storage
IndiasuffersanestimatedfoodgrainandagricultureproducelossofoverINR5
billionduetothelackofadequatepostharvestinfrastructureandinefficient
supplychainmanagement27.Themagnitudeofthewastageandconsequent
losseslendsitselftoinitiativeswhichcanbringaboutmassiveimprovementsin
thesupplychainasincreasedincometofarmers.
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
40
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.Indiahasaround500031 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,heldatGuwahation3rdto4thApril2008
41
ThetaskforcesetupbytheIndiangovernmentin2007tostudythecoldchain
infrastructuresituationinIndiapublishedareportmakingahostof
recommendationstoremedythecoldchaininfrastructureinthecountry.Someof
themare
• SettingupSpecialPassagesforvehicleswithperishablegoodsakintothose
inChinaintheGreenCorridor,anagriculturalnetworkspreadalong27,000
km.
• Allowingcoldchainreceiptsasnegotiableinstrumentssimilartowarehousing
receipts
• 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
42
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,currentlybelow10percent34.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,SeniorWaterAdvisoratthe
WorldBank
43
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

Integratedruralhubsfor
Coldchainand
Contractfarming procurement Transportation FoodRetailing
warehouses
andprocessing
• Contractfarmingfor • Acquiringtractsoflandin •Hubandspoke •Integratedlogistics •Anetworkof
fruitsandvegetables severalstatestoserveas modelwith servicesacrossroad, discountstores,
alongwithintegrated integratedruralprocurement largewholesale rail,seaandair hypermarkets,
production andprocessinghubsfor terminalsfeeding supermarketsand
management aggregationandsegregation into conveniencestoresto
distributioncenters catertoboththe
• Fruitsandvegetables • Alreadyinadvancednegotiation urbanandrural
tobefocusareasbut for700acresinPunjab •Focusoncold population
othercashcropsand chainaswellas
grainsalsoonthe • Similarplanstobereplicatedin greenhouses •Largelyownedbut
radar 4-6statesacrossIndia conveniencestores
underfranchisee
• Modeledalongthetraditional modelforquick
villagemarts,thesewillalso rollout
serveasretailingpointsselling
agri-inputsanddeliveringcredit •Drygroceries,fruits
andfinancialservices &veg,dairytobe
focusareas
• Alsoinvestinginfoodparksand
processinghubsinPunjab •Exportopportunities
andHaryanatoenhancevalue toEuropeandMiddle
addition East
Source:KPMGReport‘ProcessedFoodandAgribusiness-OpportunitiesforInvestmentinIndia’2007
44
45
5. Marketing Infrastructure
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
percentrespectivelyinruralareasbeatsthepurpose1.Penetrationofprintmedia
isequallylow;28percentinruralregions,duetolowrateofliteracyratein
1RKSwamyBBDOguidetoMarketPlanning,VolumeII,2007
46
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.
47
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
Value Chain
Conventional
e-Choupal
Source:DevelopingaRurale-hub.Thecasestudyofe-choupalexperienceofITC-B.Bowonder,VinayGuptaandAmitSingh
48
EKVI (e-agricultural marketing) - An initiative by Madhya Pradesh Government
Background
EKVI(e-KrishiVipanan)isthee-AgricultureMarketingprojecttakenupbytheGovernmentofMadhyaPradeshasapartof
itse-GovernanceinitiativetofacilitatethefarmersoftheStateintakinginformeddecisionsforsellingtheirproduce2.The
projectisexecutedonBuild-Own-Operate(BOO)basiswithaconsortiumofvendors.
Objectives
TheprojectwasimplementedtoformalizeandreorganizetheagriculturetradingbusinessofMandiBoardbyinstalling
costeffectivedigitalinfrastructureusingthelatestinformationandcommunicationtechnologytocollectanddeliverreal
timeinformationonline;tomaketheoperationsmoreeffectiveandcompletelytransparent,thusbenefitingall
stakeholders(Farmers,TradersandtheGovernment);andempoweringthemthroughaccurateandtimelyinformationfor
effectivedecisionmaking.Theinfrastructuredevelopedwouldeventuallyleadtograin-lessMandisandobviatetheneed
forphysicalmovementofagricultureproducefromthefarmers'premisestotheMandis.3
Business Model
TheMadhyaPradeshGovernmentadoptedtheBOOmodeltoacceleratetheprojectforconservingpublicresourcesand
securebesttechnicalsupportinafastchangingtechnologicalworld.TheprojectwasrolledoutbyvendorsonaBOObasis
andwasresponsiblefordevelopingandmaintainingnecessaryinfrastructure.Inreturn,thevendorsreceivedremuneration
asapercentageofmandifees.AdditionalreturnscouldalsobegeneratedwithwrittenapprovalfromtheMandiBoard
fromtheadvertisementsmadeatmandisabouttheagriculturalproduceandrelateditemssuchasfertilizer,seeds,
pesticides,farmpractices,agricultureproduceexportorder,etc.2
Farmers • Availabilityoflatestinformationonrates,arrivalsetc.invariousmandis
• Choicetodecidewhenandwheretosell
• Selltheproduceatdoorthroughe-Trading
• Reductioninlossesduetotransportationandhandling
Traders • Transparentproceduresandsinglewindowdisposal
• Reconciliationofdailysales,accounts,transitpermit
• Availabilityofratesinvariousmandiswillhelpinofferingcompetitiveratestofarmers
Benefits
• Reductionintransportationlosses
Mandis • Instantreconciliationofaccounts,transitpermitsreceivablesandpayables
• Effectivelymonitoritsactivities
• Facilitateimplementationofcontractfarming
• Ensuretransparencyinoperations
Government • Speedycollection,analysisanddisseminationofinformationtofarmersandtraders
• Improvedtaxrevenuecollectionbycollatingthisdatawithcommercialtax,incometax,etc.
• InstantaneousaccesstoevenremotelocationsthroughVSATconnectivity,whichcan
effectivelyleadtogoodgovernancethroughdisseminationofinformation
Source:www.mit.gov.in
2www.mit.gov.in/download/e-ready/Chap4.PDF
3 www.iimahd.ernet.in/egov/ifip/dec2006/article1.htm
49
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’
50
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.
The AMUL Model - A Three Tier Structure
Thedistrictunionsinstatecomprisethestatefederation,whichisresponsiblefor
3StateFederation
marketingmilkandmilkproductsofthememberunions
Adistrictunionisownedbydairyco-operativesociety(DCS)whichbuysthemilk
2DistrictUnion
fromallthesocieties,andprocessesandmarketsthefluidmilkandproducts
AvillageDCSisformedbymilkproducersandanyproducercanbecomea
1VillageSociety
memberbybuyingashareandcommittingtosellhisstockofmilkexclusivelytoit
TheAmulStatistics 2007-08
MembersUnion 13
No.ofvillagesocieties 13,141
Totalmilkhandlingcapacity(million
10.21
litresperday)
Milkcollection(billionlitres) 2.69
Milkdryingcapacity(mtsperday) 626
Cattlefeedmanufacturingcapacity 3090
Source:AmulIndia:Thetasteofsuccess,BusinessOutlook,February,2007
51
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.The
successcanbeattributedtothefollowingfactors–
• Holisticvaluechainapproach–GrameenDanone’svaluechainwassimpleandinvolvedlocalcommunity.Themodel
benefitslocalproducersandentrepreneurswhilekeepingproductionanddistributioncostslow.
• Environmentalsustainability–Thefactorywasdesignedtouseharvestedrainwater,solarpowerandbiogas.Alsothe
cupsforyogurtweremadeofbiodegradablecornstarchtoreduceenvironmentalimpact.
Source:GrameenBankWebsite
52
5.2 Marketing Supply Chain

Presence of too many intermediaries
Source:KPMGReport‘ProcessedFoodandAgribusiness-OpportunitiesforInvestmentinIndia’2007
TheagriculturalmarketinIndiatodayisdominatedby7,500Government
authorizedmarketplacesormandis,whicharegovernedbystatespecificAPMC
Acts.Mandisaresecondarywholesalemarketslocatedinmajortradingcentres
thatgatherlargepartoffarmproducefromvariousruralprimarymarkets.
However,smallfarmershavelimitedaccesstothesewholesalemarketsandthey
largelyrelyuponmiddle-manorcommissionagentsinlocalruralmarketsto
markettheirproducegiventhepriceriskandtimeriskofperishableproducts.
Thisprevailingenvironmentleadstoasupplychainthathasseveral
intermediariesfromthefarmtotheconsumer.Theunreasonablylongsupply
chainresultsinsteepescalationinthetotalcostowingtoprocurement,transit
andothertaxesandservicechargesleviedatvariouslayers.
Thedirectimpactoftheemergenceofintermediariesislowpricerealizationby
thefarmers.Theintermediariesappropriateasizableproportionofthefinalsales
53
astheirservicecharges.Sinceeachintermediaryworksoutamarginforhimself
keepingthecostescalationinthenextphaseinmind,itisthefarmer(beingthe
firstseller)whobearstheultimatecost.Duetosuchinefficienciesinthesupply
chain,ithasbeenestimatedthatthepricereceivedbythefarmersisonlyabout
24to58percentofwhattheconsumerpays.Strengtheningthesupplychaincan
benefittheconsumersandproducersby20-25percent4.
Inviewofthepredominanceofsmallandmarginalfarmersinthecountry,and
theneedforimprovingtheirviabilityinthechangingandcompetitiveenvironment
ofagri-business,thenetworkingorclusteringoffarmersforthepurposeof
marketingoftheirsurplusescanbeachievedthroughalliancessuchascontract
farmingorcooperativemarketing.Thisalsohelpsfarmerstotakeadvantageof
mechanizedfarming,betterinputsandirrigationfacilities,leadingtoeconomiesof
scale.
Direct Marketing – A step closer to the final consumer
Riseinfarmerincomeandreductioninfoodpricespaidbytheconsumercanbe
madepossiblethroughdirectmarketing.Directmarketingofagriculturalproduce
helpsincompleteeliminationofmiddlemenandcommissionagentswhocharge
ahighlevelofcommissionfeefromtheagriculturists/farmers.Variousdirect
marketingmodelshaveemergedthatdilutethepowerofintermediariestoan
extent.Someofthemostefficientandeffectivemodelshavebeendiscussed
below:
4ICRIERWorkingPaper197
54
Rythu Bazaar (Farmers Market)5
RythuBazaarwasconceptualizedbytheGovernmentofAndhraPradeshin1999withthefollowingobjectives:
• Providedirectinterfacebetweenfarmersandconsumers-eliminatingintermediariesintrade
• Toensureremunerativepricestothefarmersandprovidefreshvegetablestotheconsumersatreasonableratesfixed
everyday
• Facilitatepromptrealizationofsaleproceedstothefarmerswithoutanydeductions
• Curbmalpractices
The Rythu Bazaar Model
Inthismarket,farmersbringvegetablesandselldirectlytotheconsumers,therebyeliminatingmiddlemenwhoexploit
bothfarmersandconsumersalike.Thus,theproduceavailableiseconomicalandfarmfresh.Ithashelpedinreductionof
pricesinothervegetablemarketsandvendors.
Brazil – Direct farmer processor linkages and operational efficiency
Brazilisanoutstandingsuccessstoryinagriandfoodexports,havingachievedleadershipstatusinawiderangeofagri
productsincludingsugar,orangejuice,meat,oilseedsetc.ThekeyunderlyingfactorswhichhaveenabledBraziltoachieve
thispositionareasfollows:
• Directfarmerprocessorlinkages:Thishashadmulti-foldbenefitsincludingenablingprocessorstoachievescalein
operationswhichhasledtodevelopmentofsustainablebusinessmodels,helpingensurefarmersadoptbestpractices
toenhancecropproductivity
• Theotherkeyenableristhefreemarketsystemwhichhasensuredthatprocessorsandfarmersaimtomaximize
operationalefficiencies.Fore.g.onetonofsugarcaneproduces140KgofSugar6 (visavis100kginIndia,85kgin
Argentina)inBrazilwhichisamongthehighestintheworld.
BrazilsPerformanceintheExportmarket(2005)
Worldrank Marketshareof Exportgrowth

Commodity
Exports Production globalexports rates,2000-05
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
55
6. Soft Infrastructure
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: Lackofaholisticapproachinvolvingamatrixoffarm

enterprises
• 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
56
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.
57
Theneedforcontextappropriatetrainingandcapacitybuildingatalllevelsstartingwithfarmersisessential,asistheneed
toputknowledgeintopractice.
58
6.3 Support Infrastructure

TheroleofsupportinfrastructurealongsideHumanresourcedevelopmentin
enablingthegrowthofthesectorisignoredoftenbybothpolicymakersand
sectorpractitioners,withattentionbeingpaidtoactivitiesdirectlyrelatingto
agriculturesuchaspre-harvestorpost-harvest.Educationisonesuchcomponent
ofsupportinfrastructureforagricultureandalsoavitaldriverofhumanresource
development.
Education
Halfofthoseengagedinagriculturearestillilliterateandjust5percenthave
completedhigherSecondaryeducation.Incomesandeducationareofcourse
leastamongagriculturallabourers.Ensuringfoodsecurityandfarmerwelfare
thusrequiresupportsystemstoextendtechnologyandscalebenefitsina
sustainablemannertoahugeexistingworkforceinagriculturethatlacksnon-
farmskillsandisalsoageing.
Graduation Rates by Fields
Source:GlobalEconomicsPaperNo:169,June,2008
59
India’sstatesupportedagriculturaleducationsystemconsistsofoneCentral
AgriculturalUniversity,forty-fiveStateAgriculturalUniversities(SAUs)andfour
NationalInstitutesofIndianCouncilofAgriculturalResearchhavingthestatusof
deemeduniversities.Thereareothereducationinstitutesandresearchcentres
whicharededicatedtocertainnichessuchasveterinarysciences,vegetables,
foodgrains,etc.Indiahas,duetovarioushistoricreasons,developedan
agriculturaleducationsystemwhichissomewhatisolatedfromtherestofthe
educationdisciplines1.Thus,notonlyaretheresourcesengagedinagriculture
under-educated,eventheeducatedstudentsareremovedfromthebenefitsof
inter-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(BrazilianMicroandSmall
BusinessSupportService)apublic,non-governmentalorganizationthatsupportssmall,medium,andindividual
businesses.
Sources:TrainingforRuralDevelopmentinBrazil:SENAR,FAO2004,ABlueprintforGreenEnergyintheAmericas2007,GartenRothkopf
1SureshKSinha’sB.P.PalMemorialLectureattheNationalAcademyofSciences,Allahabad,1999
60
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,beingrelevanttotherestofthe
populationaswell,itiswidelyknownthatinfrastructureforsecondaryand
tertiaryhealthcareisinadequateinIndia.Thesewouldneedtobeaddressedas
partofeffortstoimprovegeneralhealthandwellbeingoftheIndianpopulace.
WhileIndiahasnotbeensubjecttonationalepidemicsofthescaleoftheMad
CowdiseasethatsweptacrosstheUKandotherpartsoftheworldinthepast,
responsestorecentthreatssuchasthebirdfludiseaseshowsthatIndia’s
preparednessandinfrastructureislowwithrespecttothehealthofanimalsand
otherorganismswhicharepartofIndianagriculture.
61
7. Agricultural Policy
TheroleofpolicyinunlockingthepotentialofIndianagriculturecan’tbe
overstated.AgriculturalPolicybynaturehaslinkageswithnotjusttheagricultural
sectorbutalsowithindustrialpolicypromotinginvestmentsacrossvarious
sectorsincl.retail,roads,financing,etc.
Asdiscussedunderpostharvestsection,FCI’sroleinprocurementand
distributionoffoodgrainsneedsarethink.Asthegraphbelowshows,whilethe
governmenthasconstantlyincreaseditsexpenditureonfoodsubsidythegrowth
inofftakes(Rice&Wheat)hasnotalwaysincreased.
Growth in Off take of Rice & Wheat vis-à-vis Food Subsidy
Source:DepartmentofFood&PublicDistribution
ThiscouldhavebeenduetohostofreasonsincludingFooddiversion,Leakage1,
Pilferage&theft,IrregularitiesinidentificationofBPLfamilies,Lossesdueto
poorqualityofpackingmaterialandDamagedfoodgrains2.Inatellingcomment
ontheinefficiencyplaguingthePDS,in2008,overtenlakhtonneoffoodgrain
worthmillionsofrupeeswasfounddamagedoverthelastdecadeand
additionallyFCIspentaroundINR25milliontodisposetheserottenfoodgrainsin
additiontoaroundINR2.4billiontopreventthelossoffoodgrainsduring
storage.FCIandStategodownswillhavetoimprovestoringfacilitiesand
checkingmethods.Thestoragecapacitywillalsohavetobeincreasedtoachieve
thetargetortheexistingfacilitieswillhavetobescaledup.Moreover,controlled
procurementofthegrainsneedstobeensuredtoavoidoverstocking.
AlternativelywhileFCIcancontinuetosetpolicies,thelogisticscanbe
outsourcedtoprivateplayerswhiletargetingthedualbenefitsofreduced
investmentforFCIaswellasincreasedefficienciesduetomarketforces.
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/
62
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
Sl.No. Stageofreforms NameofState/UnionTerritory
AndhraPradesh,ArunachalPradesh,Assam,Chattisgarh,
States/UTswherereformstoAPMCActhasbeendonefor
Goa,Gujrat,HimachalPradesh,Jharkhand,Karnataka,
1 directMarketing;ContractFarmingandMarketsinPrivate/
MadhyaPradesh,Maharashtra,Nagaland,Orissa,Rajasthan,
CoopSectors.
SikkimandTripura.
a)DirectMarketingNCTofDelhi
States/UTswherereformstoAPMCActhasbeendone
2 b)ContractFarming:Haryana,Punjab,andChandigarh.
partially.
c)PrivateMarkets:PunjabandChandigarh
States/UTswherethereisnoAPMCActandhencenot Bihar*,Kerala,Manipur,Andaman&NicobarIsland,Dadra&
3
requiringreforms. NagarHaveli,Daman&Diu&Lakshadweep
States/UTs,whereAPMCActalreadyprovidesforthe
4 TamilNadu
reforms
States/UTswhereadministrativeactionisinitiatedforthe Mizoram,Meghalaya,Haryana,J&K,Uttarakhand,West
5
reforms. Bengal,Puducherry,NCTofDelhiandUttarPradesh
Someofthenorthernstateshavealsotriedtoboostthedevelopmentof
agricultureandagri-businessindustriesthroughvariouspoliciesovertheyears
andalsothroughproposedmeasures.Thestateshavealsoattractedconsiderable
attentionduetotheincentivestheyoffertoattractinvestment.BaddiinHimachal
Pradeshforinstance,hasdevelopedintoahubforfoodprocessingindustriesin
particular.Thetablebelowprovidesasnapshotofpoliciesacrossfourkey
northernstates.
5EconomicSurveyofIndia,2008-09,Statusason31stMar09
63
Punjab HimachalPradesh Uttarakhand Rajasthan
Newpolicies NewAgroIndustrialPolicy- Planstoconvertstateintoa Planningtogiveinterest-free New“RajasthanAgribusiness

2009tobeannounced,to ‘HerbalBiobusinessValleyof loansforsettingupself- andAgroIndustries
beimplemented-Punjab India’.Theareasidentifiedas employmentagriculture DevelopmentPolicy”drafted
AgroIndustriesCorpLtd prioritybiobusinessinclude industry(SAI)unitsunderthe forthefocusedgrowthof
(PAIC)(stategovt'snodal commercialmicropropagation, specialagriculturezones agrosector.
agency),toachieverapid bio-businessthroughhigh (SAZs)schemewhichislikely
industrializationinthefield valueindustrialcashcrops, toprivatisemandisinthenew
ofagricultureandagro- organicfarming, MandiAct.
processing. vermicompost,mushrooms, UndertheSAZprogramme,
fermentation,nutraceuticals thegovernmentproposesto
andotherprocessedproducts haveagro-basedunitslike
whichhaveimmensescopein fisheries,teagardens,dairy
thefirstphase. farmingandvariousother
agricultureandhorticulture
activities.
Encouraging Dialogueinitiatedwiththe - Govt.HorticultureFarmshave Proposestoencourageprivate

more provinceofManitoba, beenleasedouttoprivate sectorindustries,apexco-
partnerships Canadatosetupajoint sectorentrepreneursinorder operativesinstitutions,
taskforcetoexplorenew toattracttechnologyand APMCsetc.tocomeforward
avenuesofinvestmentin investmentinproductionof andsetupsuchcentres/
agriculturesectorin plantingmaterial. institutes.TheState
Punjab. Sericulturefarmtransferredto Governmentwillsupportsuch
primaryco-operativesocieties projectsbyprovidinglandat
forbettermanagement. concessionalrateand50
percentinitialseedcapital
Amedicinalandaromatic
matchingtheindustry
plantsexportzonehasbeen
contributionwithinaceilingof
establishedcoveringseven
INR60millions.
districtsandspecialised
herbalparksareintheoffing
Singlewindow AspecialcellcalledUdyog SettingupofSingleWindow Thesinglewindowcontract StateGovernmenthas

schemes Sahayak(industry ClearanceAgencyand facilitywouldbeavailableat constitutedanEmpowered
facilitator)setuptohelp MonitoringAuthorityunder theDistrictIndustrialCentres Committeeconsistingof
entrepreneursobtain thechairmanshipoftheChief attheDistrictlevelandState Secretaries,inchargeof
speedyclearancesfor Minister,alongwithsingle IndustrialDevelopment DepartmentsofFinance,
settingupindustriesin windowagenciesatmajor CorporationofUttarakhandat Industries,Agricultureto
Punjab.Allknowledge industrialtownslike thestatelevel.Apartfrom provideSingleWindow
drivenindustriessuchasIT, Parwanoo,Baddi,Paonta providinginformationand ClearancetoAgricultureand
electronicsand Sahib,GoalthaiandSansarpur escortservicestothe FoodProcessingIndustry
biotechnologyhavea Terrace entrepreneurs,thecentres
separatesinglewindow willalsobemaintainingadata
servicemechanismunder bank
PunjabInformationand
CommunicationTechnology
CorporationLtd.
64
Punjab HimachalPradesh Uttarakhand Rajasthan
Financial RuralDevelopmentFund, NABARDsanctionedan AprovisionofINR100million TheStateGovernmentwill

assistance/ MarketDevelopmentFund assistanceofINR188mllion isbeingmadeforthesoil- reimburse50percentcostof
Subsidy havebeencreatedto for19minorirrigation testingprojectwiththe preparationoftheproject
providefinancialassistance (comprising12flowirrigation governmenttakingthehelpof reporttosetupnewagro
schemes,5liftirrigationand2 scientistsofreputednational industrialunitssubjectto
deeptubewellschemesfor institutionsforthispurpose. ceilingofINR0.6million.
Bilaspur,Kangra,Kullu,Mandi, FinancialAssistancewillbe
Shimla,SirmaourandSolan releasedaftertheUnitisset
districts)and15ruraldrinking upandcommencesits
waterschemesinthestate. operations.
Theassistancetothehill
statecameunderRural
InfrastructureDevelopment
Fund(RIDF).
Interest 5percentbackended Interestsubsidyof10percent ReduceVatfrom4percentto 6percentbackendedinterest

Subsidyand interestsubsidyfor5yrs forfiveyearsforfood- 1percentonallfoodproducts subsidyfor7yrs(proposed)
exemptions (proposed).Infrastructure processingunits.Salestax andonpackagingmaterial.3
DevelopmentCessand exemptionforfood percentperannumback
othertaxes/levieswould processingunitsfor10years. endedinterestsubsidyfor
berationalisedandchange Salestaxrelief&electricity first7years.Thestate
inlandusechargeswould dutywaiverfor governmentisalsoproviding
bewaivedoffwhile subsidyforprojectsunder
12years(Category-A):
ExternalDevelopment variousschemesof
9YearsCategory-B)&
Chargeswouldbe AgriculturalandProcessed
7Years(Category-C).
reviewedintheproposed FoodProductsExport
newagro-policy DevelopmentAuthority
(APEDA),NationalHorticulture
Board(NHB),MinistryofFood
ProcessingIndustry(MFPI)
andtheNaturalMedicinal
PlantBoard(NMPB)subject
toamaximumlimitofINR2
million
Source:Pressreleases,IBEF,Stategovernmentwebsites,StatedraftAgriculturepolicyplans,publicprivatepartnershipstatewebsites
65
8. Recommendations
Ourdiscussionofvariousissuesandchallengesplaguingthesector,aswellas
thesuccessofvariousprogrammesbothpublicandprivate,incl.international
examples,yieldafewkeyrecommendationsforthesector.
Inclusive growth and group approach
Forgrowthtobeatallinclusive,theagriculturalstrategymustfocusonthe85
percentoffarmerswhoaresmallandmarginal.Itisnowwellrecognizedthatthe
poorarebestempowerediftheyfunctionasagroupratherthanasindividuals
andthatthisisalsothebestwaytosecureeconomiesofscale.Agroup
approachcouldalsoimprovethebargainingpowerofsmallcultivators.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.
66
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’scapacityinrelativelyneglectedareas,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.
67
9. Conclusion
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.
1ForANewDealToTheRuralPoor,TheHindu,12thMarch2008
Acknowledgements
Ramesh Srinivas is an Executive Anand Ramanathan is a D. Dharmendra is a Senior Sonia Topiwala is a Consumer
Director in KPMG's Consumer Manager in KPMG's Consumer Consultant in KPMG’s Consumer Markets and Retail Analyst in
Markets and Retail practice. Markets and Retail practice. & Industrial Markets practice. KPMG’s Research, Analytics and
Based in the firm’s Bangalore Based in the firm’s Bangalore Based in the firm’s Mumbai Knowledge practice. Based in
office he can be reached at office, he can be reached at office, he can be reached at the firm’s Mumbai office, she
rameshs@kpmg.com anandramanathan@kpmg.com ddharmendra@kpmg.com can be reached at
stopiwala@kpmg.com
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.
in.kpmg.com
KPMG in India KPMGContacts

Mumbai Hyderabad Pradip Kanakia
KPMG House, Kamala Mills Compound 8-2-618/2 Executive Director
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Mumbai 400 013 Hyderabad - 500 034
Tel: +91 22 3989 6000 Tel: +91 40 3046 5000
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Fax: +91 22 3983 6000 Fax: +91 40 3046 5299 Executive Director
Head - Consumer Markets Sector
Delhi Kolkata rameshs@kpmg.com
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Infrastructure Development in Agriculture - Route To Rural Transformation

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InfrastructureDevelopmentin

Ramesh Srinivas areaoffocusforcorporateIndiaandpresentsopportunitiesthathavehithertonot

Executive Director and beenfullyexploited.1

Tarun Sawhney themindsofpeoplewhothinkruralmarketingisallaboutagriculturalmarketing.

Changing Infrastructural Scenario

3. Rural Markets and Agriculture 08

4. Indian Agricultural Linkages 10

4.2 Harvest and Post-Harvest Infrastructure 31

Why do we need to look at Indian agriculture?

Agri-ValueChainpresence Challenges SelectCases Recommendations

• Pre-Harvest •Poorcropselectionand •Protectingtraditionalvarietiesof •Inclusivegrowthandgroup

Agri-ValueChainpresence Challenges SelectCases Recommendations

• Harvest & •Poorandinadequate •Mechanizationofprocessing •PPPsinTerminalMarkets

Agri-ValueChainpresence Challenges SelectCases Recommendations

• Marketing •Inaccessible,incompleteand •EVKI-Ane-AgricultureMarketing • PPPsinTerminalMarkets

• Soft Infrastructure •Inadequatereturnson • Brazil’sSENAR-combining • Inclusivegrowthand

What needs to be done?

Challenges in Agriculture Infrastructure

Harvest & Post- Harvest

3. Rural Markets and

(%) Top20cities Others Rural Total Evenwithincreasingurbanizationandmigrationitisestimatedthat

Expenditure 21 15 64 100 ThedevelopmentofruralIndiaisessentialforsustainingthe

4. Indian Agricultural Linkages

4.1 Pre-Harvest Infrastructure

2006 57.75 42.25

Paddy(kg/ ha) Wheat yields (kg/ ha)

Chambal Fertilizers and Chemicals - Creating demands through Facilitation

Extensions Services uttamkrishi.com

• CompanydealersprovideUrea • Cropandproductdemonstrations • Website,‘uttamkrishi.com’,

DCM Shriram’s network of Hariyali Kisaan Bazaar

Agro-climaticRegion States/PartsofStates Region-specificConstraints

Tata Kisan Sansar – The rise of precision farming

Source: Company website

Role of Public-Private Partnerships in Natural resource conservation

"Participation of private organizations in providing Agricultural Extension services

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

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

Himachal Pradesh is using crop diversification to fight climatic changes

PPP - A solution to pre-harvest infrastructure challenge

4.2 Harvest and Post-Harvest Infrastructure

“The annual physical and value loss to

- Ministry of Food Processing Industries

India still suffers from lower mechanization TheavailabilityanduseofimprovedequipmenthaveenabledstateslikePunjab

Mechanization of processing technology in Vietnam

4.2.2.1 Grading and sorting

4.2.2.2 Poor packaging

Terminal Markets- A solution to quality grading and better packaging

Post-harvest chilling by Adani Fresh - Controlled Atmosphere Chambers

Suguna’s poultry integration model

Mega Food Parks- Infrastructure Integration

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

State Government’s role in attracting investments

Contract Farming - Closing the gap between farmer and processor

Role of Organized retailing in improving Agri-infrastructure

Reliance Farm to Fork Model

5.1 Marketing Intelligence / Marketing

e-choupal – Private sector initiative connecting farmers electronically

ITC e-Choupal Business Model

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

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

The AMUL Model - A Three Tier Structure

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