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InfrastructureDevelopmentin
AgricultureRoutetoRuralTransformation
7August2009,NewDelhi
KPMG IN INDIA
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ThisisabriefingpaperwrittenbyKPMGinIndiathatanalysestheopportunities
presentedbytheIndianAgriculturemarketwithrespecttoitsinfrastructural
shortcomings.
ThestudybeginsbyexplainingtheroleofagricultureinIndia’sruralmarketsand
highlightstheneedtoimmediatelyaddressthechallengesfacedbythesector;it
goesontoexplainthevariouschallengesentailedintheagriculturalsupplychain-
rightfromissuesinpreandpostharvestingtoconcernsaboutresearchand
development,humanresourcedevelopmentaswellasinadequaciesofrural
infrastructure.
Whilehighlightingthechallenges,thepaperusesvariousexamplesofsuccessful
andinnovativecasesthatbringtolightthekeyopportunitiesforplayersacrossthe
agriculturalvaluechain.
Thestudyconcludeswithourlearningsandrecommendations.
About the study
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Thepopularadage“Mayyouliveininterestingtimes”couldnothaveperhaps
foundabettercontextintheglobaleconomy.TheIndianeconomytoohasnot
beencompletelyimmuneintheaftermathoftheglobalfinancialcrisiswhichhas
hitmostsectorsandgrewatamuchslowerrateof6.7percentin2008-09
comparedtoitsperformanceinrecentyears.TheUnionBudget(2009-10)has
revealedtheIndiangovernment’splanstogettheeconomybacktoahigher
growthrateof9percent,includinggettingtheagriculturesectorto4percent
growthrate.Agriculturepresentsanexcellentplatformforthegovernmentto
driveitsinclusivegrowthagendaforruralIndia.Ruraldemandisincreasinglyan
areaoffocusforcorporateIndiaandpresentsopportunitiesthathavehithertonot
beenfullyexploited.1
Thereisalotthatmustbedoneifsuchambitioustargetshavetobemet,
particularlyinmodernizingtheagriculturalsectorandensuringitssustainability.
Thisreportaddressesafewkeyinterventionsthatareneededforthegrowthof
theIndianagriculturalsectorspanningvariouslinkages–bothpreandpost
harvestinfrastructure,marketinginfrastructureaswellassofteraspectsofthe
infrastructuresuchashumanresourcedevelopment.Thelatterdoesnotusually
meritmuchattentioninagriculturalpolicy,itselfanareawhichneedsarethink.
Ramesh Srinivas
Executive Director and
Head - Consumar Markets Sector
KPMG in India
Foreword from KPMG India
1 UnionBudget2009-10
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Thereportmakesafewrecommendationstoaddressthegapsininfrastructure
supportingtheagriculturalsector,basedonanalysisofkeychallengesacross
varioussegmentsoftheagri-businesssupplychain.Severalsuccessfulefforts,
bothdomesticandinternational,havebeenusedtoshowcasepossiblesolutions
totheissuesinIndianagriculture–includingpublicprivatepartnerships.Sectors
thatderivetheirdemandfromagriculturesuchasfoodprocessingandfood
logisticscanalsobenefitfromtheserecommendationsandtheseshouldhave
importantimplicationsfortheruraleconomyfrombothanemployment
generationandsocialdevelopmentperspective.
Theanalysesandpointofviewpresentedinthereporthavebeengatheredand
validatedthroughdiscussionswithvariousindustryplayersandexperts.Wetake
thisopportunitytothanktheindustryplayersformakingthisendeavorpossible.
WealsothankCIIforhavinggivenusthisopportunitythroughknowledgepartnershiptoparticipateinthedevelopmentofagri-infrastructureandthe
harnessingoftheuntappedpotentialofruralIndia.
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TheconceptofRuralMarketinginIndiaEconomyhasalwaysplayedaninfluential
roleinthelivesofpeople.InIndia,leavingoutafewmetropolitancities,allthe
districtsandindustrialtownshipsareconnectedwithruralmarkets.
TheruralmarketinIndiaisnotaseparateentityinitselfanditishighlyinfluenced
bythesociologicalandbehavioralfactorsoperatinginthecountry.Therural
populationinIndiaaccountsforaround627million,whichisexactly74.3percent
ofthetotalpopulation.
TheconceptofruralmarketinginIndiaisoftenbeenfoundtoformambiguityin
themindsofpeoplewhothinkruralmarketingisallaboutagriculturalmarketing.
However,ruralmarketingdeterminesthecarryingoutofbusinessactivities
bringingintheflowofgoodsfromurbansectorstotheruralregionsofthe
countryaswellasthemarketingofvariousproductsmanufacturedbythenon-
agriculturalworkersfromruraltourbanareas.
TheruralmarketinIndiaisundergoingasilentbutdefiniterevolutionontheback
ofenhancedpurchasingpowerofruralconsumers,thechangingconsumption
patternsandincreasingoverallvalueofconsumptionofgoodsandservices.The
sheersizeoftheruralmarketwhichhaswitnessedtremendousgrowthinthe
recentyearsaslargesectionsofruralpopulationtransformedintodiscerning
consumershascaughttheimaginationandincitedbusinessinterestofthetop
conglomeratesinthecountry.
Tarun Sawhney
Conference Chairman &
Chairman, Agriculture Competitiveness
Sub-Committee, CII NR &
Executive Director,Triveni Engineering & Industries Ltd.
Foreword from CII
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Key Trends
Rising Purchasing Power
OnaccountofrisingpurchasingpowerinruralIndia,thecorporatesectoris
discoveringthehugepotentialthatcanberealizedbycreatingaccessand
focusingmarketingeffortsintheruralsegment.AccordingtotheNationalCouncil
forappliedEconomicResearchthereareasmanymiddle-incomeandabove
householdsintheruralareasasthereareintheurbanareas.
Government Initiatives
Thefocusedapproachofthegovernmenttobringaboutoverallruralprosperityis
evidencedbyinitiatives.RegionalRuralBankshavealsobeeninstructedto
expandtheirbranchnetworksandextendtheirservicestonon-residentIndians
aswelltoexpandtheirscopeingeneral.Lookingatthecoreconcernsofthis
sector,thegrowthofthissectorintermsofincreasedpublicinvestmentisof
immensenecessityatthisjuncturetorevivethefateoftheruraleconomyof
India.Therewasalotofhopethatthepresentgovernmentwouldaddressthese
concernsbyallocatingfundsinbudgets.Severalincentivestotheagricultural
sectorwhichhasreallybeenthebackboneoftheruraleconomyisboundto
favourablyanddirectlyimpactgrowthoftheruralsector.
Changing Infrastructural Scenario
Thefocusedmarketattentionontheruralmarketsisaidedbytheslowlybut
surelychanginginfrastructuralscenarioinruralIndia.Thebudgetproposalsarean
acknowledgementofthefactthatIndia’spoorinfrastructureneedsurgent
attention,whichinturnislikelytoaddressmanyoftheillsbesiegingthe
country’svastagriculturesectorandthebottlenecksfacingruralmarketingin
generalandorganizedruralretailinspecific.
IthasbeenalsobeenobservedthatIndia’sruralmarketsaregrowingatdouble
therateofurbanmarkets.Moreover,thetotalnumberofruralhouseholdsis
expectedtorisefrom135millionin2001-02to153millionin2009-10.ThisislikelytoresultinruralIndiabecomingthelargestpotentialmarketintheworld.
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Table of Contents
1. Executive Summary 01
2. Background 06
3. Rural Markets and Agriculture 08
4. Indian Agricultural Linkages 10
4.1 Pre-Harvest Infrastructure 11
4.1.1 Agri-Inputs 11
4.1.2 Agri-Inputs Distribution 174.1.3 Soil and Water Management 19
4.1.4 Crop Selection 24
4.1.5 Crop Diversification 26
4.1.6 Irrigation 28
4.2 Harvest and Post-Harvest Infrastructure 31
4.2.1 Harvesting 31
4.2.2 Packaging and Processing 33
4.2.3 Logistics & Storage 39
4.2.4 Basic Infrastructure - Power, Roads, Water 42
5. Marketing Infrastructure 45
5.1 Marketing Intelligence / Marketing Information 45
5.2 Marketing Supply Chain 52
6. Soft Infrastructure 55
6.1 Research and Development 55
6.2 Human Resource Development 56
6.3 Support Infrastructure 58
7. Agricultural Policy 61
8. Recommendations 65
9. Conclusion 67
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Why do we need to look at Indian agriculture?
Indiahasexperiencedstrongeconomicgrowthinrecentyearsfueledbya
boomingservicessectorandincreasedindustrialproduction.However,agriculture
continuestoremainthemainstayoftheIndianeconomy-engagingnearly58
percentoftheworkforceandcontributingtoaboutaquarterofIndia’sGDP.India
hasadominantpositioninworldagriculture,withthesecondlargestarableland
bankintheworldandrankinginthetopthreeproducersofrice,wheat,coarse
grains,fruitsandvegetables,tea,coffee,andjute.Indiaalsohassomeofthe
largestlivestockpopulations,whichcombinedwiththelargefarmingsectorhelp
ensuresthatagri-businessremainstheoverwhelmingcontributortotheeconomy
frombothamonetaryandemploymentperspective 1.
What are the main challenges? How are they being tackled? Are there any
success stories to learn from?
Theopportunitypresentedbytheruraleconomyissignificant.Accordingtoa
McKinseysurveyconductedin2007 2,theruralIndiamarketwouldgrowalmost
fourtimesfromitsexistingsizein 2007,whichwasestimatedatUSD577 billion.
However,thegrowthoftheruraleconomyisstronglycoupledwithadvancesin
agriculture,asectorwhichisblockedbyvarousissuesrangingfrompooruseofwaterontheinputsidetopoorpackagingandstorageontheoutputside,leading
tosub-optimalproductivityinvariousstagesoftheagriculturalsupplychain.
Thus,agriculturalsupplychainhasbeenexaminedthoroughlytoidentify
challengesundereachstep,studysuccessfulexamples(bothdomesticand
international)andtorecommendpotentialsolutions&interventions.
1. Executive Summary
1 Agribusiness,CLSA,2006
2 The'BirdofGold':TheRiseofIndia'sConsumerMarket,2007
1
Source:KPMGAnalysis
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Thepre-harvestsegmentoftheagri-valuechainhasseensomesuccesses
especiallyintheareasofhorticulture,whereinprivatesectorinvolvementhas
resultedinsignificantgainstofarmers.Thereisaneedtoapplythelearningsfromtheseventureswhichhavenegotiatedtheexistingchallengestoother
agriculturalareassuchasfoodgrains.
Inthepost-harvestsegment,therehavebeensomerecentdevelopments
includingthelaunchofterminalmarketsinvariouspartsofthecountry,which
couldprovideablueprintforthereformoftheinfrastructurethatiscurrentlyin
place.Further,thereisanurgentneedtoensureauniformpolicyframework
acrossthecountrywhileensuringholisticdevelopmentofinfrastructureas
opposedtotheskewednatureofexistinginfrastructurewhichisunderutilizedin
certainsegmentsofthevaluechainsuchascoldstoragesbutsimplyinadequate
inothersegments.
2
Agri-ValueChainpresence Challenges SelectCases Recommendations
• Pre-Harvest
Infrastructure
•Poorcropselectionand
diversification
•LowSeedreplacementrate
•Lowqualityseeds
•Extinctionoftraditionalvariety
•Poorandunbalanceduseof
chemicals(fertilizers&pesticides)
•Protectingtraditionalvarietiesof
ricethroughseedbanksinOrissa
•DCMShriram’snetwordof
HariyaliKisaanBazaarsforinputdistribution
•Conservationtechnologieslike
laserleveler,zerotilage,dryseeding
•TataKisanSansarusingprecisionfarming
•McCainFoodsprocessof
growingshepodypotatoes
•PPPbetweenPunjabgovernment
andPepsicoforcitrusfruits
•JainIrrigationdripirrigation
network
•Chinareplacingfloodirrigation
withdripirrigation
•Inclusivegrowthandgroup
approach
•Rationalizationofsubsidies
•ModernizingIrrigationSystem
&Techniques
•Agriculturalextensioninfilling
informationgaps
•PPPsincontractfarming,drip
irrigationprojects
Agri-ValueChainpresence Challenges SelectCases Recommendations
• Harvest &
Post-Harvest
Infrastructure
•Poorandinadequate
mechanization
•Poorpackaging,sorting,
grading&processing
•Poorlogistics,storageand
coldstorageinfrastructure
•Inadequatebasic
infrastructuresuchasPower,
RoadsWater
•Mechanizationofprocessing
technologyinVietnam-developed“Coversplit
technology”designedto
generateahigherratioof
wholeseed
•Sugunapoultry’sunique
integrationmodelconnecting
processorstoframers•ChordiaFoodpark’s
contributiontoinfrastructure
integration
•USA’sWarmerdamCenter
usingsolarpowerforcoldstorage&packing
•PPPsinTerminalMarkets
•UniformPolicyframework
•Holisticinfrastructure
development
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Whilethereareafewexamplesofstatesponsoredinitiativesintheareaof
marketing,thisvitalareaofinterventionremainslargelyunaddressed.Several
studieshaveshownthelowerrealizationtofarmersfromthepricepaidbytheendconsumer,demonstratingtheneedforreductioninthenumberof
intermediariesintheagri-supplychaintherebyimprovingefficiencies.
Thelastsegmentoftheagri-valuechainthatmeritsattentioniscertainlynotthe
leastimportantandisperhapsthekeytounlockingthepotentialofIndian
agriculture.Theneedforasecondgreenrevolutionhaslongbeenfeltandthis
couldbeusheredinbyresearchfacilitieswithclosertieswiththeagri-business
industries,developmentofhumanresourcesemployedintheareaofagriculture
aswellasenablingbettersupportinfrastructurefortheruralpopulation,
especiallyinhealthcare.
3
Agri-ValueChainpresence Challenges SelectCases Recommendations
• Marketing
Infrastructure
•Inaccessible,incompleteand
delayedmarketinginformation
•Presenceoftoomany
intermediaries
•EVKI-Ane-AgricultureMarketing
projecttakenupbythe
GovernmentofMadhyaPradesh
executedonBuild-Own-Operate(BOO)basiswithaconsortiumof
vendors.
•FOODNET:Transformingthelives
offarmersinUgandathrough
powerofinformation
• GrameenDanoneFoodsLtd,
Bangladesh:Successstoryofa
co-operative
•RythuBazaar(FarmersMarket)-A
directmarketinginitiativebythe
GovernmentofAndhraPradesh
•Brazil-Directfarmerprocessor
linkagesandfreemarketsystem
• PPPsinTerminalMarkets
• PromotionofRuralKnowledgeCentres,ICT-basedextension,
andtheprivatesector.
Agri-ValueChainPresence
Challenges SelectCases Recommendations
• Soft Infrastructure •Inadequatereturnson
investmentinresearchanddevelopment
•Lackoftrainedhumanresources
•Lackofefficientruralsupport
infrastructureparticularlyeducationandhealthcare
infrastructure
• Brazil’sSENAR-combining
literacyeducationwithoccupationaltraining
• Inclusivegrowthand
approach
• Holisticinfrastructure
development
• Leveragingpartnerships
suchasIBSAineducation,
researchandtraining
• PPPsineducation,research
andtraining
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What needs to be done?
WhilewehavelookedatthevarioussegmentsofIndianagriculture,tryingtofind
solutionstotacklevariouschallenges,itisclearthatsomeofthesector’s
problemscanbesolvedbyaddressingissueswhicharenotuniquetothesector
butareinhibitingIndia’sgrowthingeneral–healthcareandroadsbeingtwokey
areasforintervention.
Severalglobalexamplesdiscussedinthereportprovidepotentialmodelswhich
couldbeusedtodevelopsolutionstothevariouschallengesinIndianagriculture.Oneofthepossiblesolutionavenuescouldbetheuseofpublic-private
partnershipsacrosssegmentsfromseedresearchtohumanresource
development,fromruralhealthcaretobetterinformationnetworksforfarmers.
Thekeywouldbecollaborationbetweenprivateandpublicagencies.
India’sagriculturesectorpresentsimmenseopportunitiesforinvestmentsif
variousstakeholderscollaborateanddevelopinnovativeandeffectivemodelsthat
notonlylookataddressingtheissuesinIndia’sagricultureset-upbutalso
introducebestagriculturalpractices.
4
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AlotofbuzzhassurroundedtheIndianruralmarketinrecenttimes,especiallyin
thecontextofagriculture,whichcontinuestoremainthebackboneoftheIndian
economy.DespiteagricultureplayingakeyroleinIndia’seconomy,ithasbeen
sufferingfrommajorroadblockswhichhavehindereditsgrowth.Problemshave
existedateachstageofthevaluechain.
Issuesconcerningagri-infrastructureareoneofthemostprominentchallenges
thatneedtobeaddressedwithimmediateaffect.Lackofproperirrigationand
watermanagement,environmentalconcernsrelatedtopoorsoilmanagement,
inadequateandpoorfertilizerandpesticiderequirementscoupledwithscanty
post-harvestinfrastructureincludingshortageofproperwarehousesandstorage
facilities,poorgrading,sortingandpackagingofyieldarehurtingtheagricultural
baseofoureconomy.Problemsexisteveninmarketingofproduceasfarmers
arehandicappedbythelackofinformationonpricesandforecasts.Government
policiesandregulationhavealsocreatedalotofunneededcomplexityinthe
systemwhichhasdiscouragedinvestmentinthissector.Thelackofagri-support
infrastructurehasalsoplayedspoilsport.Absenceofproperresearchand
developmentinstitutes,ruraltransportinfrastructure,ruralhealthcareand
educationalfacilitieshavestifledthissector.
2. Background
Challenges in Agriculture Infrastructure
Pre-Harvest InfrastructureHarvest & Post- Harvest
InfrastructureMarketing Infrastructure Soft Infrastructure
•Lowseedreplacement
rate
•Hybridseedproduction
stilllacking
•Lowqualityseeds
•Extinctionoftraditionalvariety
•Poorandunbalanceduse
ofchemicals(fertilizers&
pesticides)
•Lackofinputdistribution
infrastructure
•Erosionofnatural
resources
•Poorcropselectionand
diversification
•Poorirrigationtechniques
andoverrelianceon
monsoons
•Poorandinadequate
mechanization
•Transportationgaps
•Poorpackaging,sorting,
grading&processing
•Poorlogistics,storageandcoldstorage
infrastructure
•Inadequatebasic
infrastructuresuchas
Power,RoadsWater
•Inaccessible,incomplete
anddelayedmarketing
information
•Presenceoftoomany
intermediaries
•Inadequatereturnson
investmentinresearch
anddevelopment
•Lackoftrainedhuman
resources
•Lackofefficientruralsupportinfrastructure
particularlyeducationand
healthcareinfrastructure
6
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Anumberofinnovativemeasureshavebeenundertakenbythepublicandprivate
sectorstotackletheseissuesandimprovethestateofIndia’sagrarianmarket.
TheseinitiativeshavehelpedtransformthelandscapeofruralIndiainsomeparts
ofthecountryanditwillbetheeffortintheremainingsectionsofthisreportto
usetheseasillustrationstoprovideinsightsonovercomingpolicyandstructural
challengesfacingagricultureinIndia.Thefocuswillprimarilybeonhighlighting
andovercomingchallengeswiththeagriculturalsupplychainandissuesrelated
tomanagementofresources–humancapital,R&Dandpolicytoprovidepossible
solutionsfromaproductivityandmodernizationperspective.Globalcasestudieshavealsobeenusedtosuggestmechanismstotransformspecificsub-sectors
withintheagrarianeconomy.
7
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Indiahasemergedasamajorglobaleconomicpowerwiththeeconomy
registeringhighgrowthratesintherecentpast.PartsofIndiahavestartedto
displaysignsofaffluence,butthisprogresshasnotbeenuniform.Therural
regionshavenotbeenabletomatchtheirurbancounterparts.Withmorethan70
percent1 ofIndia’spopulationlivinginvillages,thebenefitsofeconomicgrowth
havefailedtopercolatetomorethantwo-thirdsofthepeople.
Evenwithincreasingurbanizationandmigrationitisestimatedthat
63percentofIndia'spopulationwillcontinuetoliveinruralareas
in2025.2
ThedevelopmentofruralIndiaisessentialforsustainingthe
growthlevelsinthecountry.Withagriculturebeingtheprimary
employerofmorethanhalfofIndia’spopulation,particularlythe
underprivileged,improvementsinthesectorcouldgoalongwayinenhancing
thestandardoflivingofthepoor.However,inrecentyears,agriculturalgrowth
hasdropped.Thegrowthrateinagriculturesectorinvestmentandprofitability,
netsownareaundercrops,andtheareaunderirrigationhavealsodropped.
“The agrarian crisis has its roots in the collapse of the rural economy...
Unemployment leading to out-migration of the asset-less is growing. At every level of the livelihood security system, there is a tendency to make profit out of
poverty. Something is terribly wrong in the countryside... " -Dr. M.S. Swaminathan3
AgriculturebeingthemainstayofIndia’seconomy,itisimperativethat
considerableeffortsaremadetoextricatethesectorfromstagnation.Larger
irrigationfacilities,betterseedsandagri-inputsatreasonablecostswillhavetobe
providedtofarmers.Theaccesstoimprovedinputsandtechnologieswillhaveto
becoupledwithprovisionoffinance,infrastructuralandmarketingfacilities.
Agricultureneedstobecomeanincomeproducingactivityandfarmersshould
notbelefttotheuncertaintyofweather,financialresources,andmarkets.
OneofthekeyreasonsforthestagnationofIndia’sagricultureisthefalling
productivityrootedfromstructuralchallengesthathaveseepedintothebaseof
thesector.Challengeswithhardandsoftinfrastructurecoupledwithpoor
sourcesofinformationandfinancinghavecreatedalotofdistressinthesector.
3. Rural Markets and
Agriculture
(%) Top20cities Others Rural Total
Population 10 20 70 100
Income 31 13 56 100
Expenditure 21 15 64 100
Savings 60 8 32 100
2008-09 was the poorest
year in the last 5 years,
with the agricultural sector
growing at 1.6 percentSource:EconomicSurveyofIndia,2008-09
1 ForANewDealToTheRuralPoor,TheHindu,12thMarch2008
2 Afruitfulinvestmentopportunity,expresshospitality,March2008
3 Farmers'distress:causes&cures,TheHindu,10thSeptember2004
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Hurdlesintheagri-supplychainwithrespecttopoorseeddevelopment,poor
cropselectionandmanagementtechniques,inadequateirrigationandwater
conservationmeasures,poorcoldchainandprocessinginfrastructure,lackof
researchanddevelopmentandpoorextensionofcurrenttechnologieshave
resultedinwastagesto the tune of INR 500 billion.Lackofbasicinfrastructure
suchpoorroads,inadequateeducationandhealthcarefacilitieshavealsoinhibited
thegrowthofthissector.Onlyabout48percentvillagesarecoveredwithroads.
Thetotalroadlengthinthecountryisabout33lakhkm,ofwhichonly58
thousandKmisNationalHighway.Theexistingrailfacilitiesinthecountryarealsoinadequate.Therailwayroutelengthinthecountryisonlyabout70lakhkm
andtheelectrifiedtrackisnotevenbareminimum.4 Raillinesdonoteven
connectsomeofthedistrictsinthecountry.Besidesthetransport,thestateof
infrastructureforhorticulturalproduceaswellasmeatproductsleavesmuchto
bedesired.Indiahasaround5000 5 coldstoragefacilities,ofwhich90percentare
privatelyowned.Alargenumberoftheseareofthesinglechamberandsingle
producttype.Nearly80percentofthecoldstoragefacilitiesareaccountedforby
asinglecommoditynamelypotatoandtheyhaveautilizationofonlyaround50
percent.Further,thecoldstoragecapacityisskewedtowardsthenorthernand
easternregionswhichwith65percentofthecoldstoragesconcentratedinUttar
PradeshandWestBengal.6
Addressingthesestructuralchallengesthroughinnovativemeasuresand
technologieswhicheffectivelylinkproductionsystemswithprocessingand
consumptioncanleadtoselfsufficiencyinfoodaswellasimprovementinrural
welfare.Theprosperityachievedbyaugmentingagriculturalgrowthcouldhelpto
addresstheissuesofalargefractionatthebottomofthepyramid.
Inordertoachievethis,weneedtoworkonresolvingsomeoftheself-made
problemsaswellasbuildmechanismstoaddressexternalproblemssuchas
climatevariabilityanderosionofnaturalresources.
Byanalyzingthevariouslinkagesintheagriculturevaluechainandidentifyingthe
challengeswithineach,wecouldcomeupwitheffectivesolutions.Thiscouldnot
onlyunearthnewopportunitiesbutcouldalsotransformthesechallengesinto
potentiallyprofitableinvestments.
“There is a need for new
technologies, new
organizational structures,
new institutional responses
and, above all, a new
compact between farmers,
technologists, scientists,administrators,
businessmen, bankers and
consumers. Hence, there is
a need for creative and
imaginative solutions that
increase agricultural
productivity, farm
incomes, food production
and, at the same time, also
contribute to greater
purchasing power for the
poor” ManmohanSingh,Prime
MinisterofIndiaatGAIF,April2008
4 ‘SomepotentialforagriculturalmarketinginfrastructureprojectsinIndia’-PaperpresentedintheGeneralBodyMeetingofNationalCouncilofState
Agricultural,MarketingBoards,heldatGuwahation3rdto4thApril2008.
5 ReportoftheTaskForceonDevelopmentofColdChaininIndia,Dept.ofAgricultureandCooperation,MinistryofAgriculture,Govt.ofIndiaAug2008
6 AgricultureInformaticsDivision,NationalInformaticsCenter,Agmark
9
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India’sagriculturesectorneedstorevampandmodernizeitsbackwardand
forwardlinkages.Poorpre-harvestinputmanagement,suchastheuseofinferior
seeds,skewedfertilizerapplicationandimproperwatermanagementpractices,
havetakenatollonyields.Further,almostathirdoftheagri-produceiswasted 1
duetopoorpost-harvestinfrastructureandimproperhandlingandstorage.Both
thegovernmentandthecorporatesectorneedtofocusonstreamliningand
aligningtheseagri-linkagestomeetbestpractices.Apartfromensuringshort-
termmeasuressuchasremunerativesupportpricesandcheapagriculturalcredit,
thereisaneedtomakesubstantiallongterminvestmentsinirrigation,waterconservation,buildingruralroadsandmarkets,providingrobustprimary
educationandhealthfacilitiesintheruralareas.
Theschematicbelowsummarizesvariouslinkagesintheagriculturalecosystem,
eachofwhichisdiscussedsubsequently.
4. Indian Agricultural Linkages
1 IndianAgribusiness,CLSA,2006
Pre-Harvest Post-Harvest
Soilandwater
management
Storageandmarketing
Infrastructure
ResearchandDevelopment
SupportInfrastructure-transport,
electricity,education,healthcare
Opportunitiesexistacrossthevaluechain
(PPPisanemergingoption)PrivatePlayers PublicParticipation
AgriFinancing
Agri-input Agri-outputAgro-
processing
Agri-distribution
sub-system
Productionand
marketingof
agricultural
inputssuchas
seeds,
fertilizers,etc
Productionof
crops,
poultry&
dairying,etc
Pulping
industries,
beverage
industries,etc
Storage,
transportationand
marketingof
variousgoods,etc
10
Source:KPMGAnalysis
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4.1 Pre-Harvest Infrastructure
Improvingproductivityisnotaneasytaskandrequiresconsiderablechangesin
pre-harvestinfrastructure.Adoptionofbetterinputscanimproveoutput
significantly.Newtechnologiesareneededtopushtheyieldfrontiers,utilize
inputsmoreefficientlyanddiversifytomoresustainableandhighervalue
croppingpatterns.Therightcropselectiontechniquescanconsiderablyinfluence
thechancesofobtainingthedesiredoutput.Innovativesolutionstoinput
distributionandusageextensioncouldgoalongwayincreatingasustainable
farmingsystem.Thefollowingsectionunderlinesthedifferentissuesoftheback-
endsupplychainthatneedtobeaddressedandalsohighlightsexamplesof
innovativesolutionsandpracticesadoptedbypublicandprivateplayerstotapthe
back-endagri-infrastructureopportunity.
4.1.1Agri-Inputs
4.1.1.1 Seeds
Thereisaneedtoensureadequateandtimelysupplyofqualityinputsofwhich
thesupplyandqualityofseedneedsthemosturgentattention.
• Lowseedreplacementrate(SRR)
PoorfarmerawarenessandthelackofadequatecredithavekeptSRRat2-10
percentlevelsforkeycropsversusamoreappropriate20-25percent.
Furthermore,thereispracticallynochangeintheSRRinmoststatesof
NorthernandEasternIndia.
Seedisoneofthemostcriticalinputsforafarmertogethigherproductivity
peracreandconstitutesonly5-10percentofthetotalcultivationcost,exceptvegetativelypropagatedcropssuchaspotatoorgarlic.However,inIndia,due
tolowawareness,misconceptionsoncultivatingnewseedseveryseason
andinsufficientmoney,farmersresorttoplantingsavedseedseveryyear2.
Seedssavedfromthecropoveratime,tendtolosetheirvirilityandpotency,
thusresultinginlowerproductivityofupto20-25percentinself-pollinated
cropsandashighas50percentincross-pollinatedcrops 3.
2 InterviewwithMrSekharNatarajan,IndiaRegionLead,Monsanto
3PlanningCommission11th5yearplan
11
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• Poorqualityof seeds
Oneofthemajordeterrentstohighproductivityandresultantlowyieldsin
Indiaistheuseofpoorqualityseedsbyfarmers.Lessthan12percentofthe
farmersinIndiausequalityseeds,whiletherestcultivatesavedseedsfrom
theircropsorbuyinginferiorqualityseedsfromnearbyruralmandis 4.Alotof
thefarmerantipathyforseedreplacementhasresultedfromdistrustin
governmentchannels,whichhaveoftenpeddledlow-qualityseedsat
premiumprices5.
• Hybridseedproductionstilllacking
Therealsoexistsmissinglinksintheseedproductionsystem.Thereisvery
littlefocusonhybridseedproductioninpublicsector.Howevertheprivate
sectorhasexpandedtofillthegap.
Inspiteofthisimprovement,India’ssuccesswith
high-yieldingseedvarietieshasbeenlargelyconfined
tofoodgrains.Advancedseedresearchand
propagationintoothercropsisalmostnon-existent.
Chinaproduces40percentmorericethanIndiawith
about33percentlowercropplanted.Theyieldsin
Chinaatover200kg/hectareareabouttwicethan
thatofIndia’s.Betterimplementationofhighyield
varieties,adequatemaintenanceofirrigationfacilities
andconsistentinvestmentsindevelopingnewer
seedsandagri-researchhavecontributedtothe
sustenanceofhighyieldsinChina 6.
ChangingShareofPrivateandPublicSectorin
SeedsProduction
Year Private(percent) Public(percent)
2004 49.11 50.89
2005 58 42
2006 57.75 42.25
Theprivatesectorseedindustry
inIndiaisgrowingappreciably
andhasmadesignificant
contributionstoBTcotton,
hybridsofmaize,rice,sunflower,etc.
Source:PlanningCommission
Source:FAO,TheGravyTrain,KotakSecurities,August2008
4 InterviewwithMr.SekharNatarajan,IndiaRegionLead,Monsanto
5 PlanningCommission11th5yearplan
6 GravyTrain,KotakSecurities,August2008
Rice yields in India are one-half of that of other major producers
12
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• MediocreimprovementsinSeedproduction
Theimprovementsinseedproductionaremediocrebyworldstandards;
India’spaddyandwheatyieldsarestillathirdofbestin-classworld
standards.Muchofthesametrendsaretrueforothercrops 7
• Extinctionoftraditionalvariety
Withtheadventofthegreenrevolution,theemphasisonagricultureinIndia
shiftedawayfrombiodiversitytoincreasedyield.Asaresult,thegeneticbase
ofricevarietiesisbeingreducedconsiderablyandseveraltraditionalseed
varietiesarenowfacingextinction.
Source:RBI,FAO,CLSAAsia-PacificMarkets
7 PlanningCommission11th5yearplan
Paddy yields are a third of best-in-class
Paddy(kg/ ha)
Wheat yields also similarly low
Wheat yields (kg/ ha)
13
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Source-M.S.SwaminathanFoundation
4.1.1.2 Chemicals
• Fertilizers
India’spastresearchanddevelopmenteffortstoincreaseproductionfocused
onuseofinputsformaximizingproduction.Thisfocuswillnowhavetoshift
toincreasetheefficiencyofinputsforoptimumandsustainedproduction.The
firststepistoratinalizethecurrentfertilisersubsidy,whichhasbeenan
importantcauseofdeterioratingsoilquality.
14
Thereisaneedforseedproductionanddistributionsystemtoberevampedbystrengtheningpublicsector
seedagenciesandbyinvolvingprivatetradeinseedmultiplicationanddistributionsystem.Statesmustsimultaneouslystrengthentheirsystemstocheckqualityofinputs.InformationonimportanceofSRRalso
needstobecommunicatedtothefarmersandeffortstosavetraditionalvarietiesarerequired.
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AccordingtotheUnionBudget,thebudgetaryfertilizersubsidyisINR758
billion.Thisamountisfourtimestheinvestmentinagriculturesector.
However,thismoney,ifinvesteddirectlyinagriculture,infrastructureor
educationcouldgivebetterreturnsandcouldbesociallymoreproductive.
Thefollowingpresentthemajordrawbacksofthefertilizersubsidies:
• Thefertilizersubsidyprimarilybenefitsstatesanddistrictsthathave
abundantwaterresourcesasavailabilityofwaterisarequirementforthe
useoffertilizers.Thisresultsinlesssignificantgainstothesmallandmarginalfarmerswhichresideinsemi-aridandaridregions
• Itencouragesover-useofchemicalsleadingtolong-termsoildegradation
andwaterpollution;thisisworsenedbythecurrentsubsidypolicywhich
hasledtoaskewedusageofnitrogenous,potassiumandphosphates
fertilizers.Pricingdistortionsininputshasalsocontributedtothisskewed
development
• Almostathirdofthesubsidiesgotothefertilizerindustry,insteadofthe
truerecipientwhichisthefarmer
• Lastly,subsidizingfertilizerstotheextentof85percenthasalsoresultedin
theillegalflowofthesechemicalstoNepalandBangladesh,thereby
creatingartificialscarcityattheborders 8.Thus,thechallengeforstates
suchasBihar,Bengal,AssamandTripuraistoensurethatthesupplies
meantfortheirfarmersisnotdivertedtotheneighboringcountries.
Thus,thereisanurgentneedtorationalizesubsidiesandalsoexamine
methodsbywhichthedeliveryofsomepartofthepresentlyhugesubsidies
canbetransferredfromfertilizerproducerstofarmersdirectlyaswellasto
agriculturalresearchandextensionservices.
• Pesticides
Despitehavingthesecond-largestarablelandacreageintheworld,India’s
shareoftheINR1.5trillionglobalcropprotectionmarketisonly2-3percent 9.
Afocusonimprovingyields,aswellashighervalue-addedagriculture,islikely
tospurtheusageofagri-chemicals.Howevertheneedisnotonlytoincrease
thecropprotectionbutalsotosustainagriculturallandwhichcanbedoneby
providingtherightinformationonapplicationofinputsattherighttime.
8 Subsidiesandtrans-bordersmugglingoffertilizers,Merinews,2ndApril2009
9 IndianAgribusiness,CLSA,2006
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CompanieslikeRallisandChambalFertilizersaresupplyingagri-chemicalsaswell
asknow-howtofarmerswhilealsoplayingtheroleofacoordinator.
Thereissignificantneedtoprovidetherightguidanceandtraininginorderto
developnecessaryskillsthatwouldleadtotheadvancementofIndia’sagriculture
base.Thisrequiresthedevelopmentofabroadrangeofskillsatalllevels.To
achievethis,networkingandthedevelopmentofpartnershipsbetween
academia,researchinstitutions,policy-makersandindustryarekeymechanisms
totransfertechnologiesandknowledge.Hands-onapproachestotrainingmust
bestrengthenedacrossabroadspectrum,beginningwiththefarmer,through
management,researchanddevelopment.Indianagriculturalinstitutionsneedto
workwithindustryplayersonnotjustdesignoftheircurriculabutalsoonareas
ofimmediaterelevancesuchasdevelopmentofcropvarietiesconduciveto
processing,waterconservationandcropmanagement.
Chambal Fertilizers and Chemicals - Creating demands through Facilitation
Inputs Uttam Technology Uttam BandhanExtensions Services uttamkrishi.com
& Hello Uttam
• CompanydealersprovideUrea
andotheragri-inputslikeDAP(Di-AmmoniumPhosphate),MOP
(MurateofPotash),SSP(Single
SuperPhosphate),pesticides,
herbicides,fungicidesandseeds
• Mostoftheseproductsare
sourcedfromreputedsuppliers
andsoldunderthe‘Uttam’
umbrellabrand
• Cropandproductdemonstrations
conducted
• Fielddemonstrationsandfarmer
meetsconducted
• Soiltestsaredoneformicro
nutrientsandbasedonthereportssoilmappingisdone
• Expertsemphasizethebalanced
useoffertilizers
• Unemployedyouthfromvillages
areenrolledas‘UttamKrishiSewaks’.
• TheSewaksaretrainedinthelatesttechniquesandprovide
specialisedservicestofarmers
• Website,‘uttamkrishi.com’,
providesinformationontheweather,suitablecropping
techniquesandmarkets.
• ‘HelloUttam’telephonichelp
lineshavebeensetuptoanswerthequeriesraisedbyfarmers
Source-Companywebsite
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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.
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DCM Shriram’s network of Hariyali Kisaan Bazaar
DCMShriram’snetworkofHariyaliKisaanBazaarsisanidealplatformfor
marketingagri-inputs.Itisachainofruralcenterswhichprovidesvarious
encompassingsolutionstothefarmersunderoneroof.
Eachcentreprovides:
• 24x7supportthroughateamofqualifiedagronomistsbasedatthe
centre.
• Awiderangeofmulti-brandagri-inputslikefertilizers,seeds,pesticides,
farmimplements&tools,veterinaryproducts,animalfeed,irrigationitems
andotherkeyinputslikediesel,petrolatfairprices.
• Accesstomodernretailbanking&farmcreditthroughsimplifiedand
transparentprocessesaswellasotherfinancialserviceslikeinsuranceetc.
• Farmproducebuybackopportunities,accesstonewmarkets&output
relatedservices.
• OtherProductsandServices: Fuels,FMCG,ConsumerGoodsand
Durables,Apparelsetc.
Each"HariyaliKisaanBazaar"caterstoagriculturallandofabout50,000-70,000
acresandimpactsthelifeofapporximately15,000farmers.Sofarover302
Hariyalioutletshavebeensetupacrosseightstates-Haryana,Punjab,Uttar
Pradesh,Rajasthan,Chattisgarh,MadhyaPradesh,MaharashtraandAndhra
Pradesh10
10 Companywebsite
18
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4.1.3SoilandWaterManagement
Thepressingneedtoaccelerateagriculturegrowthshouldnotbeatthecostof
sustainabilityofthenaturalresourcebase.Whilenotentirelyirreversible,
degradationhasaggravatedthechallengesfacingtheagriculturesectorinIndiain
itsfighttoimproveproductivity.
• Highsoilerosion,leading toreductioninfertilityandproductivityofland
• Salinityandalkalinityarecausingsoilstolosesoilcarbonandmicronutrients
duetoirrationalandunbalancedfertilizeruse
• Pressureonagriculturallandhasalsoincreasedwithcropsbeing sown
withoutanybreakswhichdestroyssoilnutrients
• Alarmingdegradationofforests&commons,aggravatingtopsoillossesand
surfacerun-off
• Groundwaterrechargedecliningdangerously
Theissueofnaturalresourcemanagementmustbeaddressedurgentlysince
nearly2/3rdofIndia’sfarmlandsareinsomewayeitherdegradedorsick11.
“In the face of growing demand, limited natural resources and climate change, we
need to increase yields sustainably by helping farmers produce more using less natural
resources, while also improving their lives.” SekharNatarajan-IndiaRegionLead,Monsanto
11 PlanningCommission11th5yeaplan
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Region-specificfactorsCausingLowProductivity
Agro-climaticRegion States/PartsofStates Region-specificConstraints
WesternHimalayanregion-I J&K,HP,Uttaranchal
Severesoilerosion,degradationduetoheavy
rainfall/floodsanddeforestation,lowSRRs,poor
road,poorinputdelivery,inadequate
communicationinfrastructureandmarketing
EasternHimalayanregion-II Assam,NEStates,Sikkim
Aluminiumtoxicityandsoilacidity,soilerosionand
floods,shiftingcultivation,lowSRRs,non-availability
ofelectricity,poorroad,poorinputdeliverysystem
andcommunicationinfrastructure
Lowerandmiddlegangetic
plainsregions-IIIandIVWestBengal,Bihar,EasternUP
Flood/waterlogging,improperdrainage,
salinity/alkalinity,arseniccontamination,lowSRRs,
non-availabilityofelectricity,highpopulationgrowth,
poorroadandcommunicationinfrastructure
Upperandtrans-gangeticplains
region-VandVIWesternUP,Punjab,Har yana
Groundwaterdepletion,decreasingtotalfactor
productivity,micronutrientdeficiency,non-
availabilityofelectricity,andhighpopulationdensity
Easternplateauandhills
region-VIIOrissa,Jharkhand,Chhattisgarh
Moisturestress,drought,andsoilacidity,iron
toxicity,lowSRRs,non-availabilityofelectricity,high
populationgrowth,poorroad,poorinputdelivery
andcommunicationinfrastructure
Source:PlanningCommission11th5yearplan
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Asustainablefarmingsystemneedstobepromotedinwhichnaturalresources
aremanagedinawaythatpotentialyieldandthestockofnaturalresourcesdo
notdeclineovertime.Soilhealthawarenessmustalsobepromotedthrougha
crediblesystemofsoiltestingandadviceonnutrientmanagementshouldbe
extended.InnovativeTechnologyandresearchextensionarecriticalinaddressing
theseissues.Amovetowardsorganicfarmingwouldalsohelpinaddressingthe
side-effectsofconventionalmethods.
The 16th IFOAM organic world conference on Organic agriculture and rural
livelihoods in Karnataka, India stated that the organic farmers perceived the
conversion from conventional to organic agriculture had improved their
livelihoods in multiple ways.
The above report pointed out that over the long term the conversion to
organic farming had improved the farmers net farm incomes, reduced the
risk of pesticide poisonings, led to more self-sufficiency, improved food
safety and reduced vulnerability, and improved the access to networks
supporting knowledge exchange and political participation.
However,riskanduncertaintyrelatedtotheconversionperiod,suchas
temporarilydecliningyieldsandthelackofexperiencesandinformationaremajorconstraintspreventingtheadoptionoforganicfarming.
Further,soilconservationpracticessuchaszerotillagewhichhavegained
immensepopularityincountriessuchasBrazilalsoneedtobeexploredona
largerscale.Techniquessuchassystemofriceintensification(SRI)whichaid
waterconservationwhileincreasingyieldsdramatically,meritlargescale
deploymenttovalidatetheireffectiveness.CurrentlySRIisrestrictedtoafew
experimentalfarmers.
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Conservation agriculture
technologiesPotential benefits relative to transplanted rice
Laserleveler
Cutswateruse;fewerbundsandirrigationchannels;bettersoilnutrient
distribution;lessleachingofnitratesintogroundwater;moreefficienttractoruse
(reduceddieselconsumption);increasedareaforcultivation.
Zero-tillage
Lesslaborrequired;soilphysicalstructureismaintained(reducednutrientloss,
soilhealthmaintained);lesswaterrequired;avoidslargecracksinsoilafterdryperiods;cankeeppreviouscrop’sresidueinfieldformulch(ifappropriatedrill
seederisusedforseeding);subsoillayerisnotcompactedbytractors
(compactedsubsoilimpedesrootgrowth).
CropresiduemulchIncreasessoilwater-holdingcapacity,increasessoilquality,reducesweed
pressure,avoidsburning.
Dryseeding
Lesswaterrequired;lesslaborrequired(especiallyatpeaktransplantingtime);
postharvestconditionoffieldisbetterforsucceedingcrop;deeperrootgrowth
(meaningbettertoleranceofdryconditions,betteraccesstosoilnutrients).
Source:RiceTodayOctober-December2006
Newtechnologiesarerequiredtopushtheyieldgrowth,utilizeinputsoptimally
anddiversifytomoresustainableandmorevaluablecroppingpatterns.Theseare
allknowledgedrivenandrequirenotonlyastrongresearchandextensionsystem
withskilledmanpower,butalsoadynamicchannelforexchangeofinformation.
SomeoftheprivateplayerssuchasTataChemicalshavesetupefficient
informationextensionsystemsandintroducednewtechnologieswhichhavethe
potentialtoestablishasustainablefarmingsystem.
22
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Tata Kisan Sansar – The rise of precision farming
Tata Chemicals introduced the concept of precision farming in Uttar Pradesh, Haryana and Punjab though its
network of Tata Kisan Sansar or farm centres, which provide end-to-end agri solutions. Currently, 40 TKVKs
and about 800 franchisee TKSs are in operation, catering to 27,200 villages and almost 25 lakh farmers
Precision farming leverages modern satellite and information technology to serve the needs of Indian
farmers to analyze soil, inform about crop health and pest attacks and predict the final output.
The TKS network runs crop clinics where agronomists use computers to access information from thegeographic information system (GIS). The agronomist at the Sansar uses analyzed information on
topography, soils, climate, hydrology, cropping systems and crop suitability to advise farmers on which crops
to grow, crop management, market trends, what kind of fertilizers to use and how much, etc
At the soil-testing laboratory, technicians analyze soil samples to determine their composition and confirm
what the satellite maps have indicated
Additionally, the TKS network operates experimental farms where scientists conduct agricultural research
and development.
Source: Company website
Role of Public-Private Partnerships in Natural resource conservation
PublicandPrivateplayersarenowcomingtogethertohelpfarmersinsoiland
watermanagementbyprovidingthemuchneededresearchextensionand
trainingtothem.
ThegovernmentofMadhyaPradeshandanagrochemicalandseedcompanyDhanukaAgri-TechLimited
havecometogethertoaddresstheissueoftechnologyextensionunderthe“Public-PrivatePartnershipin
AgriculturalExtensionManagementprogramme”.Theprogrammeaimstoworktogether inareaslikesoil
testing,training,farmers’tourprogrammes,demonstrationsandtransferoftechnologythroughcyber
dhabas,agriculturefortnights,establishmentofmarketsandprovidingcreditfacilitiestofarmers.
"Participation of private organizations in providing Agricultural Extension services
will naturally benefit farmers in using new technologies, cultivating cash crops to
maximize their profit, but also help scientists to carry the technologies to the rural
areas". -ShriDigvijaySingh,ChiefMinister,MadhyaPradeshin2001
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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
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McCainFoodsenteredIndiain1997withanintenttoinvestINR1billion($25million)inpotatofrybusiness.Aftera
thoroughstudy,thecompanyconcludedthatIndianpotatowasnottheidealoneforthebusiness.Potatoes,whichwere
largerinsizeandhadlesswatercontent,wererequired.Forthekindofpotatoneeded,itwasnecessarytodevelopthe
seedincoldclimate.AteamofresearchersthentookupthetaskofdevelopingtheseedatLahulSpitiinHimachal
Pradesh.
Afterdevelopingtheseedthecompanystartedasearchforthebestareaforgrowingthenewbreeds.Thatsearchended
atMehasanainnorthGujarat,astheregionisblessedwithastretchedwintrycondition,whichwasvitalforpotatogrowth.
McCainpickedcontractfarmingasthebestoption,butdidnotaskthefarmerstogrowonlypotatoesaswellasdidn’t
promisetobuyout100percentoftheproduceeither.Asaresultthefarmerswerenotdependentonlyonthecompany.
Thecompanyworkedcloselywithfarmersandencouragedthemtosharethenewagronomypracticeslikerelyingon
qualityseed,dripandsprinklerirrigationsystems,newplantingtechniquesandadoptingcontemporarymethodsofpotato
storing.
Today,Deesa,Vijapur,Palanpur,HimmatnagarinnorthGujaratandAnandincentralGujarathaveemergedasIndia’shubs
ofnewbreedsofpotato.
Source:CompanyWebsite,Fromfieldtofries,BusinessToday,April2009
Come March, the
Shepody potatoes are
harvested and sent to
the McCain factory in
Mehsana, Gujarat
Master crop of potatoes
grown in Lahaul-Spiti
valley, Himachal
Pradesh, where the
weather is conducive
The crop is harvested in
September and rushed,
to farmers in Gujarat,
where the tubers
are replanted.
25
McCain Foods India’s process of growing Shepody potatoes-A Logistical Masterpiece
•Theyieldperhectarewith
McCain'svarieties,basedonits
technologyoflessertubersof
greatermass,hasincreasedbyas
muchas60-70percent.
•WhiletheIndianaverageyieldfor
potatoesisabout15tonnesper
hectare,inGujarat’sithas
increasedfromabout22to 27.5
tonnesperhectare.
•McCainFoodsIndiahasbegunsupplyingtomarketsinSriLanka,
Pakistan,BangladeshandNepal,as
wellasIndia.Thecompanyexports
10-15percentofitsoutputto
SouthandSouth-eastAsian
countriesandtheMiddleEast.
•By2010,allMacFriestobemadein
India
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JainIrrigation:Supplyingfarmerswithspecificvarietyofhybridonionseedsthatsuitstheirprocessingneeds.
JainIrrigationSystemsLtd.(JISL)hasthelargestoniondehydrationunitinAsiawithanannualcapacityof120,000million
tones.Inordertoprocureonionsforprocessing,JISLhasadoptedcontractfarmingmodelwithnearly3,000farmers.Jain
Irrigationundertookastudytoidentifytherightvarietyofonionssuitableforitsprocessaswellasthecountry’sclimate.
Themainobjectiveofthestudywastoimproveproductionandproductivityofwhiteonionssuitablefordehydrationand
standardizeapackageofagronomicalpracticesundershort-daytropicalconditionsusinghigh-techinputs.Theother
objectivewastodisseminatetheimprovedtechnologythroughfarmers’participatorydemonstration,trainingandcontract
farming.Withtheseobjectivesinview,about43varietiesofwhiteonionincludingexoticvarietiessuitableforshort-day
conditionswereevaluatedduringthewinterseason1996-97.Afewcultivars/hybridswereshort-listedfordetailed
investigations.Theresultsshowedthat‘WhiteCreole’wassuitable,andwasselectedformulti-locationaltrialsbothinthe
ResearchandDevelopmentfarmsandinthefarmers’fields12.
Theselectionoftherightvarietyofcropscoupledwithaninnovativeproductionprocessandresearchextensionefforts
hasmadeJISLoneofthetrustedandlargestprovidersofwhiteonionsnotonlyinIndiabutalsoglobally.Thecompany
accountsforabout40percentofthedehydratedonionexportsfromIndia 13.Thecompanyisnowplanningtoenterinto
contractfarmingfortomatoinMaharashtraandAndhraPradesh14.
4.1.5CropDiversification
Anotherimportantfactorthatneedsemphasisiscropdiversification.Crop
diversificationisintendedtogiveawiderchoiceintheproductionofavarietyof
cropsinagivenareasoastoexpandproductionrelatedactivitiesonvarious
cropsandalsotolessenrisk.Thediversificationalsohelpsastatetoproduce
moreremunerativecropsandcanalsobeusedtoaddresstheproblemsofsoil
andwatermanagement.
Inrecenttimes,cropdiversificationhasgainedsignificanceascultivationof
traditionalvarietiesoveraprolongedperiodhadcauseddegradationofnatural
resourcestoagreatextent.Thegroundwaterlevelhadalsodeclinedduetoover
exploitationoftheseresources.
ThePunjabstategovernmenthasbeenoneofthefirstmoversinthisfield.
Punjab’sstatepromotedPunjabAgroFoodgrainsCorporation(PAFC)hasan
aggressivetargetofbringingafourthofitsacreageundernon-grains.The
governmenthastakenthesupportofprivateplayersthroughthecontractfarming
routetoachieveitstarget.Oneofthefirstventuresinthestatewasledby
PepsiCointomatocontractfarmingintheearly1990s;subsequentinitiatives
havealsoseencropslikebarley,potato,maize,cornandcottoncomeunder
contractfarming.
12 actahort.org
13 SupplyChainforExportsofDehydratedOnions:CaseStudyofJainIrrigationSystemsinIndia,Food
andAgriculturalOrganizationoftheUnitedNationsNewDelhi,Feb2008
14 JainIrrigationplanstoexpanddehydratedvegetablebusiness,HinduBusinessLine,March2009
26
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Source:PAFC,ParmodKumarinContractFarminginIndia:OptionsandImplicationsforSmallandLargeFarmers(2005)
Himachal Pradesh is using crop diversification to fight climatic changes
HimachalPradesh,knownasthefruitbowlofthecountry,hasapproximately
200,000hectaresoflandunderhorticulturecultivationyieldingabouthalfa
milliontonsofdifferentkindsoffruit.ThestateearnsmorethanINR25billion
fromcultivationoffruitsandvegetables.Whileappleisthemainfruitcrop,other
fruitslikepears,peaches,cherries,apricots,almondsandplumsarethemajor
commercialcropsofHimachalPradesh.Recentlytheproductionofapplehas
beenseverelyaffectedbyadverseclimaticchanges.Asanalternate,farmersin
HimachalPradeshareincreasinglymovingtowardscommercialcultivation
amongstwhichkiwiisoneofthemostpreferredcrops.
Appleorchardsrequire1,000to1,600hoursofchill,whilekiwirequiresjust200
hoursofchillforafavourablecrop.Fruitgrowersintheareaswherethechilling
hoursarenotstaticnowhaveoptedforkiwicultivationasacashcrop.
Impact
• Asperhorticulturedepartmentestimates,atleast200farmersintheKullu
valleyalonehavetakenupkiwicultivation.
• In2008,thetotalkiwiyield inHimachalPradeshwas137tons
• DifferentvarietiesofkiwisuchasHayward,Abbot,AllisonandBrunoare
cultivatedonalmost120hectaresofland
• Kiwitypicallyneedstemperateclimatetogrow,butIndianfarmershave
beensuccessfulingrowingitevenatextremelylowtemperatures.Someof
thefarmersaregrowingkiwiatanaltitudeof8,500feet
PAFC targets of contract farming One-fourth of Punjab acreage to be
under non-grains
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4.1.6Irrigation
India’sagricultureoutputremainsvolatileandhostagetothemonsoons,despite
havingthehighestamountoflandunderirrigationintheworld.Thegrowthin
irrigationcoveragehasslowedmarkedlyaftertheGreenRevolutionand60
percentofthegrosssownareastillremainsprimarilyrain-fed.Asurveybythe
MinistryofAgriculturealsofoundthathalfofthetotalfarmerholdingsinIndiaare
notirrigated,withanother20percentbeingonlypartlyirrigated 15.Thequalityof
irrigationfacilitiesandregularavailabilityofwaterarealsomajorconcerns.
Also,wateravailabilityforirrigationisincreasinglyconstrained.Irrigationaccounts
for85percentofwaterwithdrawalsindevelopingcountries,andtherapidgrowth
ofthesectorhasbeenbasedontheavailabilityofhugequantitiesoflow-cost
water.Foryears,groundwaterprovidedaprofitablenewresource,butinmany
basinsgroundwaterisnowbeingminedrapidly.Governmentshaveledthe
expansionoflarge-scaleirrigation,butperformancehasbeensuboptimal.
WateruseefficiencycanbeaddressedbyimprovementsinIrrigation
managementandpractices.Switchingfromsurface(alsocalledfloodirrigation)to
localizedirrigationcanresultinapproximately25percentwatersavingandgrowinghigh-value-addedcropscanimproveeconomicefficiency.Manyprivate
companiessuchasJainIrrigationhaveinvestedinnewirrigationtechniques
whichhaveimprovedtheefficiencyofwaterusageaswellasenhanced
productivity.
Jain’sdripirrigationsystemsdeliverwaterusinganetworkofpipesthathavea
seriesofoutletpoints.Eachpointdistributesapreciselycontrolleddoseof
waterandnutrientsdirectlyintotherootzoneoftheplant.Thedripirrigation
systemisexpectedtosaveupto70percentofthewaterwhencomparedwith
floodirrigationtechniques(Farmerstypicallyusefloodirrigation,which
consumeslargeamountsofenergytopumpwater,muchofwhichiswasted,
aswellas10kilowatt-hoursofelectricityperdayperarea).Dripsystemscan
providea30percentefficiencyimprovementintheuseoffertilizer,increasing
overallyieldsupto230percentaccordingtoEurope’sRenewableEnergyand
EnergyEfficiencyPartnership(REEEP)
Source:REEEPassists€15MdripirrigationbuyinIndia,CleantechGroupLLC,May2009
15 IndianAgribusiness,CLSA,2006
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Chinahasalsoinvestedheavilyintodripirrigation.Thecountryrecentlypumped
inapproximatelyINR1billiontosetupadripirrigationsystempoweredbysolar
panelsinthearidXinjiangregion,whichproduces30percentofthecountry’s
cotton16.
Public-privatepartnerships,withtheirpromiseofsharedresponsibilityand
managedrisk,havealsobeenseenasmeansofcreatingtherightincentivesto
addresstheissuesofwatermanagement.Oneofthemostrecentinitiatives
addressingthisissueisthepublicprivatepartnershipbetweenNationalBankfor
AgricultureandRuralDevelopment(NABARD)andJainIrrigation.
UnileverhasalsoenteredintoaPPPwithMinistryofAgricultureandacademic
institutionstofindwaystofunddripirrigationsystemsinthestatesofKarnataka
andTamilNaduinSouthernIndia.Oneexperimentalfarmyieldedwatersavings
ofupto40percent,aswellasreducedtheamountofchemicalsneeded.UnileveroperatesinKarnatakaandTamilNaduthroughacontractfarmingmodel
foritssuppliesofgherkins.Unileverhashelpedtheindustryimproveyieldof
gherkinsbyupto60percentsinceitsinitialinvolvementin1998 17.
IntheChineseXinjiangregion,replacingfloodirrigationwithdripirrigationon
just5,000acresofcottonfarmlandhasthepotentialtoreducewateruseby22
percent,save6millionlitersayear,increasecultivableareaby5percentby
eliminatingditches,reducechemicalfertilizersby10percent,andimproveyield
by30percent
Source:Chinainvests$23Mindripirrigation,CleantechGroupLLC,Oct2008
NABARDhassignedamemorandumofunderstandingwithJainIrrigation
SystemsLtdforits‘VillageDevelopmentPlan’andimplementationofNaturalResourceManagementandDryLandAgriculture.Tobeimplementedin75
villagesacross31districtsinMaharashtra,theprojectinvolvesdevelopmentof
rainwaterharvestingandwaterstoragestructures,efficientwaterdistribution
andutilizationsystemsusingsolarpumps,developmentcroppingplanand
contractfarmingalongwithmodernagriculturalpractices
Source:JainIrrigationCompanywebsite
16 Chinainvests$23Mindripirrigation,CleantechGroupLLC,Oct2008
17 Unileversustainableagriculturereport
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PPP - A solution to pre-harvest infrastructure challenge
Theissuesrelatedtopreharvestinfrastructurehavebeensuccessfullyaddressed
whenpublicandprivateplayershavecollaboratedtocomeupwiththesolutions
tobetteragriculturalpractices.Thecollaborationhasresultedinawin-win
situationforstakeholdersandassistedthefarmerstoimproveyieldsaswellas
enhancedtheirstandardofliving.ThePunjabgovernmentwiththesupportof
Pepsicoisoneofthebestexamplesofpublicprivatepartnerships.
Source:PepsicoInternationalPresentation,2008
PepsiCo PunjabGovernment
• Objective:Lookingfordiversificationof
theiragriculturalbaseandincreasefarm
incomes.
• Contribution:Facilitatedcreationof
NurseryInfrastructure,madeavailable
landfor“demonstrationplots”,bought
inmorepartners
• Objective:Interestedinlocalizingthe
supplybaseofCitrusJuice
• Contribution:Leveragedservicesof
internationalexperts,specialized
trainingongrafting&planting,provided
accesstovariousvarieties
•Heightenedfarmerinterest
•CreationofaworldclasssourceofplantingmaterialforthePunjabFarmers-
choicebasedonevaluationof34varitiesofcitrusand16rootstockssourced
fromInternationalqualitynurseryinfrastructure
•GearinguptodelivertoPunjabfarmers-Annualcapacityof4millionsaplings
30
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4.2 Harvest and Post-Harvest Infrastructure
IfIndianagriculturehastobegloballycompetitive,itneedsinvestmentin
infrastructurethatcanpromoteefficiencybyreducingtransactioncostsand
marketrisks.Ithasbeenestimatedthatlossofprimaryproducebeforereaching
themarketduetolackofproperhandling,cleaning,sorting,gradingand
packagingfacilitiesatthevillagelevelisabout7percentforfoodgrainsand30
percentforfruitsandvegetables18.
4.2.1Harvesting
4.2.1.1 Mechanization
Agriculturalmachinesincreaseproductivityoflandandlabourbymeetingtimelinessoffarmoperationsandincreaseworkoutputperunittime.Besidesits
contributiontothemultiplecroppinganddiversification,mechanizationalso
enablesefficientutilizationofinputssuchasseeds,fertilizersandwater.Tokeep
pacewithimprovedproductionandproductivity,differentmachineshavebeen
developedforeffectivecultivationandinterculturaloperations.Machinessuchas
mangoharvesters,kinnowclippers,potatodiggers,coconutpeelers,etc.,are
beingadoptedbythegrowers.Machineshavealsobeendeveloped/installedfor
differentspecializedusessuchascoolsterilization(irradiation)forsproutingin
potatoandonion,dehydrationofdifferentproduce,vapourheattreatmentin
majormangogrowingbelts,packagingofcoconutwater,bananafig,andchip-
makingmachine,etc.
18 PlanningCommission11th5yearplan
“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
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TheavailabilityanduseofimprovedequipmenthaveenabledstateslikePunjab
andHaryanatoachievehighlevelsoflandproductivity.However,theprogressof
mechanizationinmostotherstateshasbeenslowanditsbenefitsoftimelyand
preciseoperationsarenotreachingthemajorityoffarmersinfullmeasure.The
constraintsinpromotionofmechanizationincluderequirementofequipmentfor
eachagro-climaticzone,thesmallandfragmentedlandholding,lowinvestment
capacityofthefarmers,inadequateirrigationfacilities,know-howstatusofthe
farmers,repairs&maintenancefacilitiesetc.
4.2.1.2 Transportation
InIndia,ruralroadconnectivityhasoftenbeenignored.Onlyasmallnumberof
villagesarejoinedbyrailwaysandpuccaroads.Ruralroadsplayacrucialpartof
bringingtheproducefromthefieldtothetransportpointandthentothemandis.
Smallandmarginalfarmersoftenuseslowmovingtransportvehiclesliketractors
andbullockcartstocarrytheirproducetothemarket.Suchmeansoftransport
donotfacilitatetransportofgoodstofar-offmarketplaces;forcingthefarmerto
dumphisproduceinnearbymarketsevenifthepriceobtainedthereis
considerablylow.Manysmallfarmershaveturnedreluctanttomarkettheir
producetodistantmarketsconsideringthehighcostandpoorqualityoftransport
infrastructure,especiallyforperishableproducts.Poortransportinfrastructurenot
onlyaffectsthequalityofproducebutalsoleadstoextensivewastage.
Developmentofruralroadscancontributeupto36-68percentreductionin
transportexpenses20.
Mechanization of processing technology in Vietnam
VietnamisthelargestcashewproducerinSouthEastAsiaandthethirdlargest
cashewexporterintheworldafterIndiaandBrazil.Over90percentof
productionisexported.ThecashewprocessingindustryinVietnamhasmade
significantcontributionstoenhanceexports.Thedevelopmentsinprocessing
technologyhaveenabledVietnamtoexportcashewinprocessedform.Vietnam
hasdeveloped“Coversplittechnology”designedbyVietnamesetechnicians.
Thistechnologyischeapandisabletogenerateahigherratioofwholeseed.
Duetoeasyavailabilityofefficienttechnology,thenumberofprocessing
companiesincreasedfrom6in1986to30in1994(withtotalcapacityof75000
tons/year)to62in1999(withtotalcapacityof250000tons/year)toabout120in
200319.
19 RaboBankReport
20 PlanningCommission11th5yearplan
32
India still suffers from lower mechanization
Source:WorldBank,KotakInstitutionalEquities
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4.2.2PackagingandProcessing
4.2.2.1 Grading and sorting
TheexistinggradinginfrastructureinIndiaisfarfromadequate.Onlyaround7
percentofthetotalquantitysoldbyfarmersinIndiaisgradedbeforesale 21.
FarmersinIndiahavelittletonoinformationofgradinginfrastructureatprimary
levelandtheygenerallyselltheiragriculturalproducewithoutgrading.
Also,thesalespracticeusuallyprevalentatfarmlevelinIndiaincludesthesaleof
heapsofallqualitiesofproduceinonecommonlot.Thus,thefarmerproducing
betterqualityisdeprivedofahigherprice,therebyresultinginnoincentivetouse
superiorqualityinputsforproducingenhancedvarieties.
UndertheAgriculturalProduce(GradingandMarketing)Act,theGovernmenthas
setupgradingstationsforcommoditieslikeghee,flour,eggs,etc.Thegraded
goodsarestampedwiththesealoftheAgriculturalMarketingDepartment
–AGMARK.The“Agmark"goodshaveawidermarketandcommandbetterprices.
ACentralQualityControlLaboratoryhasbeensetupatNagpurandeightother
regionallaboratoriesindifferentpartsofthecountrywiththepurposeoftestingthequalityofagriculturalproductsandapplyingfortheGovernment's"Agmark".
TheGovernmentisfurtherstreamliningqualitycontrolenforcementand
inspectionandimprovementingrading.
4.2.2.2 Poor packaging
PackingandhandlingofperishablesisstillinprimitivestagesinIndia.Moreoften
farmerspacktheirgoodsinjutesacks(gunnybags)ortightlypackedboxes,
whicharestackedoneabovetheother,therebyleadingtosignificantdamageto
theproduce.Whilethelossesduetopoorpackagingaremorepronouncedforhorticulturalproducts,itisquitesubstantialforfoodgrainslikestaples,pulses
andoilseedsaswell.Majorityoffruitsandvegetablesarestilloutsidethe
purviewofproperpackaging.Efficientpackagingcanmakeasignificantdifference
inthemassivequantityoffoodgrainsIndialosesinthesupplychaineveryyear.
Terminal Markets- A solution to quality grading and better packaging
TerminalMarketshavesuccessfullyaddressedtheproblemsofpackagingand
gradingwhilealsohelpinginclosingthevariousgapsinpostharvest
infrastructure
21 PlanningCommission11th5yearplan
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TerminalMarketsareestablishedunderPublicPrivatePartnership(PPP)mode
andoperateonaHub-and-SpokeFormatwhereintheTerminalMarket(thehub)is
linkedtoanumberofCollectionCentres(thespokes).Thesemarketshelpin
realizingbetterreturnstothefarmersbyreducingpostharvestlossesof
perishablecommoditiesandreducingthenumberofmiddlemenaswellas
provideonestopshopfortheprocessorstoprocurequalityrawmaterials.
Theperishablehorticulturalproduceiscleanedatthecollectioncentresand
transportedtotheterminalmarketsthroughvanstherebyreducingpostharvest
losses.Theproducearrivingintheterminalmarketisgradedandstoredinthe
coldstoragetillitisauctionedthroughelectronicauctionsystemordirectselling.
Thecommoditiesmarketedincludeallkindsofperishablecommodities,suchas
fruits,vegetables,flowers,aromatics,herbs,meat,poultryetc.Non-perishables
arealsohandledintheTerminalMarket.However,theproportionofnon-
perishablescannotexceed15percentofthetotalthroughputofthemarket.
Similarly,theproportionofnon-horticulturalproductswithintheperishable
commoditiescannotexceed15percentofthetotalthroughputofthemarket.
TerminalMarketsisaPublic-privatepartnershipmodelthatlinksproductioncentretotheconsumptioncentre.TheGovernmentofIndiaislookingto
promoteterminalmarketsin8cities-Mumbai,Nashik,Nagpur,Chandigarh,
Rai,Patna,BhopalandKolkata22
Source:www.msamb.com,MaharashtraStateAgriculturalMarketingBoard
22IBEFfoodprocessingpresentation,December2008
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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
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Integration by players
Increasingdemandforprocessedfoodandincreasinglystringentquality
parameterswilldrivegrowthforintegratedplayers,weedingoutunorganizedand
non-integratedplayers.LowerpricesforpoultryinSouthIndiacanbeattributed
tothehighlevelofintegrationinthesemarkets.Integratorsincludelargeregional
firmsthatincorporatethevariousaspectsofproduction,includingtheraisingof
grandparentandparentflocks,rearingday-old-chickens(DOC),contracting
production,compoundingfeed,providingveterinaryservicesandwholesaling.
Smallunitscouldprobablyfindthemselvesatacostdisadvantagebecauseof
higherfeedandtransportcosts,expensivevaccinesandveterinarycareservices
andconstraintsinaccessingcheapandeasycredit.
Suguna’s poultry integration model
Themodelhascreatedawin-winsituationforboththefarmerandtheintegrator.
Farmersareprovidedwithday-oldchicks,feedandhealthsupport.The
performanceismonitoredonadailybasiswithSugunafieldstaffvisitingthe
farmstocheckonthehealthofthebirds,feedintake,growthandmortality
levels.Insixweekstime,thebirdsareweighedandarereadytobesoldby
Sugunathroughitsownretailoutletsaswellasotherretailersandexporters.The
farmersarepaidagrowingchargeforthebirdsattheendoftheperiod.
Post-harvest chilling by Adani Fresh - Controlled Atmosphere Chambers
AdaniFreshhassetupthreelargeCAfacilitiesof6,000MTeachatRewali(Rampur),Senj(Theog)andRohru.Itoperates
onanintegratedapproachfromfarmtomarket.IthascreatedlinkageswithfarmersinthecatchmentsofitsthreeCA
facilitiesandprovidesplasticcratesformovementofproducefromfieldlevelaggregationpointstoitsCAfacilities.
AdaniFreshconductsqualitytestingtochecktheorchardsandtreeswhichwouldsupplytheapplesfortheirfacilities.
Oncethefieldtestingisdone,theapprovedorchardownersbringtheirproducetothecollectioncenterwherethey
transfertheirproducetotheplasticcratesprovidedbyAdani.Thefarmersarethenrequiredtotransporttheproduceto
thenearestfacility.
TheapplesareonceagaintestedattheCAfacilityandpaymentsaremadebasedonvariousgradesandotherparameters
likecolours,size,shineandappearance.
TheapplesarethenstoredinthevariousCAchambersbasedonthestorageplanandthenmovedoutoftheCA
chambersaspermarketingplan.#
# ReportoftheTaskForceonDevelopmentofColdChaininIndia,Dept.ofAgricultureandCooperation,MinistryofAgriculture,Govt.ofIndiaAug2008
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SugunahasemergedastheleaderintheIndianpoultrybroilersegmentwithits
uniquebusinessmodel.Thecompanyisplanningtoexpandacrossthecountry
andalsoincreaseitsexportsinthenearfuture.Sugunahasalsobeenexceptional
inintroducingorganizedpoultryfarminginnorthIndia.Poultryfarmshave
traditionallybeenconcentratedinsouthernIndiawithnearly60-70percenttotal
outputcomingfromthesouthernstates,butSuguna’ssuccessfulforayinnorth
IndianstateslikePunjabandDelhihashelpedlinkfarmersinamarketinwhich
80percentofpoultryfarminguntilrecentlyhasbeeninthenon-organisedsector.
Suguna’sentryhasalsoledtoanorganisedmethodofproducing,procuringand
saleofbroilerchickensinnorthIndia.24
Mega Food Parks- Infrastructure Integration
ManystategovernmentshaveplannedtosetupMegaFoodparkswhichare
aimedatbringingtogetherallplayersinthevaluechainsoastominimise
wastagesandfacilitatebetterinventorymanagementandproductionplanning.
Theproposedmega-foodparkswillbebetween10and100hectaresinsizeand
30locationsacrossIndiahavealreadybeenidentified.Theparkswouldbesetup
throughprivateconsultantswiththegovernmentprovidinggrantsofuptoRs500
millioneach.
Eachmegafoodparkwillcatertoaminimumcatchmentoffivedistrictsandwill
provideallfacilitiesrightfromthefarmgatetotheretailshelves,including
collectionanddistributionandcentralprocessingcentres.Functionslikesorting,
gradingandpackagingalongwithirradiation,foodincubation-cum-development
willtakeplaceinthesefoodparks. 25
24 TheGreatIndianChickenRun,Tehelka.com,July2009&MOFPI
25 SEZstatusformegafoodparksontheanvil,Financialexpress,Nov,2006
Centrereceives40EoIstosetupRs2,500-crmegafoodparks,Financialexpress,Nov,2008
Source:Companywebsite
37
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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
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Contract Farming - Closing the gap between farmer and processor
Inordertobridgethegapbetweenfarmerandprocessor,someoftheprivate
playerssuchasPepsiCo,RelianceLifeSciencesandMcDonaldshavemodified
theirsourcingchannelstoincludecontractfarming.Typically,thefarmeragreesto
providecertainquantitiesofaspecificagriculturalproductwhichshouldmeetthe
qualitystandardsofthepurchaserandbesuppliedatthetimedeterminedbythe
purchaser.Inturn,thebuyercommitstopurchasetheproductand,insome
cases,tosupportproductionthrough,forexample,thesupplyoffarminputs,
landpreparationandtheprovisionoftechnicaladvice 26.Someoftheclear
benefitsofcontractfarmingwhichcreatesabeneficialsituationforbothfarmers
andprocessorsare:
• Integrationofthesupplychaintohelp ensuretimelyavailabilityofqualityand
quantityofrawmaterialforprocessors
• Significantreductionoftheprocurementcost forfoodprocessorsby
removingthemiddlemen
• Foodprocessorscansourcerawmaterialas pertheirrequirementsatlow
costs
• Privatesectorparticipationincreasesthescopeoftechnologytransfers,
capitalinflowandalsoleadstoassuredmarketsforcropproduction
4.2.3Logistics&Storage
IndiasuffersanestimatedfoodgrainandagricultureproducelossofoverINR5
billionduetothelackofadequatepostharvestinfrastructureandinefficient
supplychainmanagement27.Themagnitudeofthewastageandconsequent
losseslendsitselftoinitiativeswhichcanbringaboutmassiveimprovementsinthesupplychainasincreasedincometofarmers.
FoodGrainprocurementanddistributioninIndiaisstilllargelyundergovernment
control.TheFCIremainsthenodalagencyforprocurementanddistribution.The
CentralWarehousingCorporation(CWC)whichisthebiggestwarehousing
infrastructureintheworldremainsgrosslyunder-utilizedwithaverageannual
occupanciesoflessthan72percent.Inadditiontothis,ithasbeenobservedthat
overthepastdecade,about1milliontonesoffoodgrainsrottedintheFCI
godownsraisingquestionsoverthestorageandtransportinfrastructure.28
26 FoodandAgricultureOrganizationoftheUnitedNations 27 GovernmentBureau2007
28 DepartmentofFoodandPublicDistribution,MinistryofConsumerAffairs,PresntationonTheChallengesinFarmFreshBusinessVinodSawhnyPresident
andCOO,BhartiRetail
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In2007,aUSDAERSstudy29 foundthatdecentralizationoffoodgrain
procurementwouldhavemarginalimpactonpricesofwheatandrice,butcould
helpincreaseefficienciessignificantly.FCIhastakenthefirststeptowardsbetter
managementoffoodprocurementanddistributionbyawardingacontractfor
bulkmovementtoaprivateplayerAdaniAgri-Logisticsin2008,butmoreneeds
tobedone.PrecedentsforsuchpolicyexistinChina,whoselargepopulation
underlinestheneedforefficientmanagementoffoodsecurity.
FurtherinnovationsintechnologysuchasIntegratedInformationSystemforFood
grainsManagement(IISFM),fortheFCIneedtoberolledouttoawidernetwork
thanthecurrentreach,tohelpensuretransparencyininformationandprovide
visibilityonstockaroundthecountry.
Thereisanurgentneedforotherinnovationsintransportandhandling.Awell-
developedandefficientsystemoftransportationhelpsintheexpansionof
markets,reducesthetransporttimeandcostsoftransportationofthe
commodities.Onlyabout48percentvillagesarecoveredwithroads.Thetotal
roadlengthinthecountryisabout33lakhkm,ofwhichonly58thousandKmis
NationalHighway.Thegovernmentconcernhasbeenmainlytodevelopsingle
laneroads.Thelackofdoublelaneroadshasanegativeeffectonthespeedof
transportmeans.Thenumberofgoodscarriervehicles,althoughincreasing,is
inadequatefortransportinggoodsbyroad.Railwaywagonsarealsousedfor
transportationofagriculturalcommoditiesfromwholesalemarketsto
consumptioncenters.Howeverrailwayroutelengthinthecountryisonlyabout
70lakhkmandtheelectrifiedtrackisnotevenbareminimum.Theexistingrail
facilitiesinthecountryarehighlyinadequate.Raillinesdonotevenconnect
someofthedistrictsinthecountry.Theaircargofacilitiesarealsoavailablein
limitednumberofstates.Existingaircargofacilitiesareinpoorconditionand
muchbelowtheinternationalstandards.30
Besidesthetransport,thestateofinfrastructureforhorticulturalproduceaswell
asmeatproductsleavesmuchtobedesired.Indiahasaround5000 31 cold
storagefacilities,ofwhich90percentareprivatelyowned.Alargenumberof
theseareofthesinglechamberandsingleproducttype.Nearly80percentofthe
coldstoragefacilitiesareaccountedforbypotato.Further,theyhaveautilization
ofonlyaround50percent.ThecoldstoragefacilitiesformeatinIndiaarealmost
negligibleandinstateslikeWestBengal,thereisnoneforacommonly
consumedproductsuchasfish32.
29Indianwheatandricesectorpoliciesandtheimplicationsofreform,Economicresearchreport(UnitedStates.Dept.ofAgriculture.EconomicResearch
Service);no.41)30‘SomepotentialforagriculturalmarketinginfrastructureprojectsinIndia’-PaperpresentedintheGeneralBodyMeetingofNationalCouncilofState
Agricultural,MarketingBoards,heldatGuwahation3rdto4thApril200831 ReportoftheTaskForceonDevelopmentofColdChaininIndia,Dept.ofAgricultureandCooperation,MinistryofAgriculture,Govt.ofIndiaAug2008
32 ReportoftheTaskForceonDevelopmentofColdChaininIndia,Dept.ofAgricultureandCooperation,MinistryofAgriculture,Govt.ofIndiaAug2008
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ThetaskforcesetupbytheIndiangovernmentin2007tostudythecoldchain
infrastructuresituationinIndiapublishedareportmakingahostof
recommendationstoremedythecoldchaininfrastructureinthecountry.Someof
themare
• SettingupSpecialPassagesforvehicleswithperishablegoodsakintothose
inChinaintheGreenCorridor,anagriculturalnetworkspreadalong27,000
km.
• Allowingcoldchainreceiptsasnegotiableinstrumentssimilartowarehousingreceipts
• Providingfinancialincentivesforinvestmentsincoldchaininfrastructure
includingsubsidiesandinterestratesubventions
Inthe2009budgetthegovt.hasannounced100percenttaxdeductionon
investmentsincoldchainfacilities.Thisneedstobesupportedwithother
interventionstohelpensureacomprehensivecoldchainnetworkwhichcovers
transportvehicles,creationofcontrolledatmospherefacilitiesincoldstorages,
etc.Factorssuchascostefficiencyandenvironmentsustainabilityalsoneedto
beaccountedforwhiledevelopingandmodernizingexistingstorageand
packaginginfrastructure.Developedcountrieshaveusedalternatesourcesof
energytodevelopcostefficientandenvironmentfriendlyagriculture
infrastructure.Theuseofalternatesourcesofenergysuchassolarpowerforcold
storage&packingfacilitiescouldplayasignificantroleinIndianAgricultural
infrastructurewhichfacesanacutepowerdeficitsituation.
USA’sWarmerdamCenterisoneofthelargestsolarenergysystemsinthe
agricultureindustry
TheWarmerdamfruitpackingfacility,locatedinCalifornia’sSanJoaquinValley
(USA),hostsoneofthelargestsolarenergysystemsintheUSagriculture
industry.Theinstallationcommissionedinearly2008,isanticipatedtoproduce
1.2MWhperyear.TheWarmerdamplantisknownforinnovativehandling,
coolingandpackagingofproducesuchascherriesandkiwis.Tosupportthis
operation,thesolarinitiativewilloffset60percentoftheelectricalpowerneeds
oftheirpackinghouseandcoldstoragefacilities
Source:Conergy,Companywebsite
41
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4.2.4BasicInfrastructure-Power,Roads,Water
Theroleofphysicalinfrastructureintheeconomyhasmeritedandreceivedalot
ofattentionfrompolicymakers.Howeversignificantinvestmentshavebeen
devotedtopower,roads,highways,etcnotallofthemdirectlyservingtherural
areasoragriculture.Whiletheagriculturalsectorenjoyssubsidized(orfreein
somecases)electricity,otherinfrastructuresuchasroadsandirrigationremains
low.Further,Indiahasapowerdeficitofover20GW(18percentpeakdeficit)33.
Thereisanurgentneedtonotonlyreducethedependenceofthesectoron
powerfromfossilfuelsbutalsoincreasethecontributionofrenewablesources
tothetotalinstalledcapacityforgeneration,currentlybelow10percent 34.This
wouldhavethewelcomeside-effectofprovidingcontinuouspowersupplyto
ruralareaswhichcurrentlydon’treceive24hrsofsupplyinmostpartsofthe
country.
Oneofthereasonsforloss/wastageofagriculturalproduceistheconditionof
theroadsthatconnectfarmerstomarketingcentres.Itisbelievedthataround7-
10percentofproduceislostinTransportationandWarehousingintheagricultural
supplychain35.Whilethe2009budgetaugmentsthefundingfornationalhighway
infrastructure,muchneedstobedonetoimprovetheconditionofroadswhich
connectIndia’svillagestotherestofthecountry.
India’sdependenceonthemonsooniswidelydocumented.Howeverdespitethe
factthatitispublicknowledgethatIndia’swatersupplyisnotadequateinsome
areas,mostoftheworkinwaterconservationforagriculturehasbeenrestricted
toprivateenterprisesortheworkofNGOs.Innovativetechniqueslikedrip
irrigationhavenotmadeinroadsintoIndianagriculturedespitethefactthatthe
twomainstaplecrops–riceandwheatconsumehighquantitiesofwaterper
unitareaofcultivationwhencomparedtoothercropssuchassorghumandbeet.
In2005,aWorldBankreport36 examinedIndia’swatersituation,forecastinga
grimpictureby2020,bywhenIndia’sdemandisexpectedtoexceedallknown
sourcesofsupply.TheWorldBankhasinrecentyearssponsoredanumberof
focusedprojectsdesignedtoalleviateIndia’swatersituationbyrevivingIndia’s
crumblingtanksystemsinstatessuchasOrissaandKarnatakawhereinlessthan
50percentofthestate’slandisirrigated.Theseprojectsalsoaimtoincrease
farmerincomesthroughaparticipatoryapproachthatencouragesdiversification
intohighervalueandlesswater-intensivecrops.Thegovt.needstobetaking
largerscaleactionbasedonexperiencesgainedfromsuchactionstohelpensure
Indiadoesnotendupwitha‘dry’future.
33CentralElectricityAuthority
34 HydroPowerwhichaccountsforroughly25percentofinstalledcapacityisnotincludedhere.
35 TransportSysteminFoodGrainSupplyandChallenges,HDGujrati,GM-Concor,May2008
36 India’sWaterEconomy:BracingforaTurbulentFuturebyJohnBriscoe,SeniorWaterAdvisorattheWorldBank
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Role of Organized retailing in improving Agri-infrastructure
Theemergenceoforganizedretailinginrecentyearshasincreaseddemandfor
qualityproduceleadingtorisingprivatesectorinvestmentinsupplychain
infrastructure.Backwardintegrationbyorganizedretailersisexpectedtohave
positiveimplicationsontheentireagri-valuechain.Organizedretailingcan
empowerfarmerswithtechnologyandprovidethembettermarketaccess.Itcan
helptolowermarketingcostsbybringingthefarmersandretailerscloser,leading
tolowerpricesforconsumersandhigherrealizationforfarmers.Manyretail
playerssuchasRelaice,Bharti-Walmartretail,AdityaBirlaretail,etc.have
investedinimprovingtheback-endprocessesofthesupplychain.
Thegrowthoforganizedretailingislikelytoincreaseprivateinvestmentandlead
toimprovedcapital,infrastructureandhumanresourceformationinthe
agriculturesector.
Reliance Farm to Fork Model
Contractfarming
Integratedruralhubsfor
procurementandprocessing
Coldchainand
warehousesTransportation FoodRetai ling
• Contractfarmingfor
fruitsandvegetablesalongwithintegrated
production
management
•Fruitsandvegetables
tobefocusareasbutothercashcropsand
grainsalsoonthe
radar
• Acquiringtractsoflandin
severalstatestoserveasintegratedruralprocurement
andprocessinghubsfor
aggregationandsegregation
•Alreadyinadvancednegotiation
for700acresinPunjab
• Similarplanstobereplicatedin
4-6statesacrossIndia
• Modeledalongthetraditional
villagemarts,thesewillalsoserveasretailingpointsselling
agri-inputsanddeliveringcredit
andfinancialservices
• Alsoinvestinginfoodparksand
processinghubsinPunjabandHaryanatoenhancevalue
addition
•Hubandspoke
modelwithlargewholesale
terminalsfeeding
into
distributioncenters
•Focusoncold
chainaswellas
greenhouses
•Integratedlogistics
servicesacrossroad,rail,seaandair
•Anetworkof
discountstores,hypermarkets,
supermarketsand
conveniencestoresto
catertoboththe
urbanandruralpopulation
•Largelyownedbut
conveniencestores
underfranchisee
modelforquickrollout
•Drygroceries,fruits
&veg,dairytobe
focusareas
•Exportopportunities
toEuropeandMiddle
East
43
Source:KPMGReport‘ProcessedFoodandAgribusiness-OpportunitiesforInvestmentinIndia’2007
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Inadditiontodirectphysicalinfrastructurerequiredtosupporttheagricultural
sector,thereisastrongneedtosupplementitwithmarketinginformation/
intelligencewhileaddressingvariouschallengesinthesupplychain.
5.1 Marketing Intelligence / Marketing
Information
Eventhoughtherehasbeenconsiderableprogresstoprovidefarmerswith
marketinformationrelatingtoprices,farminputsandweatherforecast,such
informationinremoteruralvillagesisnoteasilyaccessible.Smallandmarginal
farmersinIndiagenerallyhavelimitedaccesstopricinginformationand
knowledgeregardingimprovedandmechanizedfarmtechniques,whichcould
improvetheirproductivity.Farmersalsolackreadyaccesstoqualityinputsand
criticalinformationsuchasweatherforecaststhatcouldhelpthemimprovethe
qualityoftheirproduce.
Informationaccessisoftenatediousandtimeconsumingprocessforfarmers
duetolessdevelopedmedia&communicationinfrastructureinruralregions.
AlthoughtheGovernmentusestheradioandtelevisiontobroadcastmarket
prices,thelowpenetrationofradioandtelevisionmediaat19percentand41
percentrespectivelyinruralareasbeatsthepurpose 1.Penetrationofprintmedia
isequallylow;28percentinruralregions,duetolowrateofliteracyratein
5. Marketing Infrastructure
1RKSwamyBBDOguidetoMarketPlanning,VolumeII,2007
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remoteruralvillages.However,ontheotherhand,thepricequotationsarealso
sometimesnotreliableowingtothetime-lag.
Duetoimproperaccesstomarketintelligenceandpricingtrends,farmersreadily
acceptwhateverpriceisofferedtothembythemanditraders.Asaresult,
tradersarewell-positionedtoexploitthefarmersthroughpracticesthatsustain
system-wideinefficiencies.Farmershavelimitedornilknowledgeoftheprice
obtainedbyintermediariesinthewholesalemarket.Suchinefficienciesdrastically
increasetransactioncostsandslashpotentialprofitsfortheruralIndianfarmers.
Hence,thereisanurgentneedtomakethefarmerawareofpricetrendsfor
variouscropssothathecanaccordinglyplanhischoiceofproduce.
Inrecenttimes,privateplayershavewellsupportedtheGovernmenteffortsto
spreadmarketingintelligenceamongfarmers.ITC’se-choupalandtheoperations
ofotherplayerslikeTata’sKisanSansarhavestrengthenedthecompetitiveability
ofsmallfarmersinIndia.Co-operativefarmingisconsideredtobeaboonina
countrywherelandholdingsaremarginalandfarmersareexploitedtoselltheir
produceatapricewhichdoesnotevenrecovertheircost.
e-choupal – Private sector initiative connecting farmers electronically
e-choupalisaoneofitskindinitiativelaunchedbyITC,whichassistsfarmersin
makinginformeddecisionstoselltheirproduceatanappropriateprevailing
marketprice.
46
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ITC e-Choupal Business Model
Thee-ChoupalmodelrequiresITCtomakesignificantinvestmentstocreateandmaintainitsownITnetworkinruralIndia
andtoidentifyandtrainalocalfarmertomanageeache-Choupal.Thecomputer,typicallyhousedinthefarmer’shouse,is
linkedtotheInternetviaphonelinesor,increasingly,byaVSATconnection,andservesanaverageof600farmersin10
surroundingvillageswithinabouta5kilometerradius.Eache-ChoupalcostsbetweenUSD3,000andUSD6,000toset
upandaboutUSD100peryeartomaintain.Thecostofusingthesystemisnegligible,butthehostfarmer,calleda
sanchalak,incurssomeoperatingcostsandisobligatedbyapublicoathtoservetheentirecommunity;thesanchalak
benefitsfromincreasedprestigeandacommissionpaidtohimforalle-Choupaltransactions.Thefarmerscanusethe
computertoaccessdailyclosingpricesonlocalmandis,aswellastotrackglobalpricetrendsorfindinformationabout
newfarmingtechniques—eitherdirectlyor,becausemanyfarmersareilliterate,viathesanchalak.Theyalsousethee-
Choupaltoorderseed,fertilizer,andotherproductssuchasconsumergoodsfromITCoritspartners,atpriceslowerthan
thoseavailablefromvillagetraders;thesanchalaktypicallyaggregatesthevillagedemandfortheseproductsand
transmitstheordertoanITCrepresentative.Atharvesttime,ITCofferstobuythecropdirectlyfromanyfarmeratthe
previousday’sclosingprice;thefarmerthentransportshiscroptoanITCprocessingcenter,wherethecropisweighed
electronicallyandassessedforquality.Thefarmeristhenpaidforthecropandatransportfee.“Bonuspoints,”whichare
exchangeableforproductsthatITCsells,aregivenforcropswithqualityabovethenorm.Inthisway,thee-Choupal
systembypassestheGovernment-mandatedtradingmandis.
Source:digitaldividend.org
Source:DevelopingaRurale-hub.Thecasestudyofe-choupalexperienceofITC-B.Bowonder,VinayGuptaandAmitSingh
Value Chain
47
C o n v e n t i o n a l
e -
C h o u p a l
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EKVI (e-agricultural marketing) - An initiative by Madhya Pradesh Government
Background
EKVI(e-KrishiVipanan)isthee-AgricultureMarketingprojecttakenupbytheGovernmentofMadhyaPradeshasapartof
itse-GovernanceinitiativetofacilitatethefarmersoftheStateintakinginformeddecisionsforsellingtheirproduce 2.The
projectisexecutedonBuild-Own-Operate(BOO)basiswithaconsortiumofvendors.
Objectives
TheprojectwasimplementedtoformalizeandreorganizetheagriculturetradingbusinessofMandiBoardbyinstallingcosteffectivedigitalinfrastructureusingthelatestinformationandcommunicationtechnologytocollectanddeliverreal
timeinformationonline;tomaketheoperationsmoreeffectiveandcompletelytransparent,thusbenefitingall
stakeholders(Farmers,TradersandtheGovernment);andempoweringthemthroughaccurateandtimelyinformationfor
effectivedecisionmaking.Theinfrastructuredevelopedwouldeventuallyleadtograin-lessMandisandobviatetheneed
forphysicalmovementofagricultureproducefromthefarmers'premisestotheMandis.3
Business Model
TheMadhyaPradeshGovernmentadoptedtheBOOmodeltoacceleratetheprojectforconservingpublicresourcesand
securebesttechnicalsupportinafastchangingtechnologicalworld.TheprojectwasrolledoutbyvendorsonaBOObasis
andwasresponsiblefordevelopingandmaintainingnecessaryinfrastructure.Inreturn,thevendorsreceivedremuneration
asapercentageofmandifees.AdditionalreturnscouldalsobegeneratedwithwrittenapprovalfromtheMandiBoardfromtheadvertisementsmadeatmandisabouttheagriculturalproduceandrelateditemssuchasfertilizer,seeds,
pesticides,farmpractices,agricultureproduceexportorder,etc.2
• Availabilityoflatestinformationonrates,arrivalsetc.invariousmandis
• Choicetodecidewhenandwheretosell
• Selltheproduceatdoorthroughe-Trading
• Reductioninlossesduetotransportationandhandling
Farmers
Traders
Mandis
Government
• Transparentproceduresandsinglewindowdisposal
• Reconciliationofdailysales,accounts,transitpermit
• Availabilityofratesinvariousmandiswillhelpinofferingcompetitiveratestofarmers
• Reductionintransportationlosses
• Instantreconciliationofaccounts,transitpermitsreceivablesandpayables
• Effectivelymonitoritsactivities
• Facilitateimplementationofcontractfarming
• Ensuretransparencyinoperations
• Speedycollection,analysisanddisseminationofinformationtofarmersandtraders
• Improvedtaxrevenuecollectionbycollatingthisdatawithcommercialtax,incometax,etc.
• InstantaneousaccesstoevenremotelocationsthroughVSATconnectivity,whichcan
effectivelyleadtogoodgovernancethroughdisseminationofinformation
B e n e f i t s
Source:www.mit.gov.in
2www.mit.gov.in/download/e-ready/Chap4.PDF3 www.iimahd.ernet.in/egov/ifip/dec2006/article1.htm
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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’
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The AMUL (Anand Milk Union Limited) Model - Marketing information through co-operative farming
Indiahaswitnessedsomesuccessinco-operativefarminginareasofmilk,fertilizer,andsugarbuttheprimaryareaof
grainfarmingisstillfarfromwitnessingsuccess.CompanieslikeAmulhaveachievedconsiderablesuccessadoptingthis
modeoffarming.
TheAmulModelisanintegratedco-operativestructurethatprocures,processesandmarketsmilkandmilkproducts.
Amulwasformedin1946asadairyco-operativemovementandismanagedbytheGujaratCo-operativeMilkMarketing
FederationLimited(GCMMF).
Amulisregardedasanepitomeoffaithwhichenabledfarmerstoliftthemselvesfrompovertyandcreatedasocio-
economicrevolutioninthecountry.ThesuccessofAmulliesinitsbusinessmodelwhereproducersareinvolvedatevery
stageofoperationinadditiontoprofessionalmanagementwhichensuresitsworkingsimilartothatofaprivate
corporation.
TheAmulStatistics 2007-08
MembersUnion 13
No.ofvillagesocieties 13,141
Totalmilkhandlingcapacity(million
litresperday)10.21
Milkcollection(bill ionlitres) 2.69
Milkdryingcapacity(mtsperday) 626
Cattlefeedmanufacturingcapacity 3090
Source:AmulIndia:Thetasteofsuccess,BusinessOutlook,February,2007
The AMUL Model - A Three Tier Structure
3StateFederation
2DistrictUnion
1VillageSociety
Thedistrictunionsinstatecomprisethestatefederation,whichisresponsiblefor
marketingmilkandmilkproductsofthememberunions
Adistrictunionisownedbydairyco-operativesociety(DCS)whichbuysthemilk
fromallthesocieties,andprocessesandmarketsthefluidmilkandproducts
AvillageDCSisformedbymilkproducersandanyproducercanbecomea
memberbybuyingashareandcommittingtosellhisstockofmilkexclusivelytoit
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Grameen Danone Foods Ltd, Bangladesh: Success story of a co-operative
GrameenDanoneFoodsLtd.wasstartedbyacollaborationofGroupeDanoneandGrameenbanktoproduceahealthy
andaffordableyogurttargetedtothepoorfamilies.Tokeepcostslow,GrameenDanonecreatedalocalsupplychainfrom
scratch.ThemilkwasprocuredfromlocalfarmerswhoweretrainedbyGrameenDanone.Themilkprocessingfactory
reliedmoreonlowcostlaborandlessontechnology.Fordistributionandmarketing,localwomenwereemployedwho
wentdoortodoorinordertoselltheproducts.
Today,GrameenDanoneismarketinga60gcupofyoghurtat6cents,whichissubstantiallylessthanotherproductsin
themarket.Asinglecupisfortifiedwithsufficientnutrientstomeet30percentofachild’sdailyrequirements.Thesuccesscanbeattributedtothefollowingfactors–
• Holisticvaluechainapproach–GrameenDanone’svaluechainwassimpleandinvolvedlocalcommunity.Themodel
benefitslocalproducersandentrepreneurswhilekeepingproductionanddistributioncostslow.
• Environmentalsustainability–Thefactorywasdesignedtouse harvestedrainwater,solarpowerandbiogas.Alsothe
cupsforyogurtweremadeofbiodegradablecornstarchtoreduceenvironmentalimpact.
Source:GrameenBankWebsite
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5.2 Marketing Supply ChainPresence of too many intermediaries
TheagriculturalmarketinIndiatodayisdominatedby7,500Government
authorizedmarketplacesormandis,whicharegovernedbystatespecificAPMC
Acts.Mandisaresecondarywholesalemarketslocatedinmajortradingcentres
thatgatherlargepartoffarmproducefromvariousruralprimarymarkets.
However,smallfarmershavelimitedaccesstothesewholesalemarketsandthey
largelyrelyuponmiddle-manorcommissionagentsinlocalruralmarketsto
markettheirproducegiventhepriceriskandtimeriskofperishableproducts.
Thisprevailingenvironmentleadstoasupplychainthathasseveral
intermediariesfromthefarmtotheconsumer.Theunreasonablylongsupply
chainresultsinsteepescalationinthetotalcostowingtoprocurement,transit
andothertaxesandservicechargesleviedatvariouslayers.
Thedirectimpactoftheemergenceofintermediariesislowpricerealizationbythefarmers.Theintermediariesappropriateasizableproportionofthefinalsales
52
Source:KPMGReport‘ProcessedFoodandAgribusiness-OpportunitiesforInvestmentinIndia’2007
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Rythu Bazaar (Farmers Market)5
RythuBazaarwasconceptualizedbytheGovernmentofAndhraPradeshin1999withthefollowingobjectives:
• Providedirectinterfacebetweenfarmersandconsumers-eliminatingintermediariesintrade
• Toensureremunerativepricestothe farmersandprovidefreshvegetablestotheconsumersatreasonableratesfixed
everyday
• Facilitatepromptrealizationofsaleproceedstothefarmerswithoutanydeductions
• Curbmalpractices
The Rythu Bazaar Model
Inthismarket,farmersbringvegetablesandselldirectlytotheconsumers,therebyeliminatingmiddlemenwhoexploit
bothfarmersandconsumersalike.Thus,theproduceavailableiseconomicalandfarmfresh.Ithashelpedinreductionof
pricesinothervegetablemarketsandvendors.
Brazil – Direct farmer processor linkages and operational efficiency
Brazilisanoutstandingsuccessstoryinagriandfoodexports,havingachievedleadershipstatusinawiderangeofagriproductsincludingsugar,orangejuice,meat,oilseedsetc.ThekeyunderlyingfactorswhichhaveenabledBraziltoachieve
thispositionareasfollows:
• Directfarmerprocessorlinkages:Thishashadmulti-foldbenefitsincludingenablingprocessorstoachievescalein
operationswhichhasledtodevelopmentofsustainablebusinessmodels,helpingensurefarmersadoptbestpractices
toenhancecropproductivity
• Theotherkeyenableristhefreemarketsystemwhichhasensuredthatprocessorsandfarmersaimtomaximize
operationalefficiencies.Fore.g.onetonofsugarcaneproduces140KgofSugar 6 (visavis100kginIndia,85kgin
Argentina)inBrazilwhichisamongthehighestintheworld.
BrazilsPerformanceintheExportmarket(2005)
CommodityWorldrank Marketshareof
globalexports
Exportgrowth
rates,2000-05Exports Production
Ethanol 1 1 51 79
Beef 1 2 24 32
Poultry 1 3 35 31
Corn 4 3 35 48
Pork 4 4 13 40
5en.wikipedia.org/wiki/Rythu_bazaar
6 RaboBankReport,MinistryofFoodProcessingIndustries
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6.1 Research and Development
ResearchandDevelopment(R&D)isanotherlinkintheagriculturalecosystem,
whichhasseenmixeddevelopment.Whilethegreenrevolutionusheredin
remarkablechangesinIndia’sagriculture,nothingonthatscalehasbeen
achievedsince,exceptperhapsintheareaofdairyfarmingthanksinlargepart
duetoco-operativessuchasAMUL.Severalexpertshavearguedfortheneedfor
asecondgreenrevolutionespeciallyintheareaofhorticulturalproducts,but
Indianagricultureisyettoseesomethingonthatfront.
Inordertoimprovefarmproductivities,continuousintroductionand
implementationofinnovativetechnologiescallsforexistenceofastrongR&D
network.Whilesubstantialinvestmentismadeinthisregard,theeffortshavenot
beenrewarding.Thisispurelybecauseoflackofaclearlystatedstrategythat
assignsdefiniteresponsibilities,prioritizestheresearchagendarationally,and
recognizesthattheresearchmodeisnotalwaysbestsuitedforproduct
developmentanddelivery.Someofthecommonproblemsailingtheagri-R&Din
Indiaare:
• Commodity-centric R&D: Lackofaholisticapproachinvolvingamatrixoffarmenterprises
• Compartmentalization of R&D agencies: Lackofeffectivebilateralflowof
informationamongstresearch,extension,andimplementationdepartments
• Poor validation and feedback mechanisms: Lackoflarge-scaleon-farm
validationoftechniquesandfeedbackthereon,leadingtopracticallynoscope
forenhancement
Anexemplaryshiftisrequiredtotransformthepresentcommodity-centric
researchtoasystemsapproach.Sincefarm-levelproblemsarespecifictoagro-
climaticzones(ACZs),aconvergencebetweenR&Dagencieswithinindividual
ACZsisrequired.Thiscanhelpbringregion-specificityintechnologiesandtheir
time-boundassessment.Aseven-stepmechanismisrequiredtoset-upa
research-development-technologytransfercontinuuminvolvingallstakeholders:
• Problemidentificationandprioritization
• Convergenceofexistingtechnologiestomatchtheneed
• Generationofneed-basedviabletechnologiesusingtheholisticfarming
systemapproach
• On-farmassessmentandevaluation
• Feedbackonthetechnologies
• Refinementoftechnologies,ifnecessary
• Helpingensuretimelyavailabilityofinputs
6. Soft Infrastructure
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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.
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Theneedforcontextappropriatetrainingandcapacitybuildingatalllevelsstartingwithfarmersisessential,asistheneed
toputknowledgeintopractice.
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6.3 Support Infrastructure
TheroleofsupportinfrastructurealongsideHumanresourcedevelopmentin
enablingthegrowthofthesectorisignoredoftenbybothpolicymakersand
sectorpractitioners,withattentionbeingpaidtoactivitiesdirectlyrelatingto
agriculturesuchaspre-harvestorpost-harvest.Educationisonesuchcomponent
ofsupportinfrastructureforagricultureandalsoavitaldriverofhumanresource
development.
Education
Halfofthoseengagedinagriculturearestillilliterateandjust5percenthave
completedhigherSecondaryeducation.Incomesandeducationareofcourse
leastamongagriculturallabourers.Ensuringfoodsecurityandfarmerwelfare
thusrequiresupportsystemstoextendtechnologyandscalebenefitsina
sustainablemannertoahugeexistingworkforceinagriculturethatlacksnon-
farmskillsandisalsoageing.
Source:GlobalEconomicsPaperNo:169,June,2008
Graduation Rates by Fields
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India’sstatesupportedagriculturaleducationsystemconsistsofoneCentral
AgriculturalUniversity,forty-fiveStateAgriculturalUniversities(SAUs)andfour
NationalInstitutesofIndianCouncilofAgriculturalResearchhavingthestatusof
deemeduniversities.Thereareothereducationinstitutesandresearchcentres
whicharededicatedtocertainnichessuchasveterinarysciences,vegetables,
foodgrains,etc.Indiahas,duetovarioushistoricreasons,developedan
agriculturaleducationsystemwhichissomewhatisolatedfromtherestofthe
educationdisciplines1.Thus,notonlyaretheresourcesengagedinagriculture
under-educated,eventheeducatedstudentsareremovedfromthebenefitsofinter-disciplinaryinteractions,commoninothernations.Further,thelinkagesto
industry,notjustintermsofplacementofthestudents,butalsoinengagingin
industrysponsoredresearchprogrammes-avitalfeatureoftheuniversity
systeminothercountries,arenotverystrong.
Inadditiontotheinstitutesengagedinagriculturaleducation,thereare
institutes/programsdedicatedtoagri-businessmanagementsuchasIRMA
(Anand),MANAGE(Hyderabad)andAgribusinessManagement(ABM)programs
atIIMAandIIML,amongothers.
Howeveragapremainsforeducatingpeopleatthebasiclevel,especiallyinrural
areas.
Brazil’s SENAR
Brazilwhichalsofacedtheproblemofloweducationinpeopleemployedintheagriculturalsector,establishedanagency,
SENARdevotedtotheruralsectorin1991.ThestatedmissionforSENAR(NationalServiceforRuralApprenticeship)was
todevelopruraloccupationaltrainingandsocialpromotionactivitiesformenandwomenwhoworkinruralareas.The
majorityofworkersreachedbySENARtodateworkincattleraising,extractiveexploitationofanimalandvegetable
resources,agro-industryandagriculture.Inmanyinstances,SENARcombinesliteracyeducationwithoccupational
training.Anotherfocusisthepreparationofworkers,particularlymediumandsmallproducers,toimproveproductivityand
expandoutput.Inthiscontext,SENARhasformedaneffectivepartnershipwithSEBRAE(BrazilianMicroandSmallBusinessSupportService)apublic,non-governmentalorganizationthatsupportssmall,medium,andindividual
businesses.
Sources:TrainingforRuralDevelopmentinBrazil:SENAR,FAO2004,ABlueprintforGreenEnergyintheAmericas2007,GartenRothkopf
1SureshKSinha’sB.P.PalMe morialLectureat theNati onalAcademyofScien ces,Allah abad,1999
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Aholisticapproachtoagriculturaleducationinplanningfutureprogrammesmay
yieldbetterresultsthantheskewedstateweseeinIndiatoday.TheIndian
agriculturalinstitutionswoulddowelltoworkwithindustryplayersonnotjust
designoftheircurriculabutalsoonareasthatmeritimmediateattentionsuchas
cropvarietiesthatalsoaidinwaterconservation.Variousopportunitiestodevelop
resourcesexistinareassuchasfoodprocessinginIndiawhichitselfremainsat
woefullevels.
Health Infrastructure
HealthcareinIndiahasnotreceiveditsfairshareofattentionfrompolicymakers
andasaresult,itsroleasafundamentalelementofthesupportinfrastructurein
contributingtothedevelopmentoftheeconomy(theagriculturalsectorincluded)
hasnotreceivedmuchattention.Thehealthofthehumanpopulationisintimately
connectedtothehealthoftheanimalwithseveralfatalanddebilitatingdiseases
beingcommontobothmanandanimal.Seriousattentiontoanimalhealthcare,
diseasediagnosis,andprophylacticswillgoalongwayinensuringhumanhealth
also.
Whiletheinterventionsrequiredinhealthcareinfrastructureforhumansarenot
specifictotheresourcesengagedinagriculture,beingrelevanttotherestofthepopulationaswell,itiswidelyknownthatinfrastructureforsecondaryand
tertiaryhealthcareisinadequateinIndia.Thesewouldneedtobeaddressedas
partofeffortstoimprovegeneralhealthandwellbeingoftheIndianpopulace.
WhileIndiahasnotbeensubjecttonationalepidemicsofthescaleoftheMad
CowdiseasethatsweptacrosstheUKandotherpartsoftheworldinthepast,
responsestorecentthreatssuchasthebirdfludiseaseshowsthatIndia’s
preparednessandinfrastructureislowwithrespecttothehealthofanimalsand
otherorganismswhicharepartofIndianagriculture.
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TheroleofpolicyinunlockingthepotentialofIndianagriculturecan’tbe
overstated.AgriculturalPolicybynaturehaslinkageswithnotjusttheagricultural
sectorbutalsowithindustrialpolicypromotinginvestmentsacrossvarious
sectorsincl.retail,roads,financing,etc.
Asdiscussedunderpostharvestsection,FCI’sroleinprocurementand
distributionoffoodgrainsneedsarethink.Asthegraphbelowshows,whilethe
governmenthasconstantlyincreaseditsexpenditureonfoodsubsidythegrowth
inofftakes(Rice&Wheat)hasnotalwaysincreased.
ThiscouldhavebeenduetohostofreasonsincludingFooddiversion,Leakage 1,
Pilferage&theft,IrregularitiesinidentificationofBPLfamilies,Lossesdueto
poorqualityofpackingmaterialandDamagedfoodgrains 2.Inatellingcomment
ontheinefficiencyplaguingthePDS,in2008,overtenlakhtonneoffoodgrain
worthmillionsofrupeeswasfounddamagedoverthelastdecadeand
additionallyFCIspentaroundINR25milliontodisposetheserottenfoodgrainsin
additiontoaroundINR2.4billiontopreventthelossoffoodgrainsduring
storage.FCIandStategodownswillhavetoimprovestoringfacilitiesand
checkingmethods.Thestoragecapacitywillalsohavetobeincreasedtoachieve
thetargetortheexistingfacilitieswillhavetobescaledup.Moreover,controlled
procurementofthegrainsneedstobeensuredtoavoidoverstocking.
AlternativelywhileFCIcancontinuetosetpolicies,thelogisticscanbe
outsourcedtoprivateplayerswhiletargetingthedualbenefitsofreducedinvestmentforFCIaswellasincreasedefficienciesduetomarketforces.
7. Agricultural Policy
1www.indianexpress.com/news/house-panel-finds-over-50-leakage-in-pds/303392/0
2 www.financialexpress.com/news/10-lakh-tonnes-of-food-grains-damaged-in-fci-godowns/330283/
Growth in Off take of Rice & Wheat vis-à-vis Food Subsidy
Source:DepartmentofFood&PublicDistribution
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TheroleofthecentralgovernmentinfixingMSPcouldbere-examinedinthe
lightoffindingsoftheHighLevelCommitteeonLong-TermGrainPolicy3.Further
pricingcontrolcouldbedevolvedtothestates&FCIinterventioncouldbe
selectivewherestatesaren’tadequatelygearedup4.
Technologyneedstobeleveragedtobringaboutgreaterdisciplineinthesystem
beginningfromtrackingstatusoftruckstransportingstockstoensuringrealtime
stockstatusatFCIdepots.TheIntegratedInformationSystemforFoodgrains
Management,discussedearlier,isastepintherightdirectionandcouldbe
extendedtofreightaswellandnotjuststocks,providingatooltoauditaswellas
trackfoodstocks.
Anotherkeypieceofregulationintheagriculturalsectorespeciallyfor
horticulturalproduceistheAPMCAct.TheGovernmentofIndiahascirculated
modellegislationtitled“TheStateAgriculturalProduceMarketing(Development
andRegulation)Act,2003”tobringaboutreformsinagriculturalmarketing.
Contractfarming,directmarketingandpublic-privatepartnershipinmanagement
anddevelopmentofagriculturalmarketsarethemajorinstrumentsofchange
amongothers.Twenty-fivestates/UTshavealreadyamendedtheirAPMC
Acts/madevaryingprovisionsforthepurpose,whileotherstatesareinthe
processofamendingtheirrespectiveAPMCActs(seetablebelowfordetails) 5
Someofthenorthernstateshavealsotriedtoboostthedevelopmentof
agricultureandagri-businessindustriesthroughvariouspoliciesovertheyears
andalsothroughproposedmeasures.Thestateshavealsoattractedconsiderable
attentionduetotheincentivestheyoffertoattractinvestment.BaddiinHimachal
Pradeshforinstance,hasdevelopedintoahubforfoodprocessingindustriesin
particular.Thetablebelowprovidesasnapshotofpoliciesacrossfourkeynorthernstates.
5EconomicSurveyofIndia,2008-09,Statusason31stMar09
Sl.No. Stageofreforms NameofState/UnionTerritory
1States/UTswherereformstoAPMCActhasbeendonefordirectMarketing;ContractFarmingandMarketsinPrivate/
CoopSectors.
AndhraPradesh,ArunachalPradesh,Assam,Chattisgarh,
Goa,Gujrat,HimachalPradesh,Jharkhand,Karnataka,
MadhyaPradesh,Maharashtra,Nagaland,Orissa,Rajasthan,
SikkimandTripura.
2States/UTswherereformstoAPMCActhasbeendone
partially.
a)DirectMarketingNCTofDelhi
b)ContractFarming:Haryana,Punjab,andChandigarh.
c)PrivateMarkets:PunjabandChandigarh
3States/UTswherethereisnoAPMCActandhencenot
requiringreforms.
Bihar*,Kerala,Manipur,Andaman&NicobarIsland,Dadra&
NagarHaveli,Daman&Diu&Lakshadweep
4States/UTs,whereAPMCActalreadyprovidesforthe
reformsTamilNadu
5States/UTswhereadministrativeactionisinitiatedforthe
reforms.
Mizoram,Meghalaya,Haryana,J&K,Uttarakhand,West
Bengal,Puducherry,NCTofDelhiandUttarPradesh
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Punjab HimachalPradesh Uttarakhand Rajasthan
Newpolicies NewAgroIndustrialPolicy-
2009tobeannounced,to
beimplemented-Punjab
AgroIndustriesCorpLtd
(PAIC)(stategovt'snodal
agency),toachieverapid
industrializationinthefield
ofagricultureandagro-
processing.
Planstoconvertstateintoa
‘HerbalBiobusinessValleyof
India’.Theareasidentifiedas
prioritybiobusinessinclude
commercialmicropropagation,
bio-businessthroughhigh
valueindustrialcashcrops,
organicfarming,
vermicompost,mushrooms,
fermentation,nutraceuticals
andotherprocessedproducts
whichhaveimmensescopein
thefirstphase.
Planningtogiveinterest-free
loansforsettingupself-
employmentagriculture
industry(SAI)unitsunderthe
specialagriculturezones
(SAZs)schemewhichislikely
toprivatisemandisinthenew
MandiAct.
UndertheSAZprogramme,
thegovernmentproposesto
haveagro-basedunitslike
fisheries,teagardens,dairy
farmingandvariousother
agricultureandhorticulture
activities.
New“RajasthanAgribusiness
andAgroIndustries
DevelopmentPolicy”drafted
forthefocusedgrowthof
agrosector.
Encouraging
more
partnerships
Dialogueinitiatedwiththe
provinceofManitoba,
Canadatosetupajoint
taskforcetoexplorenew
avenuesofinvestmentin
agriculturesectorin
Punjab.
- Govt.HorticultureFarmshave
beenleasedouttoprivate
sectorentrepreneursinorder
toattracttechnologyand
investmentinproductionof
plantingmaterial.
Sericulturefarmtransferredto
primaryco-operativesocieties
forbettermanagement.
Amedicinalandaromatic
plantsexportzonehasbeen
establishedcoveringseven
districtsandspecialised
herbalparksareintheoffing
Proposestoencourageprivate
sectorindustries,apexco-
operativesinstitutions,
APMCsetc.tocomeforward
andsetupsuchcentres/
institutes.TheState
Governmentwillsupportsuch
projectsbyprovidinglandat
concessionalrateand50
percentinitialseedcapital
matchingtheindustry
contributionwithinaceilingof
INR60millions.
Singlewindow
schemes
AspecialcellcalledUdyog
Sahayak(industry
facilitator)setuptohelp
entrepreneursobtain
speedyclearancesfor
settingupindustriesin
Punjab.Allknowledge
drivenindustriessuchasIT,
electronicsand
biotechnologyhavea
separatesinglewindow
servicemechanismunder
PunjabInformationand
CommunicationTechnology
CorporationLtd.
SettingupofSingleWindow
ClearanceAgencyand
MonitoringAuthorityunder
thechairmanshipoftheChief
Minister,alongwithsingle
windowagenciesatmajor
industrialtownslike
Parwanoo,Baddi,Paonta
Sahib,GoalthaiandSansarpur
Terrace
Thesinglewindowcontract
facilitywouldbeavailableat
theDistrictIndustrialCentres
attheDistrictlevelandState
IndustrialDevelopment
CorporationofUttarakhandat
thestatelevel.Apartfrom
providinginformationand
escortservicestothe
entrepreneurs,thecentres
willalsobemaintainingadata
bank
StateGovernmenthas
constitutedanEmpowered
Committeeconsistingof
Secretaries,inchargeof
DepartmentsofFinance,
Industries,Agricultureto
provideSingleWindow
ClearancetoAgricultureand
FoodProcessingIndustry
63
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Punjab HimachalPradesh Uttarakhand Rajasthan
Financial
assistance/
Subsidy
RuralDevelopmentFund,
MarketDevelopmentFund
havebeencreatedto
providefinancialassistance
NABARDsanctionedan
assistanceofINR188mllion
for19minorirrigation
(comprising12flowirrigation
schemes,5liftirrigationand2
deeptubewellschemesfor
Bilaspur,Kangra,Kullu,Mandi,
Shimla,SirmaourandSolan
districts)and15ruraldrinking
waterschemesinthestate.
Theassistancetothehill
statecameunderRural
InfrastructureDevelopment
Fund(RIDF).
AprovisionofINR100million
isbeingmadeforthesoil-
testingprojectwiththe
governmenttakingthehelpof
scientistsofreputednational
institutionsforthispurpose.
TheStateGovernmentwill
reimburse50percentcostof
preparationoftheproject
reporttosetupnewagro
industrialunitssubjectto
ceilingofINR0.6million.
FinancialAssistancewillbe
releasedaftertheUnitisset
upandcommencesits
operations.
Interest
Subsidyand
exemptions
5percentbackended
interestsubsidyfor5yrs
(proposed).Infrastructure
DevelopmentCessand
othertaxes/levieswould
berationalisedandchange
inlandusechargeswould
bewaivedoffwhile
ExternalDevelopment
Chargeswouldbe
reviewedintheproposed
newagro-policy
Interestsubsidyof10percent
forfiveyearsforfood-
processingunits.Salestax
exemptionforfood
processingunitsfor10years.
Salestaxrelief&electricity
dutywaiverfor
12years(Category-A):
9YearsCategory-B)&
7Years(Category-C).
ReduceVatfrom4percentto
1percentonallfoodproducts
andonpackagingmaterial.3
percentperannumback
endedinterestsubsidyfor
first7years.Thestate
governmentisalsoproviding
subsidyforprojectsunder
variousschemesof
AgriculturalandProcessed
FoodProductsExport
DevelopmentAuthority
(APEDA),NationalHorticulture
Board(NHB),MinistryofFood
ProcessingIndustry(MFPI)
andtheNaturalMedicinal
PlantBoard(NMPB)subject
toamaximumlimitofINR2
million
6percentbackendedinterest
subsidyfor7yrs(proposed)
64
Source:Pressreleases,IBEF,Stategovernmentwebsites,StatedraftAgriculturepolicyplans,publicprivatepartnershipstatewebsites
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Ourdiscussionofvariousissuesandchallengesplaguingthesector,aswellas
thesuccessofvariousprogrammesbothpublicandprivate,incl.international
examples,yieldafewkeyrecommendationsforthesector.
Inclusive growth and group approach
Forgrowthtobeatallinclusive,theagriculturalstrategymustfocusonthe85
percentoffarmerswhoaresmallandmarginal.Itisnowwellrecognizedthatthe
poorarebestempowerediftheyfunctionasagroupratherthanasindividuals
andthatthisisalsothebestwaytosecureeconomiesofscale.Agroupapproachcouldalsoimprovethebargainingpowerofsmallcultivators.The
approachcouldrangefromlowlevelsofcollectivefunctioningsuchasjoint
investmentsinlumpyinputssuchastubewellsorco-operativesforinput
purchaseandmarketing,tohighlevelsofcollectivefunctioningsuchasland
poolingorevenjointpurchaseorleasingoflandandjointfarming.
Thefewexampleswheresmallandmarginalfarmershavebenefitedfrom
contractfarmingarethosewheretheyhaveenteredintocontractscollectively
ratherthanindividually.
Onewaytopossiblyencouragemarginalfarmersandwomentoformgroupsfor
purposesoffarmingwouldbetoshiftatleastsomeofthecurrentsubsidiesto
beavailableonlytogroupsofsuchfarmersratherthantoindividuals.
Holistic infrastructure development
Infrastructuredevelopmentneedstotakeasystems-approachthataddressesall
roundneedsratherthancreateskewedresourceswhichareeitherunder-utilized
orwasted.Infuture,ifaregionistargetedforaspecificcrop,theinfrastructure
creation/developmentforthatcropneedstoaddressallneedsfromcropresearch
toirrigationneedsforthatcroptostorage(forbothseedsandharvest)and
transportinfrastructureforthesamecrop.
Soilhealthawarenessmustbepromotedthroughacrediblesystemofsoil
testingandofadviceonnutrientneedsbasedonsoiltests.
Uniform Policy Framework
AstheAPMCActimplementationhasshown,therearedifferencesbetween
statesinregulationwhichcouldcreateimbalancesintheagriculturalecosystem,
promotinggrowthinonestateduetofavourablepolicieswhileanother
stagnates.Statesshouldlearnfromoneanotheratthetimeofpolicy
development,emphasizingsustainablecropsandtechniques.Theprivatesector
shouldalsobeengagedatthetimeofpolicyformulationthroughindustrialbodies
suchasCIIandASSOCHAMtoensurepolicesaretunedtobusinessrealities.
8. Recommendations
65
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Modernizing Irrigation Systems & Techniques
Greateremphasisisrequiredoninvestmentsinphysicalrehabilitationofexisting
waterreservesandonmodernizationofirrigationsystems-essentialfor
improvingtheefficiencyofwateruse.
Rationalization of subsidies
Thereisanurgentneedtorationalizesubsidiesacrossnutrientsandalso
examinemethodsbywhichthedeliveryofsomepartofthepresentlyhuge
subsidiescanbetransferredfromfertilizerproducerstofarmersoragroupof
farmersdirectly.
Filling information gaps
Agriculturalextensioniscriticalfornarrowingthemoregeneralknowledgegaps
thatexistsinouragriculture.Statesmustbeginbyfillingupfield-levelvacancies
inextensionandprovidemuchbettertraining,includingatSAUs.Atthesame
time,theCentre’splantosupporttheKVKsandATMAsshouldbesynergizedand
madepartofacomprehensiveandparticipatorydistrictplanningprocess.
AlternatedeliverychannelsspanningRuralKnowledgeCentres,ICT-based
extension,farmer-to-farmerextension,NGOs,andtheprivatesectorshouldalso
bepromotedsimultaneously.ATMA’scapacityin relativelyneglectedareas,such
asanimalhusbandrymustbeincreasedandthescopeofStrategicResearch
ExtensionPlans(SREP)enlarged.
Education, Research & Training
IndiawoulddowelltolearnfrominternationalexamplessuchasSENAR,Brazil.
PartnershipssuchasIBSA1 couldbeleveragedonsettingupasimilarscheme.
Thatwouldhavetheusefulby-productofimprovinginclusionwhilefurtheringthe
causeofIndianagriculture.
Public Private Partnerships (PPPs)
PPPscouldbeausefultooltoacceleratedevelopmentinvariousareasofagri-
business.CurrentlytherearePPPsintheareasofcontractfarming,dripirrigation
projectsandterminalmarketsamongothers.Howeverthescopeofthese
projectsisstilllimitedandtheyserveasexamplesormodelsratherthanbethe
norm.IndustrybodiessuchasASSOCHAM,CII,FICCIandIBEF(itselfaPPP)
couldhelpfacilitateinteractionswithbothdomesticandinternationalcompanies
andagenciestoensurewidespreaduseofbestpracticesandexpandthescaleof
privateparticipationtoresultinperformanceimprovementoftheagricultural
sector.
1IBSAisatrilateral,developmentalinitiativebetweenIndia,BrazilandSouthAfricatopromoteSouth-
Southcooperationandexchange.
66
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Indiahasemergedasamajorglobaleconomicpowerwiththeeconomy
registeringhighgrowthratesintherecentpast.PartsofIndiahavestartedto
displaysignsofaffluence,butthisprogresshasnotbeenuniform.Ruralregions
havenotbeenabletomatchtheirurbancounterparts.Withmorethan70
percent1ofIndia’spopulationlivinginvillages,thebenefitsofeconomicgrowth
havefailedtopercolatetomorethantwo-thirdsofitspeople.
ThedevelopmentofruralIndiaisessentialforsustainingthecurrentgrowth
levelsinthecountry.Withagriculturebeingtheprimaryemployerofmorethan
halfofIndia’spopulation,particularlytheunderprivilegedruralpeasantry,
improvementsinthesectorcouldgoalongwayinenhancingthestandardsof
livingintheruralhinterland.
Itisimperativethatconsiderableeffortsaremadetoextricatethesectorfrom
stagnation.Largerirrigationfacilities,betterseedsandagri-inputsatreasonable
costswillhavetobeprovidedtofarmers.Theaccesstoimprovedinputsand
technologieswillhavetobecoupledwithprovisionoffinance,infrastructuraland
marketingfacilities.Agricultureneedstobecomeanincomegeneratingactivity
andfarmersshouldnotbelefttotheuncertaintyofweather,financialresources,
andmarkets.
OneofthekeyreasonsforthestagnationofIndia’sagricultureisfalling
productivitylevelsrootedinstructuralchallengesthathaveseepedintotheentire
ruralsupplychain.Challengeswithhardandsoftinfrastructurecoupledwithpoor
communicationandfinancinghavecreatedalotofdistressforstakeholdersin
agricultureparticularlythemarginalizedsubsistencefarmer.
Advancementofanyindustrydependsuponavailabilityofskilledhumanresource
andtheagricultureindustryisindireneedofhighlyskilledandtrainedmanpower
acrossdifferentoperationallevels.Humanresourcedevelopmentneedstocover
theentirerangefrombasicinfrastructure,education,vocationalandtechnical
guidancetoprofessionalqualifications.
India’sagriculturesectorpresentsimmenseopportunitiesforinvestmentsif
variousstakeholderscollaborateanddevelopinnovativeandeffectivemodelsthat
notonlylookataddressingtheissuesinIndia’sagricultureset-upbutalso
introducebestagriculturalpractices.Publicandprivateplayersincollaboration
withpolicyneedtoplayapivotalroleinpromotinginvestmentsinagri-
infrastructureandthroughthistransformationenableruralIndiatogrowand
prosper.
9. Conclusion
1ForANewDealToTheRuralPoor,TheHindu,12thMarch2008
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Ramesh Srinivas is an Executive
Director in KPMG's Consumer
Markets and Retail practice.
Based in the firm’s Bangalore
office he can be reached at
Anand Ramanathan is a
Manager in KPMG's Consumer
Markets and Retail practice.
Based in the firm’s Bangalore
office, he can be reached at
D. Dharmendra is a Senior
Consultant in KPMG’s Consumer
& Industrial Markets practice.
Based in the firm’s Mumbai
office, he can be reached at
Sonia Topiwala is a Consumer
Markets and Retail Analyst in
KPMG’s Research, Analytics and
Knowledge practice. Based in
the firm’s Mumbai office, she
can be reached at
The Authors wish to acknowledge the contributions of Preeti Sitaram, Shilpa Taneja, Simrat Singh, Upasana Juneja, Sachiv Mehta, Ananya Shah, Kunal
Jain, Rajiv Parekh, Ashish Punjabi, Jiten Ganatra and Nisha Fernandes.
Acknowledgements
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in.kpmg.com
Pradip Kanakia
Executive Director
Head - Markets
+91 80 3980 6100
Ramesh Srinivas
Executive Director
Head - Consumer Markets Sector
+91 80 3065 4300
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