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VALUE CHAINASSESSMENT OF
CLIMATE RESILIENTCROPS IN BIHAR
JUNE 2018
Contents
Value Chain Assessment of Climate Resilient Crops in Bihar
Abbreviations and Acronyms i
Executive Summary 1
Maize 3
Rice 7
Lentil 11
Transaction Costs and Risk Analysis 13
Opportunities and Way Forward 15
Section 1: Introduction 18
1.1. Brief about ACT
1.2. Background to the study
1.3. Value chain approach for Climate Resilience
Section 2: Objectives and Methodology 19
2.1. Objective of the study
2.2. Methodology
2.3. Secondary Reveiw
2.4. Data Collection Tools
2.5. Site selection criteria and sample size
Section 3: Climate Context of the State 21
3.1. Bihar State Prole
Section 4: Value Chain on Maize 25
4.1. Introduction 25
4.2. Actors 26
4.3. Factors of relationship 35
4.4. Transaction cost analysis 38
4.5. Risk analysis based on transaction cost value chain assessment 40
4.6. Constraints and opportunities in maize value chain 40
4.7. Recommendations 41
Section 5: Value Chain of Rice 42
5.1. Background 42
5.2. Actors 44
5.3. Transaction cost analysis 52
5.4. Risk analysis based on transaction cost value chain assessment 54
5.5. Constraints and opportunities in rice value chain 55
5.6. Factors (Situation and Constraint) and scope of improvement 56
5.7 Scope of Improvement (Recommendations) 58
Pg. no
Action on Climate Today(ACT) is an initiative funded with UK aid from the UK government and managed by Oxford Policy
Management. ACT brings together two UK Department for International Development programmes: the Climate Proong
Growth and Development (CPGD) programme and the Climate Change Innovation Programme (CCIP). The views expressed
in this leaet do not necessarily reect the UK government's ofcial policies
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Value Chain Assessment of Climate Resilient Crops in Bihar
Section 6: Lentil Value Chain 59
6.1 Introduction 59
6.2 Actors 61
6.3 Factors of relationship 65
6.4 Transaction cost analysis 66
6.5 Risk analysis based on transaction cost value chain assessment 68
6.6 Constraint and opportunities in lentil value chain 68
6.7 Recommendations 69
References 71
Annexure 1: Value chain maps
Maize value chain map 72
Rice value chain map 73
Lentil value chain map 74
Annexure 2: Maize production: climate context 75
Annexure 3: Field visit details 76
Annexure 4: Transaction Cost Analysis of Maize Value Chain 78
Annexure 5: Transaction Cost Analysis of Paddy Value Chain 83
Annexure 6: Transaction Cost Analysis of Lentil Value Chain 88
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List of Tables
Table 1: Agro Climatic Zones in Bihar 22
Table 2: Crops as per cropping season in Bihar 22
Table 3: Maize Production in Bihar 25
Table 4: Major maize producing districts of Bihar (2014-15) 26
Table 5: Market share of private companies in seed marketing 26
Table 6: Cost of Maize production in one hectare 29
Table 7: Cost and margin of maize primary trader 30
Table 8: Cost and margin of maize wholesaler 31
Table 9: Corn feed processor's cost and prot 33
Table 10: Feed dealers cost and margin 34
Table 11: Feed retailer's cost and margin 34
Table 12: Percentage spread of Transaction Costs at different actors' level in Maize Value Chain 38
Table 13: Risk Analysis of Maize 40
Table 14: Constraint and opportunities matrix of Maize Value Chain 41
Table 15: Paddy production analysis of Bihar state 43
Table 16: Consumption of Nutrients during last 5 years (In MTs.) 45
Table 17: Cost of paddy production in one hectre of land 47
Table 18: Cost and margin of Paddy trader 48
Table 19: Cost and prot of rice miller 49
Table 20: Cost and prot of attened rice processor 50
Table 21: Cost and margin of attened rice retailer 50
Table 22: Cost and margin of rice wholesaler 51
Table 23: Cost and margin of rice retailer 51
Table 24: Percentage spread of Transaction Costs at different actors' level in Rice Value Chain 53
Table 25: Risk Analysis of Rice 54
Table 26: Constraints and opportunities matrix of Rice Value Chain 55
Table 27: Share of Lentil in total pulses export form India 60
Table 28: Share of Lentil in total pulses import in India 60
Table 29: Area, production, and productivity of Lentil in Bihar 60
Table 30: Cost of production and benet ratio of producer 62
Table 31: Cost and margin of lentil Aggregator 63
Table 32: Cost and share of Lentil wholesaler 63
Table 33: Cost and margin of lentil dal wholesaler 64
Table 34: Cost and margin of lentil dal retailer 64
Table 35: Percentage spread of cost at different actors' level of lentil value chain 66
Table 36: Risk analysis of Lentil 68
Table 37: Constraints and Opportunities matrix of Lentil Value Chain 69
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Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Value Chain Assessment of Climate Resilient Crops in Bihar
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Value Chain Assessment of Climate Resilient Crops in Bihar
List of Figures Pg. no
Figure 1: Methodology 19
Figure 2: Flood affected area of Bihar 23
Figure 3: Drought affected area of Bihar 24
Figure 4: India's Maize Area, Production, and Productivity 25
Figure 5: Input supply chain in Bihar 27
Figure 6: Process ow for Distillers Dried Grains with Solubles (DDGS) processing 32
Figure 7: MSP comparison of Paddy and Maize 37
Figure 8: Factors affecting Transaction Cost in Maize Value Chain 38
Figure 9: Spread of transaction cost in Maize in Value Chain 39
Figure 10: Paddy coverage in Bihar 44
Figure 11: Functioning Primary Agricultural Credit Societies (PACS) 48
Figure 12: Paddy Procurement by Food Corporation of India (FCI) 49
Figure 13: Spread of Transaction cost in Rice Value Chain 52
Figure 14: Spread of Transactional cost in Rice Value Chain 52
Figure 15: Spread of Transaction of Cost in Lentil Value Chain 66
A3P Accelerated Pulses Production Program
ABCs Agri-Business Centres
ACT Action on Climate Today
AICRP All India Coordinated Research Project
APEDA Agricultural Produce Export Development Authority
APMCs Agricultural Produce Market Committee
AR Assessment Reports
ATMA Agricultural Technology Management Agency
BBF Broad Based furrows
BSAPCC Bihar State Action Plan on Climate Change
CACP Commission for Agriculture Costs and Prices
CAGR Compounded Annual Growth Rate
CCA Climate Change Adaptation
CCIP Climate Change Innovation Programme
CPGD Climate Proong Growth and Development
DAC Department of Agriculture and Cooperation
DAM Dryland Agriculture Mission
DFID Department for International Development
DoA Department of Agriculture
DRR Disaster Risk Reduction
ET Evapo-Transpiration
FCI Food Corporation of India
FGD Focused Group Discussion
FPOs Farmer Producer Organisations
GDP Gross Domestic Product
HYV High Yielding Varieties
ICAR Indian Council of Agriculture Research
ICRISAT International Crop Research Institute for Semi-Arid Tropics
ICSD Intercooperation Social Development
IFFCO Indian Farmers Fertiliser Cooperative
IIMR Indian Institute of Miller Research
INM Integrated Nutrient Management
IPCC Intergovernmental Panel on Climate Change
IPM Integrated Pest Management
IVR Interactive Voice Responses
KCC Kisan Credit Card
KVKs Krishi Vigyan Kendras
Abbreviations and Acronyms
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Value Chain Assessment of Climate Resilient Crops in Bihar
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Value Chain Assessment of Climate Resilient Crops in Bihar
MCA Multi Criteria Analysis
MGNREGS Mahatma Gandhi National Rural Employment Guarantee Scheme
MMA Macro Management of Agriculture
MMT Million Metric Tonne
MPKV Mahatma Phule Krushi Vidyapeeth
MSAPCC Maharashtra State Action Plan for Climate Change
MSMEs Micro Small Medium Enterprises
MSP Minimum Support Prices
MT Million Tonnes
NAFED National Agricultural Cooperative Marketing Federation of India Ltd
NAIS National Agricultural Insurance Scheme
NAPCC National Action Plan on Climate Change
NAPCC National Adaptation Plan on Climate Change
NBFCs Non-Banking Financial Companies
NFSM National Food Security Mission
NICRA National Innovation on Climate Resilient Agriculture
NMSA National Mission on Sustainable Agriculture
NOP National Organic Program
NPOP National Programme for Organic Production
NSA Net Sown Area
NSDP National and State Domestic Product
PACS Primary Agricultural Credit Society
PC Producer Company
PMFBY Pradhan Mantri Fasal Bima Yojna
RH Relative Humidity
RKVY Rashtriya Krishi Vikas Yojna
RTE Ready To Eat
RTU Ready To Use
SAAPCC State Adaptation Action Plan on Climate Change
SAUs State Agriculture Universities
SEZs Special Export/Economic Zones
SRI System for Rice Intensication
TCA Transaction Cost Analysis
VCA Value Chains-based Approach
WET Water Efcient Technology
WS Water Stewardship
ZRS Zonal Research Station
Executive Summary
Climate-induced risks present signicant risks to Bihar's
planned trajectory of sustained, high agricultural growth and
steady farm productivity. Bihar's agriculture sector
witnessed a growth rate of 6.9%, while the economy
clocked 10.7% growth against a national average of 7% in 12016-17 . While the state government is bridging the rural-
urban divide by promoting higher agricultural growth,
vulnerability of the agriculture sector to climate change can
lead to signicant productivity losses. Factors that increase
the intrinsic vulnerability of Bihar's agricultural sector are:
(i)dominance (91%) of marginal holdings of less than a
hectare that have very limited access to institutional credit
and infrastructure (ii) a predominantly cereal-based farming
system. Each such holding is again fragmented in small
parcels, making investments non-viable and eroding the
adaptive capacity of these production units. Migration of
unskilled agricultural labourers to other sectors, as evident in
Bihar 's growing economy, can create st ructura l
unemployment challenges, further eroding the adaptive
capacities of rural households.
Action on Climate Today (ACT) supports the progressive
policies of the State government through technical
assistance and evaluating the constraints and opportunities
for mainstreaming climate resilient agriculture in Bihar, using
a Value Chains-based Analysis (VCA). VCA is an assessment
of different nodes and characteristics of the value chains from
producer to the nal consumer. It enables the identication of
potential interventions to make the livelihoods of (small and
marginal) primary producers, less vulnerable, to climate
induced uncertainties.
In an attempt to provide suitable policy alternatives for
safeguarding agricultural growth, governments have
promoted crop diversication strategies for resilience of
farming and natural resource systems. A clear majority of
farmers, who have diversied crop production into climate-
resilient crops, are small and marginal landowners and
resource-poor. Their production and post-production value
chains need to be understood and transformed, to realise an
egalitarian and sustained agricultural growth. Using a Multi
Criteria Analysis (MCA) tool designed by ACT, stakeholder
inputs, rice, maize and lentil were selected for an evaluation of
performance across four major parameters: production
base, income generation, socio economic and environmental
impact.
Our assessment is based on a robust combination of primary
eld surveys, extensive stakeholder consultation, market
analysis, a systematic secondary data review, and key
informant interviews in ve districts in Bihar (in 6-8 villages per 2district) . Insights and recommendations on constraints and
opportunities for the three crops are presented below:
Data CollectionReview & Analysis
1 2 3 4
Multi criteria DecisionAnalysis
for Crop Selection
StakeholderConsultation
Prioritized List ofClimate Resilient Cropsfor Value Chain Study
1
2
3
1 12th Economic Survey of Bihar2
Stakeholders- district ofcers, research institutions, input suppliers, farmers, traders, whole-sellers, processors, credit institutions, FPOs and insurance agencies.
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
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Maize
Signicance
Bihar is India's third largest producer of Maize, with recorded
production of 1.7MMT (2016-17). Rabi-sown maize, with higher
yields has been replacing winter wheat and paddy in Bihar.
Coupled with high import demand from South-East Asian
nations, access to export terminals in India's eastern coast, and
reduced yields from major maize growing states (Karnataka,
Andhra Pradesh and Maharashtra), maize from Bihar provides
an attractive, economic alternative for small holders. Bihar
today has an estimated INR 250 crore maize seed market (US$
38 million), which is all set to grow rapidly, given a strong
Compounded Annual Growth Rate (CAGR) for maize in the
state.
While maize is cultivated in all the 38 districts of the state in
varying proportions, the state's 'maize road' covers 11 districts,
including Muzaffarpur, East Champaran, Vaishali, Katihar,
Purnia, Samastipur, Begusarai, Khagaria, Bhagalpur, Araria and
Madhepura. This localisation of production offers the
opportunity to promote infrastructure investments at
economies of scale.
Climate Risks
Maize has emerged as the main alternative for winter paddy and
wheat in Bihar. However, maize production during the Rabi
season may become comparatively more vulnerable due to
increase in temperature, variable day and night temperatures
and higher uncertainties in rainfall. Sensitivity to frost, high
temperatures and water logging are harmful to maize.
Unseasonal rains and water logging for more than 3-4 days can
result in a yield loss of up to 50%. Uneven drying and
unseasonal rains are found to increase fungal contamination in
maize which exhibits a serious threat to human and animal
health. This can especially occur because of inadequate
infrastructure for storage. Therefore, an increase in rainfall
amount and intensity under the future climate would become a
major climate risk for Bihar as it will exacerbate the state's
current vulnerability to oods caused by high rainfall and
topographic conditions.
Value Chain Assessment of Climate Resilient Crops in Bihar
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Building from our analysis, we identify the immediate
opportunities that can achieve the triple-bottom line
benets (economic, social and climate/environmental) for
Bihar's maize farmers.
The biggest opportunity in the maize value chain, however,
lies in promoting local processing industries. Only 8-10% of
maize produced in the state is processed despite a robust
80-85% marketable surplus. Only a third of the demand for
maize in Bihar is driven by the livestock/poultry feed
industry, and a tenth by local consumption needs. The
remaining share hits the export markets in South-East Asia,
Nepal and Bangladesh. Unlike the top maize producers,
Andhra Pradesh and Karnataka area and production
expansion of Rabi maize in Bihar is not driven by industrial
demand.
Maize farmers (Rabi) in Bihar can garner only less than a
third of the consumers' rupee, while processors earn the
highest share in consumer's rupee among the marketing
actors. Direct selling and minimising middlemen in maize
value chains might not only result in fetching the farmer a
higher share in consumers' rupee but will also improve their
economic resilience to cope with climate change impacts.
Investments in maize processing units to fully absorb the
production can generate a ten-fold increase in direct
employment from current levels and US$ 350 million value
addition in Bihar's maize value chains annually. Currently,
33 operational units in Bihar have the capacity to process
only one-tenth of its annual production. The analysis
further indicates lucrative margins for processors and
therefore identies an incentive to expand the local
capacity in processing. This will also provide 3,000 direct
employment opportunities and will address economic
vulnerabilities of farmers to climate change (2014).
The price across mandis uctuates based on moisture
content in grains, which is a function of quality of storage.
The storage facilities for Maize are vastly inadequate, given
the exponential rate of growth of the crop. Storage is done
only at the household or at the processor level. A higher
proportion of marginal farmers also mean very low storage
potential (< 2 qtls/ farm) at farm level in Bihar. The localized
nature of Bihar's rabi maize production, along the Maize
Road, provides an opportunity to co-locate processing and
storage infrastructure and tap into the economies of scale.
Better storage facilities will also reduce the vulnerability of
the crop towards fungal contamination, induced by climate
change.
In the absence of adequate infrastructure, processors from
outside the state pocket receive more than double the
margin of other stakeholders (18%) in Bihar's maize value
chain. There are also huge losses reported during the
handling of the commodity from farm to processing (up to
9.33% of total losses), thereby impacting the margins
incurred by the producers, traders and wholesalers.
Value Chain Analysis
Our analysis suggests that a three-pronged approach for
pre-production and production stages in maize is needed
for Bihar which includes; (a) input cost-reduction strategies
(b) use-efciency gains, and (c) c l imate-proof
technologies.
Our study indicates that maize-cultivating farmers in Bihar
pay, on an average, nine times more for irrigating their
crops, compared to their counterparts in other major
producing states. Bihar uses double the recommended
quantity of fertilizers to produce the same output of Andhra
Pradesh, the top-performing state, which reduces the
protability for marginal farmers, who constitute over 90%
of adopters. In the table below, we summarise the key
challenges in the production and marketing segments of
the maize value chain in Bihar.
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Pre-production and production
Support System • Limited involvement of Farmer producer Organisations (FPOs) and Primary Agricultural
Credit Society (PACS) in the aggregation of produce and overall value chain,
consequently leading to high market fragmentation.
• Though Bihar has a network of 39 Krishi Vigyan Kendras (KVKs), there is limited promotion
of climate resilient agriculture.
• Absence of APMCs have left an institutional vacuum that have led to reduced marketing
efciencies and lower producers' shares in consumers' rupee.
Infrastructure • Only 7.53% of the total agricultural area is under micro irrigation in Bihar, resulting in
reduced water use efciency and low yields.
• Frosts cause 30% losses, and additional cold waves cause 70 to 100% losses, as
irrigation facilities are not adequate to deal with this.
• Limited physical and transport infrastructure for storage and processing.
Inputs • Private players dominate the input supply markets. The seeds supply market is
dominated by Dupont and Monsanto, and 80% of the total seeds disbursed are hybrid.
• KVKs in the Maize Road districts could play a pro-active role in frontline technology
demonstration of input cost reduction and climate resilient maize varieties.
Post-harvest and value addition
Processing • Over 80% of produce is sold outside the state for processing, and processed products
like feed and fodder are brought to local markets again.
• Absence of adequate market infrastructure for storage and drying in market yards has
increased the losses (10-15%) for the state's rabi maize farmers due to variable moisture
levels (and fungal infections).
Market Access • Processing and consumption takes place out of state, thereby impeding producers'
access to fair and transparent markets. The processors appropriate about 40% share in
consumers' rupee.
• High post-harvest and storage losses, about 10-15% (highest) have been reported.
Marketing channels, in the absence of market infrastructure, information and institutions,
are often difcult and inherently disadvantageous for producers.
Pricing • Farmers are unable to realize Minimum Support Price (MSP) declared by governments;
marginal farmers spend considerable amounts in searching and bargaining processes.
Processed Maize (INR)/MT
Maize Gluten Alt. protein source (60%) 42,000
Maize Germs Alt. energy source with 40% oil 33,000
Maize Grits Alt. energy for boilers 15,000
Maize Fibre For cattle feed 11,000
Maize Oil cake Alt. energy source in cattle feed 22,000
Maize Oil Substitute for soya oil 48,500
Maize Doc Alt. protein for livestock/poultry 20,000
Maize Gluten Feed Alt. protein for livestock/poultry 13,000
Per Quintal (100 kg) Margins- Maize
Producer 182.10
Primary Trader 141.15
Wholesaler 81.54
Processor 442.89
Dealer 260.14
Retailer 337.98
Actor Margin (Rs)
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Rice
Signicance
Autumn rice (Bhadai), winter rice (Agahani), and summer rice
(Garma) are three different varieties of rice grown in Bihar. Rice
is one of the main crop of Bihar, but its productivity is very poor.
More than 60% rice area is concentrated in Bihar in low
productivity zone and this zone contributes to more than 50% of
rice production of the state.
Area coverage under rice with high yielding varieties is about
65% and irrigation facility is available for about 40% rice area in
the state. The low productivity of rice has consequential effects
on low income and high poverty of its population, thereby
contributing to increased economic vulnerability towards
climate change impacts.
Climate Risks
Bihar receives high annual rainfall (>1000 mm) under the
present climate. More than 80% of the annual total rainfall is
received during the monsoon season (June-September)
benetting the Kharif rice. Climate variability analysis of Bihar
using a 30-model ensemble by CGIAR indicates an increasing
trend in both minimum and maximum temperatures across
Bihar, with the rate of increase in minimum temperature being
signicant and higher than the maximum temperature at almost
all stations. Uncertainty and variance in rainfall (more dry spell
days in the growing season) are expected to impact the pest-
pathogen build up and reduce rice yields in addition to
deleteriously impacting the critical tillering/panicle emergence,
Value Chain Assessment of Climate Resilient Crops in Bihar
Per Quintal Margins- Rice
Producer 361.46
Primary Trader 4.15
Wholesaler 74.27
Processor 378.16
Retailer 119.63
Actor Margin (Rs)
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
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grain-lling and ripening stages. Focus group discussions
with farmers indicate a need to make climate information
available, to accommodate an increase in rainfall amount
and intensity under the future climate.
Value Chain Analysis
There is a clear stagnation in productivity of rice in Bihar.
Approximately two-third of Bihar's rice-growing area
(North-Eastern Bihar) responsible for half of its annual
production, falls in the low-yielding category. Analysis of
the marginal rate of change in yield per unit area using
government data, indicate only a modest rate of change in
productivity between 1992-93 and 2015-16. Pre-
production/production constraints include lower seed
replacement rates (<40%) for rice and lower input
consumption patterns. Irrigation continues to be a critical
constraint that increases the cost of cultivation in crops,
across the sector. It disproportionately impacts the
protability of small and marginal farmers with high factor
costs. The analysis indicates an extreme reluctance to
invest in plant protection chemicals (herbicides and
pesticides) before the onset of pests/disease and in
irrigation during critical growth stages of the crop due to
ex t reme ly low marg ins a t wh ich the f a rmers
operate in Bihar.
Garma (Boro) rice cultivation in lowland pockets during the
months of Nov-May, using residual moisture after Kharif
harvest, is yielding higher returns to the farmer. The Garma
paddy belt is spread in low lying belts of north-eastern
districts and north-western districts viz. East and West
Champaran, where water logging beyond October renders
it unsuitable for maize cultivation. Appropriate changes in
the cropping pattern can be planned for incorporating
Garma rice in low-lying districts where maize cultivation is
impossible. The yields accrued by tapping into the residual
moisture content of the soil in these low-lying belts can
increase the economic resilience of farmers towards
climate change and can also help improve the soil quality
through the change in cropping pattern.
Highest margins in Kharif rice are earned by processors,
suggesting opportunities for upward mobility and
untapped gains along the rice value chain in Bihar.
Aggregation, bulk storage and processing, as the
stakeholder analysis suggests, have suffered from the lack
of infrastructure. More than one-fourth of produce is
retained for personal consumption, because of which
margins are negative. Small traders/aggregators run
volume-based business models, with very low positive
margins. The higher margins associated with the marketing
and value addition stages are also because of the higher
risks borne by these actors. Despite government efforts to
ensure a fair deal for its farmers by announcing higher
MSPs, most farmers are unable to sell rice at the MSP as
their inferior-quality produce is often rejected by
government agencies such as Food Corporation of India 3(FCI) and so, they are forced to sell in local mandis . On
average, 3-4 local small traders operate at the village level,
trading roughly 7.5-15 MT rice each. There are also 1-2
large traders as well as PACS that trade up to 40-70 and 50-
60 MT of rice annually. A selection of important constraints
along the pre-production, production and marketing
dimensions of the value chain is given below:
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Pre-production and production stages
Support System • Institutional constraints in enhancing production, processing and marketing
• Negligible penetration of formal, cooperative credit (1%) in the input market
• Slow adoption of mechanisation in the face of high capital requirements with limited
access to credit/delay on subsidies
Infrastructure • Market infrastructure for drying, processing and storage is absent
• Per-capita consumption of power is the lowest, suggesting its poor quality
• Adequate information on weather and markets
Inputs • Restrictions in seed subsidies have limited availability of High Yielding Varieties (HYV)
seeds
• Shortage of labour for rice transplanting and input credit
• Low adoption rates of plant protection chemicals (<300g/hectare of NSA).
Processing and Value addition
Processing/Marketing • Farmers and VC actors lack awareness on quality standards
Market Access • Market intermediaries have restricted the sharing and access to information
4Infrastructure • Lack of modern warehousing in market yards
Pricing • Information on MSP is not available to farmers
• Procurement through FCI is less than 15% of the total production
3Local markets
4ICSD Field Report
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Lentil
Signicance
Bihar is the third largest producer of lentil in India, with a
reported production of 140 thousand MT in 2014-15. The
average productivity of pulses in Bihar, ranges from 820 to 897
kg/ha though the area has shown a slow and steady decline.
Lentil is the only crop which has performed well in Bihar
whereas area and production of most of the major pulses have
declined. Lentil is cultivated in all 38 districts of Bihar, though
bulk of the production is from six districts - Patna, Nalanda,
Bhojpur, Aurangabad, East Champaran and West Champaran -
that accounts for 51% of the production. The national status
paper on pulses by Government of India identies lentil, among
all leguminous crops cultivated, as the crop providing the
highest natural nitrogen xation (in the range of 60-147 kg/ha
besides 30-35 quintals of crop residues) in Indian conditions.
Climate Risk
Bihar's major climate risks for crop production will be heat stress
due to increasing minimum temperatures in the rabi (winter)
season and high minimum and maximum temperatures in the
spring season, and intense rainfall and longer dry spells in the
kharif (monsoon) season. Climate-induced agro-climatic
conditions favour the build-up of insects and pests and
pathogens. Extremely high temperature at the time of fruit
setting to pod development stages may reduce the productivity
due to less fruit setting, non-healthy development of grain and
forced maturity of grain. The crops are also susceptible to water
logging and inundation.
Value Chain Analysis
Lentils occupy marginal lands and protect and enhance
ecosystem services. However, the area under legumes in Bihar
has declined to an extent that the cropping systems are unable
to deliver the benets leguminous crops such as lentils can
deliver. These benets include protection of soil and water
resources, enhanced agro-biodiversity, adaptation to climate
change, reduced GHG emissions through sequestration and
fodder substitution. Lower levels of input application and
irrigation have constrained the production.
Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
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Producers reported farm gate prices of roughly INR 3,025
per quintal (MSP: Rs. 3,325/Quintal). It was observed that
both primary traders and retailers are involved in lentil
aggregation. Since lentil farming is mostly subsistence
oriented, marketable surplus is recorded at only 10% of
total production. Producers often use this surplus as credit
with grocery retailers. This trade with grocery retailers
results in low transparency in price discovery, where quality
is not given nancial merit.
Primary traders either source produce directly from the
producer or from grocery retailers. The market is highly
fragmented, and quantity sourced by traders from farmers
is little/negligible since few large-scale farmers supply to
primary traders. Both wholesalers and primary traders
don't therefore enjoy high margins. Processers are based
out of state and serve the crucial role of milling, which is
necessary to protect the grains from weevils. Higher retail
margins also indicate a correspondingly higher processing
margin. Retailers sell aggregated produce, either self-
collected or from out of state. A list of constraints and
challenges as identied in the stakeholder consultation and
eld surveys is shared below:
13
Transactions Costsand Risk Analysis
Maize
For traders and wholesalers, screening and monitoring
costs are high, while search costs are high for producers.
Market access is the key underlying issue, with limited
access to aggregated storage and sale and a general lack
of transparency. Consumption of the bulk of maize
produced is not in-state, and this further complicates
marketing.
Rice
Producers bear the most screening and bargaining costs.
Traders, on the other hand, have a good understanding of
the market setup and have a well-established network with
processors. Their enforcement costs, as result of regular
bribe payments, is the biggest expense. Rice processing,
unlike maize, is available in-state. This allows big
traders/processors to limit a signicant amount of
transaction costs. Retailers face high bargaining costs due
to a lack of rice-certication mechanisms in place that allow
them to sell based on quality.
Lentils
Producers face search and screening costs, with limited
avenues to market information. The lack of aggregation
We further undertook a detailed Transaction Cost Analysis
(TCA) approach for detailed diagnostic investigation of
individual relationships within a value chain and to explore
solutions and strategies for improving efciencies. We
present the results crop-wise but also include a generic
solution set that targets capacity and knowledge
constraints among the actors. For the analysis, we divided
the major categories of marketing costs among actors
using stakeholder data and eld surveys. The major risks
for each actor were also isolated, which will yield important
insights into how climate variability will impact costs and
risks associated with the value chains.
Our ndings suggest that the biggest 'return on
investments' for producers in the maize, rice and lentil value
chains can be realised from improving market information
and awareness on quality-grade/standards for crops.
Extension trainings targeting these specic capacity
constraints can help farmers improve the margins and
increase the producers' share in consumers' rupee.
Interventions targeting improved access to market
information and efcient price discovery processes
through institutional or technology reforms have the
potential to yield rich dividends. Improving the quality of
outputs, and aggregation or storage facilities are found to
improve the margins across all categories of actors and
hence lead to a better marketing efciency. This also
contributes to increased economic resilience of farmers
towards climate change.
90
80
70
60
50
40
30
20
10
0Producer %
Trader %
Wholesaler/Processor %
Retailer %
Maiz
e
Se
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itori
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ain
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on
itori
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Maize Rice Lentils
Transaction Cost Spread in Value Chains - Bihar
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Pre-production and production
Support System • Breeding strategy (1998-2012) focuses only on pest and disease tolerance
• No crop specic credit schemes, farmers rely on non-institutional credit
Infrastructure • Inadequate market infrastructure and lack of processing infrastructure
• Unaffordable irrigation services
Inputs • Availability of improved seeds is very low; farmers depend on stored seeds
• Farmers still use old seed varieties (such as Aruni, Panthmasoor 4 and Pusa)
Processing, Value addition and Marketing
Processing/Marketing • Large scale mills are not present; inefcient milling practices
Market Access • High transaction costs lead to producers accessing village level traders only
• No real-time price discovery and dissemination of market information
• Dependency on international market due to high import
Infrastructure • Inadequate market infrastructure in storage and processing
• Farmers unaware of quality standards and depend on village-level traders
Pricing • Farm sales are mostly below the MSP price of INR 3400 (2016-17)
• Procurement by government agencies is very limited
• Lack of awareness on quality grade-linked pricing and access to market info
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opportunities at the producer level is to blame. Traders are
fairly well-connected to processors, thereby reducing their
search costs. However, given the informal nature of
contracts, their enforcmement costs are comparitively
high. For processors, costs include those arising due to the
lack of legal transactions, as welll as auditing and bribery.
Retailers face high bargaining costs, both at the seller and
buyer end.
Key risks for each of the actors were assesed based on a
set of observed risk points. For producers across the three
crops, the main high risk point is climate vulnerability. For
traders, damage and quality of the commodity is a medium
risk area. Processers, across the spectrum, face quality
and payments related risks; legal issues and infrastructure
bottlenecks are also concerns.
Opportunities andWay Forward
De-risking the value chains for maize, rice and lentil, as the
stakeholder analysis suggests, would yield maximum
benets when the investments target aggregation and
quality improvement of outputs. In the wake of climate
variability, this is also an area that is expected to be most
impacted.
Market infrastructure targeting drying, storage, grading
and aggregation coupled with awareness/extension
interventions can build resilience and reduce the
transaction costs for most of the actors in the value chains.
In this section, we share crop-wise insights on the
opportunities and way forward from the value chain
analyses. In addition, we also share our understanding
from stakeholder analyses on systemic bottlenecks that
reduce the value chain and marketing efciency in general.
Maize
Expanding rabi maize can lead to increased growth and
higher dividends for Bihar's farmers.
Bihar's rabi maize outputs are double the kharif outputs and
has the potential for cornering larger dividends. An
institutional vacuum and decient infrastructure has
enabled the middlemen and traders to game the market
and deny the producers their rightful margins. Proximity to
South-East Asian markets, comparative advantages over
competing states (Andhra Pradesh and Karnataka) in terms
of water availability, offer opportunities for targeting export
markets. Improving infrastructure requirements in storage,
drying and grading can fetch higher margins for farmers
along the value chain when coupled with policies that
enforce sale and purchase of produce at MSP levels at the
minimum. Improved storage infrastructure will prevent the
fungal contamination and can result in reduced health and
economic vulnerabilities. Government policies targeting
improved access to HYV seeds through interventions such
as input subsidies, facilitation of agri-business centres
operating on public-private partnerships, expansion of
seed villages by sharing HYV foundation seeds from SAUs
can improve production levels. Similarly, improved access
to climate resilient varieties of seeds will enable farmers to
deal with risks of increased temperature and limited water
availability. Micro irrigation, currently covers an area less
than 10-15% of the state's net irrigated area. Adopting Micro
irrigation in maize has the potential to further increase
yields by an additional 25-30%. Training plans for maize
targeting critical irrigation, plant protection, drying, grading
and quality improvements are expected to yield maximum
returns. These returns can help reducing the economic
vulnerability of the farmers towards climate change and
contribute towards replenishing the ground water table and
improving soil nutrient content.
Rice
Garma/Boro Rice offers the potential for farmers to
improve stagnant production levels in Bihar.
Garma or Boro rice has demonstrated its ability to deliver
higher productivity for farmers in areas where Maize is
unviable, because of higher water tables. While the area
and production of Kharif rice has remained stagnant,
Garma rice has grown both in area and production levels.
Improvement in seed replacement rates (30 to 40%) along
with a focus on short duration Garma rice varieties can
signicantly improve the margins to farmers, after
compensating for higher household consumption and
withholding in the crop. This can also enhance the
economic resilience of farmers towards climate change by
enabling them to save for the bad times and by increasing
their capacities to invest in climate resilient inputs. This also
serves as a channel for maintaining the soil health through
changing cropping patterns. Coupling management
innovations along with technology, including System for
Rice Intensication (SRI) has the potential to further
improve productivity of Garma rice. Government policies
can potentially target improved yields from Garma rice to
offset the reduced margins from Kharif rice by way of
improved yields (access to HYV seeds), reduced costs
(tillage, irrigation) and low HP-mechanization strategies.
Lentils
Upgrading the marginal production prole of lentil is
key to improving the pulses output in Bihar.
Lentil has shown a consistent growth pattern in Bihar's
agricultural scenario. The production of the crop is now
plagued by constraints in availability of inputs (improved
seeds, right amount of fertilizers and irrigation). Production
levels are further constrained by absence of critical
irrigation, lack of preventive application of pesticides and
Rhizobium treatment that could potentially improve yields,
as the farmer attempts to control costs in marginal
environments. Absence of infrastructure and institutions to
drive aggregation, storage and processing of lentil has led
to higher transaction costs to farmers in price discovery. In
nearly two decades, breeding strategies of state
agricultural research institutions have focused on selection
of pest and disease tolerance lines of lentil in Bihar.
Improving cultivars based on climate risk prole of Bihar
should be prioritized. Lentil offers the possibility of
designing a unique, subsidy policy for farmers based on
ecosystem services (N-xation and inorganic N-fertilizer
avoidance) for the rst time in India, thereby improving the
soil health.
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Input Availability ** * **
Climate *** *** ***
Credit ** * *
Labour ** *** *
Transport ** * *
Market Information * * *
Market volatility *** ** *
Climate * * *
Theft * * *
Damage/Wastage ** *** **
Transportation * * *
Payments ** *** **
Market volatility ** ** *
Climate * * *
Quality *** *** ***
Infrastructure ** *** ***
Transportation ** ** *
Policies and Legalities ** *** **
Payments *** *** **
Market Volatility ** * *
Maize Paddy
Risk Rating
LentilsRisk PointActors
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A comprehensive eld survey combined with a robust desk
review and stakeholder analysis has provided us deeper
insights into systemic bottlenecks for value chains that
operate in the State. In this section we attempt to share the
most important ndings and insights from the eld, which
we believe, can make the biggest impacts in safeguarding
Bihar's agricultural growth.
Resilient institutions improve market efciencies and
reduce transaction costs across value chains
The abolishment of APMCs in Bihar (2006) was intended to
favour small and marginal farmers and help them realize
higher marketing margins. The institutional vacuum in the
markets as a result, has led to: the rise of private markets
(mandis) involving local traders resulting in asymmetry in
price-discovery and higher transaction costs; absence of
adequate market infrastructure (roads, market yards,
drying-storage-grading and processing facilities);
inequitable marketing margins and revenue loss to the
exchequer by way of leakage in processing to
neighbouring states. Climate risks multiply for farmers by
affecting the quantity (marketable surplus) and the quality
of marketed surplus.
Suggestions that can help plug institutional gaps in
marketing model can include:
Ÿ Reforming rural marketing institutions to improve both
backward linkage (agri-business centres built on
public-private and micro-nance models) and forward
linkage (Farmer Producer Companies) to de-risk
farmers
Ÿ Establish block level, single-window Agri-Business
Centres (ABCs). ABCs could be established to increase
access to low-cost credit (promoted by revolving funds
and joint-liability mechanisms), HYV seeds (partially
subsidised by govt and private actors), crop protection
chemicals (weedicides and pesticides); low-cost,
efcient technologies (Slow Release Fertilizers,
machinery), real-time information (weather-market);
knowledge (paid extension services/certication
systems for QC - grading) and risk nancing (crop
insurance, government subsidies).
Ÿ Enhancing the role of KVKs in capacity building and
technology transfer along crop value chains, focusing
on quality standards, processing and value addition
and uptake of crop produces at MSPs through public
channels and PACS with aggregation, storage and
drying facilities.
Ÿ Processing can be promoted through nancing and
Micro-small- medium enterprises (MSMEs). These
MSMEs can be linked to FPOs or farmer collectives
through formal contracts to facilitate backward linkages
at the same time MSMEs can be supported in market
functions for product development, branding, and
marketing by the project in the initial years. Such initiatives
will eliminate overlapping functionaries from value chain
and improve the value proposition.
Ÿ Promotion of credit lines through NBFCs (Non-Banking
Financial Companies) to support inclusive rural
economic growth. NBFCs support innovative nancial
services to MSMEs that can promote enterprises in the
upper end of value chains (processing, packaging and
value addition).
Infrastructure investment is critical for the
sustenance of agricultural growth trajectory
Ÿ Rural markets in Bihar lack basic facilities including
pucca roads, market yards, drying-storage spaces, etc.
Value addition in agriculture is the key to sustained
economic growth in Bihar. Though Bihar is on the path
of achieving full coverage in rural electrication,
government s ta t is t ics show that per-capi ta
consumption of electricity in Bihar is 76% below the
national average, suggesting opportunities for
Renewable Energy-based marketing infrastructure in
rural Bihar. The lack of power has pushed farmers
toward adoption of diesel-powered pumps that have
contributed to inated irrigation costs, as most marginal
farmers end up as “water buyers” in the groundwater
market. Mechanisation targeting low-HP machinery can
help women and labourers move up the value chain and
support processing or value addition. Suggestions for
infrastructure improvement include:
Ÿ Integration of Renewable Energy (off-grid and grid
connected) systems can improve the per-capita power
consumption and capacity utilization of agricultural
processing infrastructure in Bihar. Every revenue
subdivision in Bihar has been planned with 132/33 KV
transmission lines under the state plan, which will take
care of power evacuation from renewable energy
projects. Grid connected solar power projects powering
rural marketing infrastructure (community dryers, cold
storage etc.) are hence, viable.
Ÿ Investing in solar pumps for irrigation can improve the
prot margins for producers. A maize farmer in Bihar,
according to Government of India statistics, currently
shoulders approximately nine-times the cost of
irrigating a plot than his peers in Andhra Pradesh or
Karnataka, which has a sizeable dryland. Farmers can
potentially boost their prot margins by 30% if solar
pumping is adopted. Solar pumps have shown to be
more effective with 40% more water yields when
compared to electric pumps. The Government of Bihar
could help farmers achieve additional co-benets by
purchase of surplus solar power from farmers (1.5-3%
Renewable Purchase Obligation, 2015). Power Purchase
Agreements could be executed with Solar Farmer
Cooperatives (Jyotigram model in Gujarat, Solar farmer
model in Karnataka and Punjab) are examples.
Ÿ Investments in drying and storage facilities at a cluster
level can help farmers and value chain players improve
their margins, due to improved quality of produce. The
TCA indicates that bulk of the actors lose a considerable
margin by way of storage losses and inferior prices
attributed to quality of produce. Marginal farmers in the
value chains do not have the capacity to store bulk of
the produce in their homesteads and transfer the risks
to agricultural traders and other value chain actors, who
appropriate a higher share of the consumers' rupee as a
reward to the higher amount of risks borne.
Ÿ Bihar loses out to neighbouring states in value addition
and employment generation as bulk of the farm
produce gets processed outside the state and gets sold
in the state at higher rates. Processors as a segment
earn the highest share of prot margins and consumers'
rupee in Bihar for the crops studied. With stable
agricultural policies and a roadmap for development in
place, Bihar should pitch for private sector investments
in agricultural processing. Agricultural SEZs (Special
Export/Economic Zones) and could be fostered (maize
road comprising 11 high producing districts for rabi
maize is an example) where investments in processing
and value addition can be concentrated.
Ÿ Promotion of warehouse receipt nancing schemes for
development of market infrastructure: Warehouse
receipt nance schemes can solve the issue of access to
credit by facilitating pledged lending as an opportunity for
taking advantages of market variations. However, it needs
to be linked with national and international markets through
spot exchanges and future markets to maximize benets
from warehouse receipt nance. This can minimize farmers'
risk by providing alternate marketing options and hedging
opportunities.
Information is key to increasing producers' share in
consumers' rupee
There is no competitive price discovery mechanism in
private local mandis, where the trader assumes the larger
role of credit supplier, information agent and buyer for small
and marginal farmers with very low bargaining power.
Access to Market information, Technology, Government
schemes and Agromet advisories through mobile
platforms such as SMS or Automated Voice Messages and
Interactive Voice Responses (IVR), in partnership with
telecom operators can improve price discovery and risk-
taking ability of marginal farmers. Private sector models
integrating IT-enabled services, such as e-Chowpal that
incorporate aggregate transportation services can prove to
be game changers. Producers spend the highest share of
marketing costs in price discovery, whereas other actors
spend higher share on quality and value addition. In the
absence of appropriate storage (and market) infrastructure
at ground level, climate variability (characterised by
unseasonal rains and extreme events) could hit the sector
hard.
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
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1.1. Brief about ACT
Climate change is a global phenomenon affecting all
sectors of economic activity. Poor people are highly
vulnerable to the impacts of climate change. The impacts of
climate change are severe in South Asia and in coming
years, are likely to become more pronounced. As per
Intergovernmental Panel on Climate Change (IPCC), by
2050 the average surface temperatures are likely to
increase by 2-4 degree celcius while the warmest daily
maximum temperatures are projected to increase by 4-7 5degree celcius . Rainfall, on which agriculture is dependent
in the region, is going to suffer as monsoon is going to be
more erratic, with some areas receiving more than they do
now and others suffering more frequent and serious
droughts. Population projections for this region indicate
that by 2050, the population is likely to increase by 0.36
percent reaching to approximately 2.3 billion. 1.6 to 2.2
billion. Agriculture which is the mainstay of the region is
likely to be further affected with rapid economic growth and
urbanization, thereby bringing sustainable change is a
great challenge for this region.
ACT (Action on Climate Today) is working to reduce the
effects of climate change in South Asia. The initiative is
funded by the UK Department for International
Development (DFID) and managed by Oxford Policy
Management. The programme provides technical
assistance to mainstream climate change in policies, plans
and budgets. It has been working in Bihar since late 2014.
1.2. Background to the study
6In 2016, ACT instituted a study to identify potential climate
resilient crops in Bihar. The study, carried out by
Intercooperation Social Development India (ICSD),
analyzed the impact of climate change on crops grown in
different agro climatic zones of the state and identied
Maize, Paddy and Lentil as the potential climate resilient
crops for the state of Bihar. The current study seeks to build
on the earlier study and explore the full spectrum of
opportunities in the identied climate resilient crops in
Bihar using a Value Chain Approach.
1.3. Value chain approach for
Climate Resilience
While production of climate resilient crops can help farmers
adapt to the changing climate, for addressing climate
change actions beyond production, it is important to study
the entire value through a climate change lens. The Value
Chain Approach, analyses the value addditon at each level
as the commodity moves from the producer to the
consumer. The current study proposes to identify
constraints and opportunities in the entire commoditiy
value chain through a climate change lens.
2.1. Objective of the study
The objective of the study is to conduct a comprehensive
Value Chain Analysis (VCA) of maize, paddy and lentil and
based on the VCA ndings, suggest strategies for
improvement and for designing a pilot project on climate
resilient agricultural value chains.
2.2. Methodology
The methodology for the study comprised three stages-
preparation stage, eld study stage and data analysis and
report collation stage. The detailed steps under each stage
are mentioned in Figure -1.
The study was conducted in two parts i.e.
Ÿ to identify the issues in crop production, and
Ÿ to study constraints and opportunities in the entire value
chain.
Details of the commodity mapping based on Multi Criteria
Analysis (MCA) are presented in Annexure I.
2.3. Secondary Reveiw
A desk review of existing material on climate resilient value
chains was undertaken as the rst step in the study.
Section 1:Introduction
Section 2:Objectives and Methodology
2.4. Data Collection Tools
Structured questionnaires and Focus Group Discussion
(FGD) Checklists were designed for interviews with the
following set of value chain actors and stakeholders:
Ÿ Farmers
Ÿ Input suppliers
Ÿ Local traders
Ÿ Wholesaler
Ÿ Processors
Ÿ Research institutes
Ÿ Government ofcials
Ÿ Farmer Producer Organisations (FPOs)
The data collection tools were eld tested and nalized
prior to eld data collection.
2.5. Site selection criteria and
sample size
The sample selection was done in three stages:
Ÿ District selection
Ÿ Village and habitation selection
Ÿ Farmer selection
Figure 1: Methodology
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
5 IPCC Fifth Assessment Report
6Selection of climate resilient crop for value chain study in state of Bihar, November 2016, Action on Climate Today
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2.5.1 District Selection
The district selection was based on the following steps:
Ÿ Steps-1: Districts where all three climate resilient
crops– maize, paddy have major area coverage
under cultivation were selected
Ÿ Step-2: From the districts selectedin Step-1,
districts having higher productivity of the three
crops were short listed
Ÿ Step -3: From the list of districts shortlisted in step -
2, districts having different agro-climatic zones for
the three crops were selected
The list of the shortlisted districts was presented to the
agriculture department ofcials in a workshop at Patna
and based on their inputs as also interaction with
Director, BAMETI, four districts, namely Purnia,
Bhagalpur, Madhubani and Samastipur were selected
for the study.
2.5.2. Villages selection
In each district, six to eight villages were selected for
the primary survey. Two types of villages were selected
in each district:
Ÿ villages where farmers had adopted improved
varieties provided by the research institute and
Ÿ villages where farmers used their own seed (mostly
traditional seeds).
Information shared by research institutions and
agriculture department formed the basis for village
selection.
2.5.3. Farmer Selection
In each village, a mimunim of ve farmers were
ramdomly selected.
2.5.4. Other Stakeholders
In addition to farmers, data was also collected from
other value chain actors like policy makers, research
instutions, service providers, input suppliers,
aggregators, traders, wholesalers, credit institutions
and insurance agencies.
2.5.5. Final Sample
During the survey, information was collected from the
following stakeholders:
Ÿ No. of individual farmers: 45
Ÿ No. of farmers in FGD: Men 115 and Women: 10
Ÿ No. of input suppliers: 12
Ÿ No. of agriculture ofcers: 30
Ÿ No. of primary traders: 7
Ÿ No of secondary traders: 8
Ÿ No. of researchers: 18
Ÿ No. of processors: 8
Ÿ No off farm machinery suppliers:2
2.5.6. Data Analysis and Report
Preparation
The quantitative data collected from the eld was
analysed in excel formats while qualitative data was
analysed using the VCA framework and associated
framework like TCA.
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Section 3:Climate Context of the State
3.1. Bihar State Prole
Geography
Bihar is a land-locked state in tropical to sub-tropical region
with a geographical area of 94,163 sq. km. It is located
between 24°20'10" and 27°31'15"N latitude and 82°19'50”
and 88°17'40"E longitude in the eastern part of the country 7and situated at about 52.73 m height above sea level .
Demography
8As per Census 2011 , Bihar has a population of 10.41
crores with 89 percent of the population being rural. The
state has a rural population density of more than 600/km2,
with higher man-land ratio, indicating the low per capita
availability of land.
Agriculture sector in Bihar
Nearly 77 percent of the State's population is generating 924.84 percent of State Domestic Product in agriculture .
Farm holdings are small and scattered. There are about 101.61 crore farm holdings of which 91 percent is marginal .
The area under cultivation as a proportion of the total area is
as high as 57 percent, as compared to only 47 percent for 11the whole country .
While the state has abundant water resources, the spatially
and temporal distribution of this valuable resource is
uneven across the state. There is also a high degree of
dependence on groundwater in the State, and this can
have serious consequences in the future. The ultimate
irrigation potential in the state is estimated to be 117.54 lakh
hectares, including major, medium and minor irrigation
schemes. This is 22.38 percent of the net sown area. The
created potential of 68.90 lakh hectares is 58.6 percent of
the ultimate potential. The utilised potential of 56.66 lakh
hectares, which is 82.2 percent of created potential and 1248.2 percent of ultimate potential .
13Climate
The state has a tropical monsoon climate receiving an 14average annual rainfall of 995 mm . The commencement of
monsoon begins as early as the last week of May or as the
rst or second week of June. The rainy season begins in
June. The months with the heaviest rainfall are July and
August. The rains are the gifts of the southwest monsoon.
There are two distinct areas in Bihar where rainfall exceeds
1800 mm. These lie on northern and north-western wings of
the State. The southwest monsoon normally withdraws
from Bihar in the rst week of October. The maximum
frequency of the tropical cyclones in Bihar is during
September-November especially during the asterism
called hathiya. These cyclones are essential for the
maturing of paddy, and are required for the moistening of
the soil for the cultivation of Rabi crops.
15Agro Climatic Zones in Bihar
In Bihar, based on soil characteristics, rainfall, temperature
and terrain, there are three main agro-climatic zones. Agro
climatic zone I and II are located north of the river Ganges
whereas the Zone III (A and B) is located south of the river
Ganges. Zone I is situated in the north-western part of the
state whereas zone II is located in the north-eastern part.
Zones I and II are ood prone whereas zone III is drought
prone.
7BIHAR STATE PROFIE 2015-16, MICRO, SMALL & MEDIUM ENTERPRISES DEVELOPMENT INSTITUTE, Ministry of Micro, Small and Medium Enterprises, Government of India
http://dcmsme.gov.in/dips/state_wise_profile_16-17/Bihar%20-%20State%20Profile.pdf8https://www.census2011.co.in/census/state/bihar.html
9Department of Agriculture, Governemnt of Bihar; www.krishi.bih.nic.in
10Report of the Task Force on Agriculture, Governemt of Bihar; http://niti.gov.in/writereaddata/files/Bihar.pdf
11Economic Survey of Bihar, http://finance.bih.nic.in/Reports/Economic-Survey-2017-EN.pdf; Executive Summary, pg xx
12Economic Survey of Bihar; http://finance.bih.nic.in/Reports/Economic-Survey-2017-EN.pdf pg- 89-91;
13Bihar State Action Plan on Climate Change, Building Resilience through Development, 2015, Governemnt of Bihar:
http://www.moef.gov.in/sites/default/files/Bihar- State%20Action%20Plan%20on%20Climate%20Change%20%282%29.pdf; Climate Profile of the state14
Economic Survey of Bihar; http://finance.bih.nic.in/Reports/Economic-Survey-2017-EN.pdf pg- 89-91; 15
Bihar State Action Plan on Climate Change, Building Resilience through Development, 2015, Governemnt of Bihar:
http://www.moef.gov.in/sites/default/files/Bihar- State%20Action%20Plan%20on%20Climate%20Change%20%282%29.pdf; pg 4-5
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
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Table 1 : Agro Climatic Zones in Bihar
Agro climatic Zone
Districts Area 000ha Average rainfall Soil
Soil and Topography
Crops
Zone -I North West Alluvial Plains
Bettiah, Motihari, Gopalganj, Siwan, Vaishali, Seohar, Muzaffarpur, Samastipur, Sitamarhi, Madhubani, Darbhanga, West & East Champaran
Net Cultivated – 2281; Gross Cultivated -- 3260
1234.7 Medium acidic, heavy textured, sandy loam to clayed, ood prone. (Large area remains under water called Chaur, Maun & Tal lands)z
Rice, Wheat, Maize, Arhar; Horticultural crops including Litchi, Mango, Makhana, Water Chestnut
Zone - II North East Alluvial Plains
Purnea, Katihar, Saharsa, Madhepura, Araria, Kishanganj, Supaul, Khagaria, Begusarai
Net Cultivated – 1147; Gross cultivated -- 1677
1382.2 Light to medium textured, slightly acidic, sandy to silty loam (large area comprise of Tal and Diara lands)
Maize, Mustard, Jute, Sugarcane; Horticultural crops include Mango, Bel, Banana, Papaya
Zone - III South Bihar Alluvial Plains
3(a) Bhagalpur, Sheikhpura, Lakhisarai, Jamui, Munger, Banka 3(b) Bhabua, Rohtas, Aurangabad
Net Cultivated – 241; Gross cultivated -- 3408
1102.1 Old alluvium to sandy loam.
Rice, Gram, Wheat; Horticultural crops include Mango, Guava, Banana, Bel, Jackfruit, Onion, Potato, Chillies, Marigold
Cropping Seasons in the State:
The principal crops are rice, wheat, pulses, maize, potato,
sugarcane, oil seeds, tobacco, and jute. Rice, wheat, and
maize are the major crops.
Table 2 : Crops as per cropping season in Bihar
S. No Kharif Crops Rabi Crops Zaid Crops
Sown in May-June
Harvested in Sep– Oct
Sown in Oct-Nov
Harvested in Feb– March
Short duration crops from March to June
1 Rice Wheat Muskmelon
2 Cotton Pulses Watermelon
3 Sugarcane Barley Gourds
4 Maize Rapeseed
5 Jowaar Mustard
6 Bajra
Climate Vulnerability of Bihar
Vulnerability refers to the degree to which the geophysical,
biological and socio-economic systems are susceptible to
and unable to cope with the adverse impacts of climate 16change . Around 90 percent of Bihar's population lived in
rural areas in 2015, where agriculture and animal
husbandry are a source of primary livelihoods. Though
Bihar state is endowed with good soil, adequate rainfall and
good ground water availability, its agricultural productivity
is one of the lowest in the country, leading to rural poverty, 17low nutrition and migration of labour . Bihar is highly
vulnerable to cl imate change encompassing (i)
approximately 81 percent of labour force employed in the
agricultural system (ii) lack of proper irrigation facilities and
high dependence on rainfall (iii) low cultivated area with
fragmented land holdings and (iv) poor marketing 18distribution, processing and storage facilities .
According to Bihar State Action Pplan on Climate Change
(BSAPCC), a drastic decline in green fodder production
and dry fodder production (crop residue of cereals, pulses
and oil seeds) has been observed during 2005-2011. The
area under pastures and grazing lands is extremely scarce
(0.18 percent of the total geographic area). Of all rural
households owning cattle and/or buffalo in Bihar, more
than three-quarters are either landless or have less than
16Definition adopted from Glossary of terms, IPCC, 5th Assessment report
17http://krishimis.in/WebPortal/AboutUs.aspx
18Source: Agrarian Communities' Action Plan on Cliamte change in Bihar
one hectare of land. Sheep and goats tend to be even more
concentrated among landless and marginal rural
households. A decline in the fodder production and in the
area under pastures has increased the vulnerability of
livestock towards climate change. It has also increased the
vulnerability of the marginal and landless farmers in terms
of livelihood opportunities (e.g. animal husbandry/dairy)
available to them in case of a crop failure.
The future projected change in maximum surface
temperatures during 2011-2040 reect a 0.6-1 degree
celcius increase in Western Bihar and 0.2-0.4 degree
celcius increase in Eastern Bihar. The projected change in
the minimum surface temperatures reect a 1.2- 2 degree
celcius increase in the Southern Bihar and 1-1.6 degree
celcius increase in Northern Bihar. The future rainfall
projections show a 5-10 percent surplus rainfall in Eastern
and Central Bihar as against 5 percent decit in Southern 19and Western Bihar during 2011-2040 .
Currently, Bihar state is highly vulnerable to climate-
induced hydro-meteorological extremes, with North Bihar,
in general, being highly ood-prone and South Bihar being
highly drought prone. An increase in surface temperatures
along with changing rainfall patterns can intensify the
impacts of droughts and oods received by the state and
have a potential to severely impact the productivity levels of
the farmers.
The total geographical area affected by the ood and water
logging amounts to 56 percent of the total geographical
area of Bihar. Floods in large parts of the plains of Bihar,
especially North Bihar, are recurring features and cause
havoc destroying crops and the quality of land and
threatening the conditions of life and livestock due to large
scale displacement. Out of these, the area of Sitamarhi,
Supaul and Kishanganj are 90 percent affected by the ood
and ve districts- Bhagalpur, Darbhanga, Khagaria,
Madhepura and Saharsa is 70 percent affected. Whereas,
33 percent of the State receives less than 750 mm rainfall,
making the southern part of Bihar vulnerable to drought.
Additionally, due to inadequate climate models and
vulnerability studies at the state level, as well as low
community awareness, Bihar is potentially more sensitive
and vulnerable to the climate change and its impacts.
Figure 2 : Flood affected area of Bihar
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
16D Bihar SAPCC report: Climate Model Intercomparison Project Phase 5 data is used
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
2524
Figure 3 : Drought affected area of Bihar
Given that Bihar is highly vulnerable to climate change
i m p a c t s , a d a p t a t i o n a n d r e s i l i e n c e b u i l d i n g
practices/initiatives are crucial to enable the sustainable
growth trajectory of Bihar's agricultural sector. Agricultural
vulnerability in Bihar has been mapped by Central 20Research Institute for Dryland Agriculture (CRIDA) . In line
with the state's policy of an 'entitlement based planning
approach', the BSAPCC adopts the motto “Building
Resilience through Development” as the core theme that
will guide implementation. Direct seeded rice has been
identied as a preferable option over the conventionally
transplanted rice which is both labour and energy
intensive. With direct seeding, rice seed is sown and
sprouted directly into the eld, eliminating the process of
planting seedlings by hand, thus reducing intensive labour
and water use.
Adaptation strategies for crops like rice and wheat include
the advancement of sowing date of rice for shorter duration.
This may increase the production of rice up to 2050 for all
ago-ecological zones of Bihar, except at zone III B
according to the simulation models. Similarly, in the
medium duration variety an increment in yield could be
predicted with the advancement of sowing date by almost
25 percent during the 2080s for Pusan. Advancing the
sowing of Radha variety by seven days may prove
benecial for 2020 and 2050 scenarios. Rabi maize showed
an increase in yield with the advancement of sowing for all
stations and for all scenarios except for Patna in 2020,
similarly, Kharif maize showed an enhancement in yield
with seven days advanced sowing.
(Source: Singh C.C. et al. 2014. “Environmental Challenge due to Climate Change in Bihar, Developing State of India”. Journal of Natural Sciences Research, Vol.4, No.13. 21-28.)
Section 4:Value Chain on Maize
4.1. Introduction
Maize, also known as the Queen of cereals, is the most
produced cereal crop in the world with production of more
than 960 MMT during 2013-14. This is a widely cultivated
crop and carries tremendous genetic variability. India has
witnessed growth in maize area, production as well as
productivity from 14 MMT production from 7.5 M ha and
productivity of 1.9 MT/ha during 2004-05 to 23 MMT from 229.5 M ha and productivity of 2.5 MT/ha during 2013-14 .
India is the seventh largest producer of maize in the world
having two percent world production and fourth largest
exporter in global trade.
Though the overall progress in maize production in India
seems to be satisfactory, several concerns cannot be
ignored like stagnant productivity at 2.5 MT/ha and
stagnant area at 22 M ha. The gap in productivity with 23global average at 5.5 MT/ha, and USA at 10 MT/ha is also
high.
Andhra Pradesh and Karnataka dominate maize
production, contributing 38 percent to national production.
Out of the nine major maize producing states, Bihar is the
sixth largest producer with 1.4MMT production on 0.6M ha 24land during 2010-11.
Figure 4 : India's Maize Area, Production, and Productivity
Table 3 : Maize production in Bihar
2011 2012 2013 2014 2015 CAGR
Total Maize 2108.19 2557.06 2755.95 2904.24 2478.75 4.61
Kharif Maize 468.52 622.42 926.32 778.21 825.15 14.51
Rabi Maize 922.28 1098.17 791 1199.39 913.78 0.7
Summer Maize 717.39 836.47 1038.63 926.64 739.82 1.65
Source: Economic survey of India, 2015-16
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
20Atlas on Vulnerability of Indian Agriculture to Climate Change, Central Research Institute for Dryland Agriculture (CRIDA), 2013
21Indian Council of Agricultural Research: http://icarrcer.in/wp-content/uploads/2014/01/ICAR-RCER-News-for-Jan-June-2010.pdf
22Department of Agriculture, Cooperation and Farmer Welfare, Government of India. http://eands.dacnet.nic.in/PDF/Glance-2016.pdf
23USDA Portal corn database https://data.ers.usda.gov/FEED-GRAINS-custom-query.aspx
24APY database, Department of Agriculture and Cooperation, GoI, 2015-16.
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
As per productivity ranking, the top three performing
district since 2014-15 are — Katihar, Madhepura and
Saharsa. The highest productivity in 2014 – 15 is recorded
for Katihar (6510 kg/hectare) which is 160 percent more
than the national average productivity of 2500 kg/ha. The
top ve district having the highest coverage under maize
are:
2726
S. No DistrictArea (000ha)
Production (000MT)
Productivity (MT/ha)
1 Khagaria 60.160 214.830 3.57
2 Samastipur 56.890 156.000 2.72
3 E chmaparan 52.230 102.580 19.64
4 Muzaffarpur 48.770 191.890 3.96
5 Bhagalpur 46.060 155.810 3.84
Table 4 : Major maize producing districtsof Bihar (2014-15)
Source: APY database,Department of Agriculture, State Govt. of Bihar, 2015-16
India's maize utilisation pattern during 2012-13 indicates
that poultry and cattle feed forms 61 percent of local
utilisation, direct consumption was 20 percent and
industrial usage for starch extraction, food processing, 25brewery and others form 19 percent . This utilisation was
79 percent of total production and the rest 21 percent (4.7
MMT) was exported during 2012-13.
4.2. Actors
Actors in maize value chain are input suppliers, producers,
commission agents, primary traders, wholesaler,
processors, dealers and distributors and retailers. The role
of each actor is very specic as described in paragraphs
below.
4.2.1. Input Suppliers
Input supply is an important function in the maize value
chain. Major inputs in maize cultivation are seed,
fertilisers and pesticides. The role of government
agencies and department is minimal in input supply
and private players dominate in maize input supply
in Bihar.
Seed Supply:
Seed is one of the most important inputs dominated by
private players. The following are the market share of
the different seed suppliers:
Role of state seed corporation in maize seed marketing
is very limited.
PUSA Agriculture University has released 13 varieties
including few varieties dedicated for improved protein
contents like Quality Protein Maize (QPM). Till date, ve
varieties are released as QPM under the brand name
Shaktiman – 1,2,3,4 and 5. These varieties are suitable
for animal feed and have shown excellent research
results. However, as revealed by university scientist
during discussions, these varieties have limited
popularity as they are not specially recognised by the
market and private feed manufacturers.
Fertiliser Usage and Supply:
Important fertiliser manufacturers and marketers in
Bihar are PPL, IFFCO, RCF and Zuari. The important
fertilisers for maize are Urea, DAP, and MoP. There are
no shortages reported in recent years for fertilisers.
According to PUSA Agriculture University, in Bihar,
usage of chemical fertilisers is increasing continuously.
Nitrogen requirement has increased from 150 N-1ha to 26200N-1ha . This is an alarming situation in the climate
context, as an increased requirement and higher
dosages are resulting in more water and soil pollution
and nitrogen emissions.
Crop protection chemicals supply:
The important molecules used in maize crop for
protection from pests and diseases are chlorpyrifos,
copperoxichloride and sulphur and herbicides used
Table 5 : Market share of private companies in seed marketing
Sl No Seed Marketing Company Market share
1 Dupont – pioneer 36 – 37%
2 Monsanto 29 – 30%
3 Limagrain 10%
4 Syngenta 5%
5 Domestic players 18 -20%
Source: ICSD Field Visit, Bihar
and retailers. There are 10 wholesalers and more than
100 retailers in Purnea district forming a well-
established network. Department of agriculture is also
availing services of these supply chain actors to
provide inputs under various schemes at subsidised
rates, but this collaboration is limitedin its scope.
However, department of agriculture is directly involved
in the maize value chain as it has a major role in
monitoring the supply and in quality control.
Producers
In Bihar, the area under maize cultivation is larger under
Rabi than under Kharif season. The shifting to Rabi
maize shows obvious comparative advantages of low
insect, pest, and diseases infestation as well as the
slow growth of weed. The total area under Rabi maize 28is around 60 percent more than that of kharif maize .
(Kharif maize area is 230,000 ha while Rabi maize area
is more than 400,000 ha for 2012). Bihar has the largest
area under maize during Rabi among all states in India.
are Pendimethalin and metachlore. Practices of
Integrated pest management and manual or
mechanical weed control are limited. During eld
discussions farmers in Purnia and Bhagalpur districts 27reported that cost of these practices is very high .
Supply chain:
The complete supply chain in seeds, fertilisers and
crop protection chemicals is dominated by private
manufacturers, dealers-distributors or wholesalers
During 2014-15, the total area under Rabi Maize was
706,000 ha while in 2005-06 it was 661,000 ha. Over ten
years, between 2004-05 to 2015-15, there is an
increase of 40,000 ha in the area. In the same period,
the production has increased from 1,519 thousand MT
to 2,478 thousand MT. Bihar's rabi maize output
doubled from 10.64 to 21.26 lakh tonnes (LT) between
2005-06 and 2013-14.
Figure 5: Input supply chain in Bihar
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
25Maize in India, India Maize Summit, IMA and KPMG Analysis. http://www.docslides.com/briana-ranney/maize-in-india
26Four decades of Soil Test Crop Response (STCR) research, findings of PUSA agriculture university. AICRP on STCR correlation, IISS, Maize pg – 103 to 119
27Focused group discussion by ICSD, field team.
28Kumar, R., K. Srinivas and N. Sivaramane (2013), Assessment of the maize situation, outlook and investment opportunities in India. Country Report – Regional Assessment Asia (MAIZE-
CRP), National Academy of Agricultural Research Management, Hyderabad, India.
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
2928
Climate:
Maize is a C4 crop and hence, it can be cultivated in a
wide range of climatic conditions with the temperature 0 0range being 22 C to 35 C. However, maize is
susceptible to frost and high temperature. The
minimum rainfall requirement of maize makes it more
climate resilient, as it can be grown in 500 mm to 900
mm rainfall.
Seed and sowing:
In Bihar, 80 percent of the area under maize is under 29hybrid seeds . Private players dominate in the seed
supply. Rabi sowing is done during September.
However, during discussions with PUSA University, it
was found that due to changes in the climate, sowing
has shifted to mid October. Thiram, carbendazim,
Trichoderma, and Azospirillum are commonly used for
seed treatment. Azospirillum helps in nitrogen xation,
while other help in countering soil borne diseases.
During eld visits, it has been observed that standard
practices are not followed for spacing and plant
polulation. The recommended spacing for maize is
75cm X 18cm or 60cm X 22cm in Kharif while for Rabi it
is 50 cm x 20 cm to 60 cm x 18 cm, but lower spacing
was observed in the eld. The recommended
population is 85000 plants/ ha but, this has not been
followed and plant population maintained is more than 30100,000 plants/ ha .
Fertiliser application:
The recommended dose of fertilisers for maize is 150:
50: 50 of N:P:K per kg/ha. According to PUSA
university, the nitrogen requirement in Bihar has
increased and Rabi maize requires more nitrogen than
Kharif maize. During discussions with farmers at
Purnia, it has been found that nitrogen supply to maize
is now 200 – 300 kg/ha. However, according to KVK,
Purnia, the increased N requirement is only 200kg
N/ha. A dose of potassium is recommended for crops
grown in low temperature zones. However, during eld
visits it has been found that farmers are not applying
potassium to the crop.
Water requirement:
The ve critical growth phases for irrigation are
seedling stage (6-leaf stage), knee high stage,
tasselling, 50 percent silking and dough stages.
Moisture stress at early growth stages results in
delayed tasselling and silking. Stress at a later stage of
growth causes a drastic reduction in yield.
Irrigation is important to cope with frost, cold waves as
well as high temperatures and heat waves as it protects
the crop.
Excess water or water logging is harmful to the crop.
The crop is highly sensitive to excess water
(waterlogging) and hence efcient drainage is as
important as irrigation. It is observed that water logging
for more than 3-4 days may result in a yield reduction to
the extent of 50 percent or even complete crop failure,
depending upon the severity of water logging. To avoid
water logging, sowing on ridges is desirable especially
in kharif.
Intercropping:
In Bihar mixed cropping of groundnut with maize is
quite protable. In certain areas, maize is intercropped
with pigeon pea. In rabi maize, intercropping of pea,
rajmash, lentil and potato is also practiced.
Intercropping minimises the risk of failure of the crop
due to various climatic conditions.
Harvesting and post-harvest management:
Maize is harvested when the husk turns yellow and
grains are hard and having about 30 percent moisture.
There is no need to wait for stalks and leaves to dry
because they remain green in most of the hybrids and
composites. The husk is removed from the cobs, and
cobs are dried in the sun for 7-8 days. Thereafter,
grains are removed either by beating the cobs with a
stick or with the help of maize sheller.
The average yield of kharif maize is abou 1.5 - 2MT/ha
while rabi maize is 2.5 to 3.5 MT/ha. Yield also depends
upon irrigation provided at critical stages and other
crop management practices.
Disease and pest management:
Maize is a hardy crop and is less susceptible to pest
and diseases. However, kharif maize tends to be more
susceptible than rabi due to favourable temperatures
and moisture content for insects and pests growth.
Downy mildew and leaf spot are common diseases.
Incidences of shoot y are also noted recently. Farmers
directly use chemical sprays and practices like IPM are
followed in crop protection. Important climatic
constraints in crop production are in Annex 2.
Table 6 : Cost of Maize production in one hectare.
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
29Directorate of Economics and Statistics, Department of Agriculture and Cooperation http://eands.dacnet.nic.in/PDF/Glance-2016.pdf
30ICSD research team, consultation with PUSA universirsity.
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Based on the eld survey, the cost of cultvaiton for
Maize in Bihar is ₹ 44,059 per quintal and the sale is
₹ 52,800 per hectare. The total income per hectare is
₹ 8,741 per hectare and net income per quintal is
₹ 182.10.
4.2.2. Primary traders:
Traders can be divided into different categories
depending on functions and volumes they trade in.
However, to simplify the analysis and establish costs,
commission agents, primary traders and wholesalers
are the three trader categories being considered in this
value chain.
Pr imary t raders are those who col lect the
produce/commodity from producers. There are
different types of primary traders -village collectors
(buying at local weekly haat), farm gate purchasers,
primary traders at the block level and district level.
However, their function remains the same which is
aggregation of the commodity from farmers.
Commission agents form a link between farmers and
traders. Their main function is to nd right primary
traders for farmers based on the quality of produce.
Commission agents do not buy the commodity but
only facilitate the process of sale between the farmer
and the trader. Throughout Bihar, the commission
agent takes approximately 1.5 percent of the sale
value.
Traders and collectors make their livelihood based on
volumes traded, rather than on margins. Margins for
traders are ₹1-2 per kilo or sometimes even less
depending on sale value and quality. Quality is an
important parameter based on which rates are
decided; important quality parameters being moisture
content, foreign material content, size and colour of
maize .
The best quality maize, with optimal moisture
percentage and low broken/damaged grain content, is
called “Shalimar Calcutta Pass” after a Kolkata-based
poultry feed company. Next in the hierarchy is “Super
Bangladesh” or SBD, followed by plain Bangladesh
(“BD”) and nally RBD (“Reject Bangladesh”) that
fetches the lowest price.
Exports in maize are around 20 percent of the total
production and hence quality parameters and rate
decisions also vary as per international markets. The
eld level analysis shows that income of a primary
trader from the trade of 1 quintal is ₹ 1.41 per kg.
3130
Farmers in Bihar do not have primary processing facilities to follow quality parameters. Grains are neither graded nor
cleaned and moisture content of maize is observed at above 10 percent.
Table 7 : Cost and margin of maize primary trader
4.2.3. Wholesaler
The basic function of wholesalers is to trade in large
quantities and supply the commodity to processors
and exporters. Warehousing facilities play a key role in
the wholesale business. It allows the wholesaler to
store excess commodity and control supply of
commodities as per market demands. The wholesaler
support different processors through timely supply of
maize for ensuring the quality of the commodity in the
market.
The wholesaler makes storage losses up to two
percent and also pays for the loading charges. Interest
on working capital for the wholesaler is at 13.5 percent
for 75 percent of commodity value. Wholesalers invest
25-30 percent of the total investment needed for the
business from their own funds while the rest is a loan
from nationalised or private sector banks.
During eld visit in Purnia, 3 – 4 wholesalers also
claimed that they are using warehouse receipt nance
to facilitate the maize business.
4.2.4. Market trade: Climate Context
The traditional marketing system is increasing trade
costs in the value chain.
Handling of commodity: During the market visits in
Bihar, eld team observed that there are huge losses 31during handling of the commodity from farm to
processing. It is estimated that 9.33 percent losses
happen in cereals during handling. The reasons
behind these losses are due to the hook system used
by labour, open storage (without packing), re-trade of
the commodity, traditional methods of heaping and
weighing, etc.
Transportation: Transportation has a hidden but key
role in commodity trade, starting from the producer's
farm to the consumer's doorstep. Traditionally, the
farmers use to transport produce by bullock cart, but
now maize is transported through tractor trollies or 1 or
2 tonne capacity. Individual farmers transport the
produce to the market and collective marketing or
transporting is not undertaken.
Table 8 : Cost and margin of maize wholesaler
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
31FDr V D Panse Committee to estimate post-harvest losses.
Interest
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
4.2.5. Processing:
Maize is processed for different purposes. Cattle feed,
bird feed, starch extraction, maize oil extraction,
popcorn making, maize oor, canned sweet corn and
sweet corn soup, canned baby corn, corn akes and
ethanol are important products produced processing
of from maize. However, feed processing is the most
popular in India with 61 percent of maize produced
being used for feed processing. In Bihar, only 8-10
percent of maize is processed within the state despite
the fact that the state has huge and rising marketable
surplus. While the area under cultivation, maize
production & yield have increased, there are only 8-10
maize processing units in Bihar. They are mainly into
milling of our and production of poultry feed. In
absence of adequate processing facility, the huge
marketable surplus of Bihar, especially in rabi season
depends completely on other states for i ts 32consumption .
In all, there are 34 units of maize processing in Bihar, of
which 21 units are of a commercial size. The total
investment in maize processing sector is ₹40079 lakhs, 33generating employment for 2200 employees . Bihar
does have poultry feed mills, mainly in the Muzaffarpur-
Hajipur region, but these are typical of 150-200 tonnes
per day (tpd) capacity. This compares poorly to the
1,000-1,200 tpd capacity feed mills in the South or the
1,000-tpd modied corn starch facilities that
multinationals like Cargill and Roquette have put up in 34Karnataka .
Distillers dried grains (DDGS) and distillers' wet grains
(WDGS) are major products used as feed products.
DDGS is more popular in poultry. “DDGS is the product
after the removal of ethyl alcohol by distillation from the
yeast fermentation of a grain or grain mixture by
condensing and drying at least three-quarters of the
solids of the resultant whole stillage by methods 35employed in the grain distilling industry ”.
The important products of dry distillations are dry
distillers' gains, wet distillers grains, condensed 36distillers soluble .
3332
Figure 6 : Process ow for DDGS processing
Table 9 : Corn feed processor's cost and prot
The cost for processing corn feed is `1707/-. The total
raw material required for producing the feed is 66 kg of
corn and 44 kg of other raw material. The total weight
losses during processing is 4 kg and by products
produced weigh 6 kgs. Processor selling price of feed
is ̀ 2150/- and that of by product is ̀ 30/-. Total margin
for the processor is ̀ 442/-.
Though there are processing units in Bihar for feed
processing, there is a huge potential for corn
processing considering the production and
productivity of corn in Bihar. Following are the
important opportunities as reported by IL&FS in short 37and medium term .
Ÿ Poultry and Animal Feed: Cluster based
interventions need to be undertaken to federate the
existing small unorganised household enterprises
into 8–10 clusters and develop processing mills.
Common facility centres may be created through a
Special Purpose Vehicle (SPV) on a PPP basis to
leverage technology and investments in the
districts of Begusarai, Samastipur, Khagaria and
Saharsa.
Ÿ Corn oil: Establishment of 2–3 large units of 200 to
250 TPD processing capacity may be facilitated in
the four districts mentioned above on a PPP basis.
Ÿ Creation of 100–150 rural warehousing facilities of
1,000–2,000 MT each in the identied clusters on a
PPP basis.
Ÿ Facilitating the establishment of 1–2 units for value
added product table product like corn akes,
popcorn, corn sweeteners etc.
Ÿ Establishment of 2–3 corn based starch producing
units of 150 TPD–200 TPD each.
Ÿ Upgrading the corn oils mills into value added
products like ethanol, alcohol, etc.
Ÿ Induce the formation of additional 5–6 clusters in
other maize growing areas of Bihar like Purnia,
Katihar, Madhepura and Bhagalpur on a PPP basis
with further provision for inducing additional 3–4
cluster, should the demand arise.
Ÿ Establishment of 4–5 grain silos with a storage
capacity of 100,000 tonnes each across the state on
a PPP basis but mainly in the maize producing
districts.
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
32Bihar: A land of uncommon opportunities for food processing, Udyogmitra portal, http://www.udyogmitrabihar.in/docs/policies/food-processing-schemes.pdf
33Economic survey of Bihar 2015- 16.
34Bihar: An unlikely corn revolution, UdyogMitra Publication. https://www.udyogmitrabihar.in/bihar-an-unlikely-corn-revolution/
35Purwadaria, Tresnawati & P. Ketaren, Pius & Sinurat, Arnold & Sutikno, Irawan. (2016). IDENTIFICATION AND EVALUATION OF FIBER HYDROLYTIC ENZYMES IN THE EXTRACT OF TERMITES (Glyptotermes montanus) FOR POULTRY FEED APPLICATION. Indonesian Journal of Agricultural Science. 4. 40. 10.21082/ijas.v4n2.2003.40-47.
36Kelly S Davis Chippewa Valley Ethanol Company, https://www.biofuelscoproducts.umn.edu/sites/biodieselfeeds.cfans.umn.edu/files/ddgs-techinfo-pro-20.pdf. 37
Food Processing in Bihar Road Ahead, interventions proposed for maize processing by IL&FS for Govt. of Bihar http://www.ilfsclusters.com/pdf/Food_Processing_in_Bihar.pdf
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4.2.6. Dealers
Dealers are bulk handlers of product, their main function is to store the product, transport it to the retailer and facilitate
business for the processor. In Bhagalpur district, there are more than 35 dealers who are directly involved in corn based
feeds, most of them are accessing feed products from outside the state. The dealer's cost and margins are as detailed in
the below table.
3534
Table 10 : Feed dealers cost and margin
The dealer's margin is �2,60 per quintal on a purchase price of �2,150 per quintal and a selling price of �2600. The costs at the dealer level are transportation, unloading, storage, losses and interest on working capital.
4.2.7. Retailers
Every dealer is associated with minimum 60 to 70 retailers with the estimated retailers in Bhagalpur district being 2200. The retailers carry the stock, display product, provide advisory to consumers as well as educate the customers about the new products. Retailers have reached to the remote and rural areas and they hold responsibility for brand development and establishment.
Table 11 : Feed retailer's cost and margin
The margin at the retailer level are �338 per quintal.
4.3. Factors of relationship
4.3.1. Support System
Extension agencies
Bihar has a network of 39 Krishi Vigyan Kendras (KVK). The
purpose of the KVKs is to disseminate new technologies
developed by research institutes and state agriculture
universities. The state government has a well established
department of agriculture with a huge network of extension
staff throughout the state. Beyond that fertiliser and
pesticide marketing companies run their extension
services through dedicated staffs and provide farm
advisories.
The overall focus of extension agencies is toward
improving production. Most of the subsidies from
government department are directed towards improved
inputs and capacity building in production related
activities. There are several ongoing projects dedicated to
improving maize production directly or indirectly. These are
1. National Food Security Mission
2. RashtriyaKrishi Vikas Yojana
3. Integrated Scheme of Oilseeds, Pulses, Oil Palm and
Maize (ISOPOM)
4. All India Coordinated Research Project Maize.
5. Agricultural Technology Management Agency
schemes.
6. State Rural Livelihood Mission, Bihar
However, there is lack of coordinated effort towards climate
resilient agriculture technological promotion. The
awareness among the ground staff on climatic issues and
efforts being taken by the agency is also observed to be
limited.
Seed production
Under the Agriculture Road Map II, the production of
certied seeds of the recently evolved crop varieties has
been emphasised. As many as 23 crops were identied and
promotion programmes for their seeds have been initiated
by the state government. Other programmes include Chief
Minister's Crash Seed Programme, Seed Village
Programme (Beej Gram Yojana) and provision of subsidy
for the production and purchase of certied seeds.
Recently Bihar government has revived Bihar Rajya Beej
Nigam (BRBN), for strengthening of Bihar Seeds
Certication Agency and multiplication of foundation and
breeder seeds by state farms. The Government has set up
three new seed processing plants at Hajipur, Bhagalpur
and Begusarai. These steps have led to increase in crop
productivity in the state. Government has also launched
'Mukhyamantri Tibra Beej Vistar Yojana. Due to these
initiatives, the seed replacement rate for major crops
like maize have increased substantially in recent 38years .
Research and development
Several agencies are involved in maize research, the main
focus of research is the development of new varieties and
another focus is developing crop protection technologies.
All India Coordinated Research Project on Maize also
focuses on developing a package of practices and
managing resources for maize.
The varietal development at research institutes was more
focused on quality and high protein varieties like High
Quality Protein Maize (HQPM) also known as Shaktiman
several version (1 to 5) are released but not yet popular with
farmers. The reason discovered by the eld team being that
Shaktiman is not offered at a special rates in the market.
This is demotivating for both farmers as well as researchers
for adopting and researching further on the varieties.
Different institutes involved in research anddevelopment are
1. Bihar Agricultural University
2. Dr. Rajendra Prasad Central Agriculture University, Pusa
3. Indian Institute of Maize Research
4. Borlaug Institute of South Asia
5. Indian Institute of Agricultural Research
Meteorological support (IMD)
The meteorological support is necessary during sowing
when the crop is in a critical stage. Maize is susceptible to
water logging, frost and temperatures above 350C. Since it
is cultivated in all three season in Bihar, meteorological
support becomes very essential for maize cultivation.
Farmers depend on newspapers and TV news channels for
specic climate related information, but these sources
provide state specic or country specic information and
not always location specic information.
Indian Meteorological Department (IMD) is slowly bringing
in new technologies and expanding reach to provide region
or zone specic information. However, block level or cluster
level information is not yet available as network has not
developed to that level of granularity.
Overall poor information and dependence on traditional
methods for weather predictions are affecting production
and productivity of maize.
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
38Economic survey of Bihar, 2015-16.
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
4.3.2. Business facilitators
Mandi
Gulab Bagh Mandi is the largest trading platform available
for maize trading. Most of the maize trading of Bihar is
facilitated in this Mandi. It is even India's largest maize
trading Mandi with annual arrivals of 5-6 lakh tonnes (7,500-
10,000 tonnes daily during the peak season from mid-April 39to mid-July) . Due to repealing of the APMC Act, there is no
a marketing board responsible for developing and 40maintaining infrastructure . The whole system is non-
transparent. Although it is said to be an open bazaar, the big
traders decide the price and even grain quality by ocular
judgements without using moisture meters or displayed
grades.
Being free from regulations of APMC Act, there are no
administrative impediments to the marketing of produce at
this mandi or the farmer/village aggregator delivering
maize directly at the railway rake points of Purnia, Ranipatra
and Jalalgarh, which are within 25 km of Gulab Bagh
Mandi. About 100 rakes, each of 2,600 tonnes, are moved
annually from these three rake points. Lack of trading
regulations are invariably working against farmers. There is
no or low transparency in price discovery and weighing, as
only ten traders are involved in the majority of trade, trading
25,000 to 50,000 MT each. The market is monotonous and
lacks vibrancy and competition.
The mandi is lacking proper infrastructure for maize
trading. The absence of a metalled road, properly sized and
well maintained shops, raised drying and trading yards,
street lights, drainage, running water and rain shelters are
clearly visible in this Mandi.
Warehousing
The warehousing development and regulations Act was
introduced in 2007. The act provided nancial
opportunities against stored commodities and made
warehouse receipt a legal tender. It was a revolutionary step
to facilitate more credit to those who needed credit and at
the same time reduces NPAs with banks by bringing in
commodity under banks custody.
Bihar has warehouses of central warehousing corporation
as well as state warehousing corporation and there are also
warehouses of private entities and individuals in Bihar. The
pledge nancing and warehouse receipt nancing is
gaining popularity in entire Bihar.
In Purnia, though there is an increase in pledge nancing,
nance against warehouse receipts (Negotiable
warehouse receipts: NWRs) is not observed and only
traders and large farmers are currently availing the facility of 41pledge nancing .
The state government has declared special warehousing
scheme for maize, Establishment of the silo for storage of
maize. Under this scheme, the benet of subsidy will be
given for the establishment of silos for maize storage. The
construction of silo with a storage target of ve thousand
tonnes of maize will be considered as one unit and a
subsidy of 35 percent will be provided on the same.
However, the chances of development of such warehouses
in rural areas are low considered the scale of investment
and size of the structure.
Finance
Nationalised banks and small scale credit cooperatives are
providing credits to farmers. However, the overall credit
offtake is very low and nancing system including a
network of nationalised banks, credit cooperatives and
rural banks is very poor in Bihar. Schemes like Kisan Credit
Card are also not very popular.
Access to credit is easier for trader, processors, and big
farmers rather than for small and marginal farmers, whose
contribution is high in production of maize and other crops.
Most of the farmers reported that their source of nance is
from informal sources like land lords, trader or relatives.
Input suppliers also provide credit to the farmers.
Government policy and schemes
Although, minimum support price (MSP) declaration by
Commission for Agricultural Costs and Prices is expected
to support producers by providing a guaranteed price for
the produce, in practise that is not the case. MSP declared
for maize during 2013-14 to 2016-17 is almost stagnant with
little increase in three years from ₹ 1,310 in 2013-14 to ₹
1,365 in 2016-17. In contrast, MSP for paddy increased
from ₹ 1,080 in 2011-12 to ₹ 1,470 for 2016-17, an increase
of more than 43 percent.
Procurement by Food Corporation of India (FCI) is very low.
During 2014-15 only 721.9 MT was procured by FCI against 42the production of 926 thousand tonnes .
3736
Figure 7 : MSP comparision of Paddy and Maize
The State Government is trying to promote a business environment in Bihar and putting dedicated efforts for attracting investment from private sector. Industrial Area Development Authority of Bihar is majorly involved in all these initiatives. The state government is very keen to develop food processing sector and even stressing on maize processing. There are different schemes to promote maize processing in Bihar as below:
1. The National mission for food processing: The ratio of 75:25 (Govt. of India and States) is applicable for
43Bihar .
2. Food park scheme: This scheme is implemented with individual and special purpose vehicle. The minimum investment by individual or SPV is 51 percent and then rest of the investment is a combination of banks,
44central and state government .
3. Scheme for Integrated Development of Food Processing sector: This scheme is for individuals with 35 percent subsidy or maximum of ₹ 5 crores. For special purpose vehicles (SPVs formed by minimum ve investors), 40 percent subsidy or maximum ₹ 10 Crore is applicable. One time settlement scheme for
45NPAs is also provisioned under the scheme .
Horizontal linkages
State Rural Livelihood Mission, Bihar (Jeevika) has
promoted producers company which is trading in maize on
a large scale. Aaranyak Agri Producer Co Ltd. is having
2,601 shareholders. It was established in 2009 and the
company has traded 1,014 MT in 2015 and 3,064 MT in
2016. The total revenue generated in consecutive years is ₹
1.28 crores and ₹ 4.66 crores, thereby posting tremendous
growth in business and scale of operation. The company is
availing warehousing facility from ITC and Star Agri
company. During 2015, producer company has distributed
patronage bonus of ₹ 6.53 lakhs to all farmers and earned
prots of ₹ 3.84 lakhs. For 2016 patronage bonus has not
been distributed yet.
Such collective initiative is setting up examples for the
promotion of new collectives. Maize is cultivated by small
and marginal farmers throughout the state. The state
government can promote producer organisations for maize
cultivators.
Vertical linkages
Vertical linkages from farmer to trader and farmer to input
supplier are more personal and less institutional in
nature.Farmers receive advisory for farm activities and
climatic information from input suppliers, while traders
provide market information and price hints. However,
information exchange from both the actors is on an ad-hoc
basis and reliability is very low, making vertical linkages
weaker.
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
39UdyogMitra portal https://www.udyogmitrabihar.in/bihar-an-unlikely-corn-revolution/
40Bihar: An unlikely corn revolution, UdyogMitra Publication https://www.udyogmitrabihar.in/bihar-an-unlikely-corn-revolution/
41Report on warehousing in India Study commissioned by the Warehousing Development and Regulatory Authority by National Institute for Public finance and policy, 2015
42Food Corporation of India, database, 2015-16
43Bihar State Government resolution on NMFP http://industries.bih.nic.in/Schemes/SchemeInfo-NMFP-XII.pdf
44Bihar State Government Resolution on FPS http://www.mofpi.nic.in/Schemes/mega-food-parks
45Bihar State Government Resolution on IDFPS http://www.mofpi.nic.in/Schemes/mega-food-parks
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
4.4 Transaction Cost Analysis
The transaction cost of the product varies at various level of the actors involved in the chain. Here are the factors affecting
maize transaction at various level.
4.4.2. Producers
The search cost for producers involves visits to nearest
markets, interaction with traders, fellow farmers accessing
market information through newspapers, phone calls and
internet. The average distance to market is about 10-12
kilometres where the producer has to spend a full day with
his travel to get the information, contacting the business
link either for input or nished product from the market. The
observation indicates producers spend approximately
`2,166/- per MT for his produce of 4.8 MT from one ha. For
producer, the screening, searching and bargaining costs
are very high in comparison to monitoring and enforcement
cost. To make the maize value chain more efcient, this cost
has to be reduced by strengthening the local institution
(promoting the aggregation/FPO) and making the market
more transparent and accessible for the producer. In this
context, use of modern technology should be encouraged
for online sale, pledging the stock etc.
4.4.3. Traders
In the state, traders are having fairly good contact with
processors or with big traders who are responsible for
trading the stock out of the state. In such a case, the search
cost is minimized but they pay high cost towards
monitoring and transfer cost. At this point, storage plays a
crucial role as most of the time the stock is transferred
immediately after the transcation is nalised. During eld
interactions, all traders interviewed shared bribing
regulatory authorities/institutions at various level for
carrying out their businesses. Their enforcement cost is
also higher than that of the producer. One trader handles on
an average 2000 MT of maize in a year which brings down
his transaction cost to `52/- per MT. The trader bears the
risk of quality assurance and transportation of produce to
the market. More transparency in the Government system
and improvement of production quality will help in reducing
3938
The transaction cost of maize at various level is calculated and shared in Annexure _. The analysis shows the spread of
transaction cost in the following graph.
Table 12 : Percentage spread of Transaction Costs at different actors' level in Maize Value Chain
4.4.1. The transaction cost of various VC actors:
The transaction cost of the maize value chain analyzed across the chain reveals that the variation is very high as the total
quantity handled by various actors differ signicantly. The actor who handles the minimal quantity of the commodities (like
retailers) bears low risk and actors having good forward and backward linkage are able to minimize the risk and the
transaction costs (Processors and traders). In maize, the variability is very high as access to the market is limited, where most
of the produce is going out of the state. The weak institutional structures also increases the transaction cost at each level.
Table -13 shows the analysis that aggregation/FPO-centric models will be more effective to reduce the TC because of
economies of scale. If the stock handled increases for farmers, there's clearly a case for reduced bargaining costs. So the
recommendation for increasing storage and FPO-centric marketing initiatives are pertinent. Similarly, FPO-centric quality and
grading standards can also unlock a huge margin that can be transferred to the producer enhancing his farm-gate price.
Uncertainty about the market, quality of commodity and legality involved in the activities also adds to the transaction cost in
Bihar.
the transaction cost for the trader and also help in making
the Value Chain more efcient.
4.4.4. Processors/ big traders
As there are few feed industries in the state, commodities
go outside the state for processing and return as a value-
added product. The lack of feed processing units in the
state is attributed to lack of infrastructural support to the
industry and to the fact that the power supply is also not
consistent to support the production at processors
level.This process of products returning to state after value
addition increases the transfer cost for the big traders. The
transparency level is low. Legal issues arise frequently with
transporter and suppliers. Searching cost is minimal as
these traders have established very good links with buyers
from other states. The enforcement expense is usually very
high. The processors and the big trader approximately
handle 40,000 MT in a year which means their transaction
cost per MT is ̀ 7.80 which is low. As processors handle the
maximum quantity in the value chain, they are also
absorbing more risk in legal transactions, auditing and
bribery. Though at this level the cost of the transaction is
low but bringing more transparency through legal contract
between buyer and seller and minimizing the enforcement
expenses can make the value chain more vibrant and
efcient.
4.4.5. Retailers
Feed industry is not very efcient in Bihar and the retail sale
of feed is not gaining momentum like it is in other states of
India. However, it is observed that average retailer is having
a business of 50-60 MT in a year with a transaction cost of
`95 /- per MT. Bargaining cost is the major cost at both
seller and buyer end. Quality of the stock is also not
guaranteed as there is no certication on percent
use of maize.
Figure 9 : Spread of transaction cost in Maize in Value Chain
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Figure 8 : Factors affecting Transaction Cost in Maize Value Chain
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4140
4.5. Risk Analysis based on Transaction Cost VC Assessment
The major risks the producer faces are climate and market volatility related. At the trader level, the risks are low while the
damage, payment and market volatility risks are medium. The major risks faced by the processor are quality and payment
related.
Table 13 : Risk Analysis of Maize
4.6. Constraints and opportunities in maize value chain
While constraints and opportunities are identied at every actor-level, producer and processor level contraints are major
hurdles in the maize value chain. Despite of policy efforts for maize processing, there is much to be realised. The research
team observed that most of the produce goes outside state for processing and is procured back as nished product. This is
evident in feed products. The largest costs observed are in transaportation of feed and fodder which is around thirty six 46percent .
Opportunities exist for both producer and processor in the maize value chain forward. Maize offers ease in cultivation with end
to end mechanisation lowering production cost. Maize is also the most easiest produce in post-harvest handling. The
evergrowing demand of corn in food as well as feed industry is reaping better returns at farm level, with more than thirty
percent of maize and sorghum stovers used as green fodder. Processors from other states are able to capitalise on
opportunities from corn feed and food products demand in the state.
Table 14 : Constraint and opportunities matrix of Maize Value Chain
4.7. Recommendations
There were many insights the team gained in the eld after
interaction with value chain actors in person and in group.
All information were analysed and synthesised to reach the
point where the seed requirement, contingency planning at
the time of exigency, loaclised PoP for production system
and mechanisation are few priorotised recommendation
for the overa l l va lue chain improvement . The
recommendation at each actors level are as follows
4.7.1. Producers
Water resource development and management are key
factors in crop production. Protective irrigation is important
for maize to survive in adverse climatic situations.
Structures like farm ponds, earthen bunds and other micro-
watershed development activities which will provide
protective irrigation coverage to small land holdings and
improve ground water can be constructed either on
farmers' elds or at the watershed level. Use of harvested
rainwater for one or two life-saving irrigations can increase 47the average yield of rainfed crops by 40–90% .
Micro irrigation increases the efciency of water use,
controls weed growth, improves yield and reduces the cost
of production. Sprinkler irrigation is popular and
economical in maize as it has high crop density and use of
drip is relatively expensive.
Mechanisation reduces the cost of cultivation by saving on
the cost of manual labour and increases the efciency of
operation. But access to mechanisation for small and
marginal labours is limited due high cost of implements and
machinery and high running costs. Custom hiring centre in
villages or within a cluster of 4 to 5 villages will increase
access to machinery and reduce running costs and
facilitate productivity by timely and efcient operations.
Credit is required throughout crop cycle to facilitate
different activities. Credit is required for input purchase,
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
46DFodder market in Bihar: An exploratory study, K.M. Singh and R.K.P. Singh and A.K. Jha and Abhay Kumar, 12 March 2013, pg -27.
46DFodder market in Bihar: An exploratory study, K.M. Singh and R.K.P. Singh and A.K. Jha and Abhay Kumar, 12 March 2013, pg -27.
47http://www.currentscience.ac.in/Volumes/112/03/0471.pdf
Infrastructural gaps
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4342
labour wages payment, payment of electricity bills, towards
hired machinery payments and for transporting of produce
to mandi. This can be either facilitated easily through Kisan
credit card scheme or by developing farmer groups and
increasing their capacities for internal lending and
repayments.
Farmer producer organisations (FPOs)carry tremendous
potential for collective action by farmers. FPOs can
facilitate access credit for farmers, run custom hiring
centres, provide input at cheaper prices by collective
purchase and most importantly provide an alternate
marketing opportunity to small and marginal farmers,
thereby reducing dependency on traditional markets.
4.7.2. Traders
A network of warehouses and cold storage provides
alternate space for storing excess production and helps to
manage supply during varying demands. Pledge nancing
are other important opportunities in warehousing. NWRs
can also promote forward contracting and exchange
trading of commodities. In all, warehousing infrastructure at
the rural level or urban level with small or large capacities
can provide alternate marketing and nancing options.
Minimum infrastructure at Mandi is very important to
facilitate and promote trade. Shops, yards, roads, street
lights, water, and ofces can motivate traders as well as
producers to trade in conditions with necessary minimum
comfort.
Regulation and development of market help in facilitating
transparency, controlling oligopoly through licensing and
establishing standard operating procedures for market
participants. It also helps in maintaining existing and
developing new infrastructure by charging trades with
minimum transaction fees. In Bihar, establishment and
enacting of such authority is required for developing fair
and transparent markets.
External infrastructure like roads, communication and rails
can be improved to connect more rural areas with
prominent markets for providing opportunities. This will
also reduce use of petroleum resources and in turn carbon
emissions.
Primary agriculture credit societies in Bihar are
participating in paddy value chain by procuring for FCI and
State Food Corporation. Considering the scale of
production of maize, they can be encouraged to participate
in maize trading by providing them with minimum techno-
managerial support and nancial support.
4.7.3. Processing
There are many schemes from central and state
government directly or indirectly promoting processing in
maize. However, the scale of operation required to
participate in these schemes is very high and these
schemes are meant for private entities like micro, small and
medium entreprises (MSMEs). Micro and small units of
processing can be developed in rural areas for processing
starch, our, akes and canned products from maize.
Medium to large units can be promoted in feed processing
and ethanol processing.
Export is another important opportunity in maize. India is
exporting more than 20 percent of its produce to Asian
countries. Special zones and regions can be identied for
promoting maize export. Dedicated infrastructure like
markets, warehouses, transport single window for
documentation and export procedures can be created to
facilitate the process.
5. Value Chain of Rice
5.1. Background
In India, rice is grown in 43.86 million ha, the production
level is 104.80 million tones and the productivity is about
2390 kg/ha (Agricultural Statistics at a glance- 2015). It is
grown under diverse soil and climatic conditions and the
productivity level of rice is low compared to the productivity
levels of many countries in the world. The highest
productivity is in China at 6710 kg per ha followed by
Vietnam (5573 kg /ha), Indonesia (5152 kg/ha) and 48Bangladesh (4375 kg/ha) .
Rice is one of the most important food crops and feeds
more than 60 percent population in India. The area under
rice crop was 30.81 million/ha in 1950-51 which has
increased to 43.86 million hectares during 2014-15, an
increase of 142 percent. Rice production has registered an
appreciable increase of ve times from 20.58 million tonnes
in 1950-51 to 104.86 million tonnes during 2014-15. The
yield was 668 kg/ha in 1950-51 and has increased to 2390
kg/ha during 2014-15. Major share of rice production takes
place in Kharif season. Rice is grown in almost all the states
in the country. However, the major ve states in rice
production are West Bengal, Uttar Pradesh, Andhra
Pradesh, Punjab and Tamil Nadu. West Bengal produces 4915 percent of total quantity of rice produced in the country .
Rice is grown under varying conditions in India from 8° to
25° N latitude and from sea level to about 2,500 metre
altitude. It is a tropical plant and requires high heat and high
humidity for its successful growth. The temperature should
be fairly high at mean monthly of 24°C. It should be 20°-
22°C at the time of sowing, 23°-25°C during growth and 25°-
30°C at the harvesting time. The average annual rainfall
required by rice is 150 cm. It is the dominant crop in areas of
over 200 cm annual rainfall and is still an important crop in
areas of 100-200 cm rainfall. The rainfall should be fairly
distributed throughout the year and no month should have
less than 12 cm of rainfall. Lesser amount of rainfall is
required as the harvesting time approaches. The elds
must be ooded under 10-12 cm deep water at the time of
sowing and during early stages of growth. Rice can be
grown on a variety of soils including silts, loams and gravels
and can tolerate acidic as well as alkaline soils. However,
deep fertile clayey or loamy soils which can be easily
puddled into mud and develop cracks on drying are
considered ideal for raising this crop . 50
Rice in Bihar
Rice is cultivated in 37 districts of Bihar. Of the thirty seven,
25 districts are falling under the low productivity group
classication (productivity of 1,000-1,500 Kg/Ha) and these
account for 63 percent of the 36.57 lakh hectares of total
area under rice in the state. Only one district is falling under
high productivity group classication i.e. yield more than
2,500 kg/ha . Average area under high productivity group 51
comprising one district during triennium ending 2000-2001
was 2.26 lakh hectares, which was 6.2 percent of total area
(36.57 lakh hectares) under rice in the state. Triennium
Table 15 : Paddy production analysis of Bihar state
Source: http://drdpat.bih.nic.in/PA-Table-04-Bihar.htm
average production was 5.87 lakh tonnes which was 10.5
percent of average total production (55.97 lakh tonnes) in
the State. Triennium average productivity of high
productivity group comprising one district was 2,597 kg/ha
as against the State's average productivity of 1,530 kg/ha.
Area, production, and productivity of rice under different
productivity groups in Bihar during triennium ending 2000-
2001 are given in the table below.
Considering the level of productivity, the leading districts in
2015-16 were — Lakhisarai, Sheikhpura and Rohtas. The
highest level of productivity (4270 kg/hectare) was
recorded in Lakhisarai. Considering the production level,
the leading districts are — Rohtas, Aurangabad and 52Banka .
Rice is one of the main crop of Bihar but its productivity is
very poor. More than 60 percent rice area is concentrated in
Bihar in low productivity zone and this zone contributes
more than 50 percent of rice production of the State. Area
coverage under rice with high yielding varieties is about 65
percent and irrigation facility is available for about 40
percent rice area in the state. If the productivity of low
productivity zone is increased, the rice production can be
increased considerably without increasing the area under 53rice . This can be achieved by adopting various climate
resilient technology like using the ood and drought
resilient varieties, promoting the seed bank for seed
availability after the recession of ood, adopting water
efcient technology like SRI, AWD, crop rotation, etc.
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
48https://www.nfsm.gov.in/StatusPaper/Rice.pdf page 1
49https://www.nfsm.gov.in/StatusPaper/Rice.pdf page 3-4
50http://www.yourarticlelibrary.com/cultivation/cultivation-of-rice-in-india-conditions-methods-and-production/20919
51http://drdpat.bih.nic.in/PA-Table-04-Bihar.htm
52http://finance.bih.nic.in/Reports/Economic-Survey-2017-EN.pdf
53http://drdpat.bih.nic.in/PA-Table-04-Bihar.htm
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Figure 10 : Paddy coverage in Bihar
5.2. Actors
In the rice value chain, a number of actors play important
roles. Being a major commodity, the volumes handled are
also very large and challenges are faced by all the actors in
the value chain. Although the supply chain is established
for hundreds of years, still there is lack of linkages amongst
the actors as far as the value chain is concerned. The main
actors involved in the rice value chain in Bihar are input
suppliers, farmers (producers), traders, processors,
retailers and service providers.
5.2.1. Input Suppliers
The input requirement for rice cultivation include seed,
fertiliser, manure, pesticide, weedicide and farm
equipment.
Seed – Farmers normally use their own seed but with the
increased awareness and need for higher production, the
farmers have understood the importance of hybrid seeds
and seed replacement. Farmers who use their own seed
have a high percentage of admixtures and seed purity
remain a big challenge for them.
A number of companies like Bayer, US Agriseeds and
DuPont Pioneer are working in Bihar for suppling paddy
Prominent varieties of rice suitable for lowland are Prabhat
and Rajendra Bhagwati and those suitable for dryland are
Vikas and Sahbhagi . Other varieties used in Bihar are
Arize-6444 (115 days), US Agri – 312 (110 days) and PHB-
71 (125 days). Drought Tolerant varieties of rice – Sahbhagi
and Sabor Ardhjan (both have 40 q/ha). Submergence
tolerant variety of rice is Swarna Sub – 1 (long duration 55-
60 q/ha). It can tolerate 14 days ash oods after 30 days
transplanting (in ood conditions it gives 30-35 q/ha).
Research is being undertaken at Bihar Agricultural
University for suitable rice variety for Submergence (North
Bihar) and Drought (South Bihar) conditions. A single crop
may have to face both the conditions during its growth
period, thus research is also being undertaken to
incorporate resistance for both these conditions in rice.
There is scope of producing long grain rice in Bhagalpur,
but due to non-availability of appropriate rice processing
(broken percentage will be more in absence of appropriate
technology), the production cannot be taken up on a large
scale.
There is government subsidy offered on selected 8-10
hybrid varieties of rice.
To achieve self-sufciency and self-
reliance in meeting the growing
demand of quality seeds of high
yielding varieties from the farmers
of the State at a reasonable price,
the Bihar Rajya Beej Nigam Limited
(BRBN) was incorporated on July
18, 1978 under the Companies Act,
1956 by the Government of India
with the nancial assistance of
World Bank under the Second
National Seed Project.
seeds. Other than private companies, the seed is also
supplied from Agriculture university and State Seed
Corporation i.e. Bihar Rajya Beej Nigam Limited (BRBN).
Department of Agriculture also supplies seeds of improved
and traditional varieties to farmers. PACS and some groups
formed by Jeevika are also involved in sales of the paddy
seed to farmers.
A specialty rice called “Katarni” (small grain
aromatic) has achieved eld trials of upto 40 q/ha
yield. The aroma of this rice is dwindling over time.
Manure – Most of the farmers use their own manure. In the
ood prone areas, farmers don't use a lot of manure.
Instead, they use chemical fertilisers injudiciously. Since,
most of the farmers are not undertaking soil testing, they
don't have an idea about the quantity of fertilisers to be used
in paddy cultivation. Moreover, the use of cow dung as fuel
cake is a matter of concern as this can be used as compost
in paddy production.
Table 16 : Consumption of Nutrients during last 5 years (In MTs.)
Source: http://krishi.bih.nic.in/Fertilizers.htm
Fertilisers – The fertiliser/nutrient consumption in the state
is increasing gradually since 2006-07. It has risen from 54163.61 kg/ha in 2011-12 to 201.07 kg/ha in 2015-16 . (see
table below).
The fertilizer requirement for the State is planned annually
according to the expected crop coverage area. The
requirement is placed to the Government of India in a zonal
conference organised at New Delhi. Based on the
discussions as per discussion with State representative,
the Department of Agriculture, Cooperation and Farmer
Welfare, Government of India and Department of Fertilizers,
Government of India x the annual target of fertilizers
requirement for the State. According to the target xed by
GOI, the State prepares district wise and districts prepare
Block wise and month wise supply plan of different
fertilizers.
When the State receives the monthly company wise
fertilizer supply plan from the Department of Fertilizer (GOI),
the State allocates this to all the districts according to
district requirement. The company receives the fertilizers at
rail rake point and distributes this to wholesalers or retailers
as per the district wise allocation. Wholesalers' sell
fertilizers to the retailers and nally, retailers sell fertilizers to
the farmers. Chemical fertilisers are distributed through
cooperatives (PACS) and government input stores.
Fertilisers are widely used in rice cultivation. These include
DAP, urea, NPK (usually 20-20-20), muriate of potash
(MOP) and to a lesser extent SSP, Gypsum and
micronutrients such as zinc and sulphur. The sale price of
various fertilisers are Urea – ₹ 450; DAP – ₹ 1140; NPK – ₹
850; SSP – ₹ 405; MoP – ₹ 560; Gypsum – ₹ 270 (all bags
are 50 kg capacity).
Pesticides, Fungicides, and Weedicides - Pesticides and
fungicides are used for control of stem borer and false
smut. The state is promoting zero tillage concept in which
there is a recommendation to use weedicide in paddy
cultivation.
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54http://krishi.bih.nic.in/Fertilizers.htm
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Wholesalers: The input wholesalers based at district head
quarter get stocks from private companies as per the
Government schedule and sell these in their existing
channel of retailers at block and village level.
Retailers: Input retailers operate small shops in the block
and villages of the districts. They buy from private
wholesalers in the area or in neighbouring cities. They sell
different varieties of rice, including local varieties which
reects the shortage of improved seeds. A range of
chemical inputs including Chlorpyriphos, Phorate,
Pendimethalin, 2-4 D and Acephateetc is sold by the
retailers. In recent years, biofertilisers like Azotobacter,
PSB, Neem Oil and Trichoderma and Pseudomonas have
also found its place in the retailer's shop. High Water
Absorbent Polymer is now available in many retail shops
which is used in dry areas for soil moisture conservation.
5.2.2. Producers
Land holdings of farmers in the three AEZs studied, ranged
between 0.5 to 20 acres. Farmers grow wheat, rice, maize,
mustard seed and a variety of pulses and horticultural
crops. Rice is the major crop for most farmers, as it is a
traditional food crop and nd its place both in ooded and
dry areas. Most farmers practice crop rotation of rice and
wheat on the same eld for years rather than alternating
with other crops such as pulses, oil seeds or vegetables.
In the context of Bihar, oods and drought are the two main
factors which impact crop cultivation. In the last 10 years,
the producers are facing the risk of uncertain rainfall
especially at the time of nursery raising and transplanting.
Some of the farmers reported that they had to throw away
the nursey raised paddy transplants as due to delayed
rains, transplanting could not be taken up. In the ood
affected areas, farmers reported crop loss of upto 100
percent during the rainy season. At the time of owering,
rains wash away the owers resulting in chaffy ears. With
limited availability of varieties, only a few farmers are able to
cope with uncertain rainfall.
The Department of Agriculture is promoting SRI (System of
Rice Intensication) but there is poor eld level adoption
amongst farmers due to the high skill requirement for
transplanting and weeding in SRI.
Smallholder farmers use a protion of the produce for family
consumption and surplus is sold in the market. For a family
of ve members, approximately 25 percent (10-12 quintals)
of the total household level paddy production is kept for
own consumption (ICSD eld survey). There are also
cases, when smallholder farmers need cash to buy inputs
for the next planting season, they sell their produce and
later purchase the grain necessary to feed the family.
Most farmers are not able to sell their product at
Government declared minimum support price (MSP) due
to the inferior quality of the produce and the lack of
accessibility to the sale point of the FCI or designated
agency. Farmers are forced to sell the produce in mandis
(local markets) or to traders at a price lower than the MSP.
Producers/ small collectors are aware of the market price
offered by traders. They are ignorant regarding the MSP
though the same is announced through radio, newspapers
and also displayed at PACS. Farmers prefer to sell the
produce from the farm gate after keeping the required
stock for their own consumption. They are not aware of
post-harvest management aspects. Different types of bags
are used by the farmers for packing paddy (empty bags of
fertilisers, cement, old gunny bags, etc). These pose a
health risk for consumers. Most of these bags are normally
thrown away after reaching the mills and a proper recycling
mechanism for the bags does not exist, which poses a
threat to the environment.
The cost of production for rice in Bihar is approximately ₹
22,113/hectare.
Due to the lack of storage facilties near the eld,
transportation of paddy from eld to home is an energy
consuming activity, involving labour and tractor. On an
average, the producer travels between 0.1-0.5 km and in
some cases, upto 2.0-3.0 km for transporting the harvest
from the eld to the storage point in the house. Paddy sold
to the local collector/trader / PACS is transported a distance
of approximately 3.0-5.0 km and in certain cases, upto 6.0-
7.0 km in poor road conditions by the producer through
tractors.
5.2.3. Aggregators or traders
The farmers sell paddy to local traders in the villages, in the
nearest market, at the PACS and sometimes directly in the
Mandis (local markets). Local traders in the village buy
small quantities of paddy and sell this to larger traders or
rice millers. On an average 3-4 small collectors are
operating at the village level. These collectors trade an
approximate volume of 150-250 bags of 50-60 kg paddy
(i.e. 7.5-15.0 MT paddy) each. There are 1-2 large traders
making a transaction of 40-70 MT paddy in each village.
Apart from these, PACS is also trading in some areas to the
tune of 50-60 MT of paddy annually. During the peak
procurement season (October-December and then again
March for Agahani paddy) the trading transcations take
place on a daily basis, whereas during the lean season,
transactions take place on a weekly basis.
Local collectors and large traders are not very quality
conscious. Their storage system is temporary in nature and
not upto acceptable storage standards.
The small traders or aggregators operate their business
with low margin but handle high volume for the
sustainability of their business. Margins for traders is ₹ 4.15
per quintal or sometimes even less. This is sufcient since
quality differentiation is limited.
Table 17 : Cost of paddy production in one hectre of land
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Table 18 : Cost and margin of Paddy trader
Figure 11 : Functioning Primary Agricultural Credit Societies (PACS)
5.2.4. Food Corporation of India (FCI)
FCI plays an important role in monitoring the price of the produce. The FCI procures the produce from farmers whenever the
market price is operating lower than the MSP. However, in the eld it was found that this intervention did not have a signicant
impact as farmers were selling paddy at less than the MSP. Though there is a steady increase in MSP over the years, but the
procurement through FCI is less than 15 percent of the total production in the state.
5.2.5. Rice Millers
Processors play a vital role in the paddy value chain. Processing of paddy results in rice as the main product. Rice is the
source of many products available in the market for consumption. Paddy has to undergo de-husking, cleaning, polishing and
packaging to become rice. The husk of the rice is reused as fuel in the processing plant or sold at a throwaway price. Rice bran
is sold to solvent plants that extract oil. It is sometimes used by the feed manufacturer to use as an additive for cattle feed.
There are rice mills in all the district but they have low capacity and are not modernized to produce high quality rice. The
processors from Haryana and Punjab used to collect the paddy through their agent and sell it to FCI which then comes back to
the state for distribution under PSD. The small scale rice mills are not adhering to the norms of pollution control board which
demands the rms to ensure propoer handling, storage and transporation of rice husk ash. During the processing of paddy,
the disposition of boiler ash can result in emissions, thereby requires effective management of ash. The rice miller in the state
is procuring the paddy through their agents (traders in villages) and through the open market. The miller earn a prot of ₹
378/- per quintal. Broken rice is purchased by the rice traders.
It was observed during the visit that processors and large traders do not buy insurance for the commodity (whether in storage
or in transit) and hence are exposed to risks arising from re, theft, etc.
Figure 12 : Paddy Procurement by Food Corporation of India (FCI)
Table 19 : Cost and prot of rice miller
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Small millers at the village level process very small quantities of rice for home consumption as a service for villagers. Medium-
and large-scale millers buy raw grain from the mandi through traders, and a few are registered as traders themselves. They
also purchase paddy from PACS and in turn sell processed rice (with 60 percent recovery).
For specialty rice the price offered is based on quality. The quality characteristics of rice are the length of the grain, whiteness
and amount of broken pieces. Millers set an acceptable level for each quality characteristic and discount the price given for
each percentage over the acceptable limit, rejecting when damage or moisture is above a certain percentage.
5.2.6. Flattened rice Processor
Flattened rice (also called beaten rice or Chuda) is a rice which is attened into at light dry akes. These akes of rice swell
when added to liquid, whether hot or cold, as they absorb water, milk or any other liquids. The thicknesses of these akes vary
between almost translucently thin (the more expensive varieties) to nearly four times thicker than a normal rice grain. This
easily digestible form of raw rice is very popular across Bihar. Normally attened rice is taken with curd in Bihar and jaggery is
added to taste. There are a number of “Chuda” makers in many towns in Bihar and they are one of the important actors in the
rice value chain in Bihar.
Paddy is either directly purchased from the farmers or local traders. chuda makers don't store paddy. Paddy is soaked in water
and immediately processed into chuda. The chuda is further sold directly to customers or retailers.
For the chuda processor, the total costs are ₹ 1625 per quintal and the margin is ₹ 191.
5.2.7. Flattened Rice retailer
The chuda is further sold either to retailers or directly to customers in small quantities especially during the festival season of
Makar Sankranti. After processing into Chuda the margin goes up. The cost for the retailer is ₹ 3,000 quintal and the retailer's
margin is ₹ 383 per quintal.
Table 20 : Cost and prot of attened rice processor
Table 21 : Cost and margin of attened rice retailer
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5.2.8. Wholesaler
Rice wholesaler's main responsibility is to bring rice from other states and distribute to local retailers.The retailers approach
wholesaler for rice stocks. The total cost of rice wholesaing is ₹ 2,875/- per quintal and whoelaser's sale price is ₹ 2,950/- per
quintal, earning him a margin of ₹ 74.27/- per quintal.
5.2.9. Retailers
Rice in Bihar is sold by retail shops, dealers and traders in Mandi. Apart from this, huge quantities are distributed through
Public Distribution System (PDS). Rakes of rice of Food Corporation of India (FCI) come from Haryana / Punjab (19000 MT per
month) (1 rake=42/58 wagons each of 60.1 MT). FCI does not have a direct role in distribution or procurement.
Table 22 : Cost and margin of rice wholesaler
Table 23 : Cost and margin of rice retailer
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5.3. Transaction cost analysis:
Factors affecting the TC at various level of the value chain is illustrated below:
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5.3.1. The transaction cost of various VC actors:
The transaction cost analysis was completed for rice value chain in Bihar for all value chain actors. Producer and retailers
handle the minimum stocks and hence bear the lowest risks. Traders and processors are handling larger volumes, bearing
maximum risks. But, it is important to understand that transaction risk is low as compared to the actual risk of individual
producer because of climate uncertainties and other factors. Processors and traders lower the risk by developing good
forward and backward linkage. Policies play a major role for risk minimization. In rice, the variability is not high as there is local
and domestic market available. The weak institutional setup also increases the transaction cost at each level. The analysis in
above table shows that transaction costs could be signicantly reduced by aggregation/FPO-centric models at the
producer's level due to economies of scale, whereas at the trader and processors level it could be reduced by adoption of
improved transfer and monitoring systems and stock handling. Quality and grading standards can also unlock a huge margin
that can be transferred to the producer enhancing their price. It is important to note here that policy level intervention and its
appropriate implementation will help to reduce the transaction cost. Uncertainty about the market, quality of commodity and
legality involved in the activities also adds to the transaction cost in Bihar.
5.3.2. Producers:
Lack of market information and knowledge about tapping the opportunity are the main challenges at the producer level. The
search cost for producers involves interaction with traders and fellow farmers, accessing market information through
newspapers, phone calls and internet. Producers spend approximately ₹ 1405/- per MT for the produce of 3.0 MT from one
ha. For producers, the screening and bargaining costs are very high in comparison to search, monitoring and enforcement
cost. To make the VC more efcient, this cost has to be reduced by strengthening the local institution (promoting the
aggregation/FPO) and making the market more transparent and accessible for the producer. In this context, modern
technology should be used for online sale, pledging the stock, etc. Grading and quality improvement of produce are
important to reduce transaction cost, which could be improved by extension services and capacity building programmes.
5.3.3. Traders:
In the state, traders are having fairly good contact with processors (small, medium and large). In this case, the search cost is
minimized but they are paying high costs towards bargaining and enforcement. Storage plays a huge role as most of the time
the stock are transferred immediately. Traders shared that bribes are paid at various level for carrying out their businesses.
Their enforcement cost is higher than the producer. One trader handles on an average 500 MT of rice in a year with a
transaction cost to ₹ 156/- per MT. The trader is taking the risk of quality assurance and payment uncertainties because of the
non-contractual setup of the trading in the market. More transparency in the government system and improvement of
production quality will reduce the transaction cost of the trader which ultimately helps in streamlining the VC.
Figure 13 : Spread of Transaction cost in Rice Value Chain
Figure 14 : Spread of Transactional cost in Rice Value Chain
Table 24 : Percentage spread of Transaction Costs at different actors' level in Rice Value Chain
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5.3.4. Processors/ big traders:
Rice processing is spread across the state and is available in small, medium and large capacities. As power supply is a
constraint, processors use diesel as a fuel other than the electricity. They have the institutional setup with the state food
corporation and PACS apart from direct linkup with traders and producers. The transparency level is low for the transactions.
The legal issues arise frequently with the transporter and the suppliers as there is no appropriate contractual arrangement
within and outside the state. Searching and screening cost is minimal as these traders have established very good links with
institutions, buyers and suppliers. The enforcement expense, transfer and monitoring and bargaining cost are high. The
processors and the big trader approximately handle 25,000 MT in a year which means their transaction cost per MT is ₹ 12.74
which is low. As processors handle maximum quantity, they are also absorbing more risk pertaining to legal transaction,
auditing and bribery. Although at this level, the cost of the transaction is low but by bringing in more transparency, legal
contract between buyer and seller and by minimizing the enforcement expenses the VC can become more vibrant and further
minimize the producers cost by improving the market dynamics.
5.3.5. Retailers:
Retail sales of rice in the state are not much diversied because of a common variety of paddy. Trade in specialty rice is limited
and restricted to select big cities in the state. It is observed that an average retailer is having a business of 20 MT in a year and
that the transaction cost is ₹ 240 /- per MT. For the retailer, the major cost is bargaining cost at both seller and buyer end.
Quality of the stock is also not guaranteed as there is no certication mechanism.
5.4. Risk Analysis based on Transaction Cost VC Assessment
The major risks faced by the producer are related to climate an labour. The trader faces high risk of damage/ theft and
payments and the processor faces risks of quality, infrastructure, policies & legality and payments as major risks.
Table 25 : Risk Analysis of Rice
5.5. Constraints and opportunities in Rice Value Chain
Though the declared MSPs are higher than the market price in past few years, the limited presence of FCI in the market
safeguards' producers' interest. Lower market prices resulting in loss for producers is the biggest constraint in paddy value
chain. The presence of newly release wide range of paddy varieities which can survive both drought and ash oods are
available however, the varieties need wider adoption among farmers.
Punjab and Haryana state dominate production in country and also have state of the art processing infrastructure. The
processor from both these states dominate Bihar market as well as FCI supplies. The schemes and subsidies provided by
Bihar state government are recent, it will take time for development of inhouse processing facilities and competitive products
within Bihar.
Table 26 : Constraints and opportunities matrix of Rice Value Chain
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5.6. Factors (Situation and
Constraint) and scope of
improvement
5.6.1. Extension and research:
The productivity of rice is dependent on the quality of
advisory service available to the farmers. It is observed that
there is a gap between the farmers and the service
providers like the department of agriculture and extension
agencies like ATMA and the NGOs working in the state. The
private companies (specially input suppliers) are offering
advisory services in high productivity areas with a mandate
to increase the sales of their inputs. Their visit also varies as
per the demand of the input sale which does have any
scope to guide the farmers in the critical stages like the post
harvest period. Borlaug Institute for South Asia (BISA) is
also catering only to the needs of farmers in the areas close
to the vicinity of the institute.
5.6.2. Package of Practice and Post-
Harvest know how
To cater to the needs of family and efforts for selling more
volume of rice (which is of coarse quality and lack of market
for premium rice), farmers try to grow more quantity of rice
and there is less focus on the quality. As a practice, farmers
prefer to broadcast seed and fertilisers, rather than
transplant paddy. The seed used is also of mixed type. As
the labour availability is becoming scarce, the practice of
rice transplanting is reducing, specially where family labour
is not available.
Farmer awareness about importance of crop rotation, soil
testing and proper land management is low. Only
progressive farmers are in direct touch with department
and follow their recommendations.
Paddy is not stored for long at the farmer's end. Within the
short span of storage, there is weight loss and loss due to
attack of rodents. There are incidences reported when
paddy lot was received with moisture and fungal attack and
entire rice was spoiled.
The government agencies and extension services are
trying to disseminate information about farming practices
to the farmers, but it is not reaching the farmers in the
remote areas.
5.6.3. Input Availability
With adequate supply of fertiliser in the state, many farmers
in remote villages are not able to acess the input due to bad
road condtion and distance to the sale point. This in turn
results in high transcation cost. In addition, it appeared that
in some instances, farmers are over-applying chemical
inputs including DAP and urea. Various Bio-fertlisers
without any quality certication are available on the input
retailers' shelves. It was informed that bio-fertilisers are
coming from faraway places like Bangalore, which means,
its efcacy must have reduced because of exposure to high
temperature during transportation.
5.6.4 Farm Implements
There are no 'formal' Custom Hiring Centres, but, there are
progressive farmers and entrepreneurs who have large
equipment and tractors. These farmers and entrepreneurs
rent their implements to other farmers during cultivation. It
has been observed that at the time of sowing the pressure
on hiring the implement is high, because large area needs
to be covered in a shorter period. The existing policy of
pushing higher horse power farm machinery (tractors
250%, combine harvestors 400%, power-tillers 150%
growth between 2009-2015) in Bihar is less effective in
value addition in pre-production stage. Rotary weeders and
transplanters that require lowe household level
investments can create a signicant impact on reducing the
labour costs.
There is high degree of parcelization of lands in Bihar.
Coupled with this is the fact the higher costs in production
are not incurred during land preparation, but during
transplanting and inter-cultural operations. The machinery
required for these are low-investment, farmer-friendly
(knowledge, skills to operate) and most importantly,
gender-friendly.
With the current set of practices already adding 30-60
percent of costs in terms of labour, it is suggested to
conduct a review of SRI in the context of rice cultivation in
Bihar. SRI has shown beyond doubt that it is quite labor-
intensive and hence not the protable way ahead for rice
cultivation in the state. Further, the effects of scale are yet to
be evident in SRI.
5.6.5 Irrigation Facilities
Bihar has fertile land and availability of water resources.
However, in spite of the fact that the irrigation network in
Bihar is spread across approximately 86.25 lakh acres,
irrigation is yet to reach many farmers. About 61.12 percent 55of net cropped area is irrigated . In Bihar, irrigation is
available through canals, tube wells, ponds and some
other modes. Flood prone areas are affected rst by ood
and later followed sometimes by drought like situations.
The synchronization between oods and duration of rice
crop sometimes does not match and ultimately results in
total crop failure. Farmers use pump sets and it is mostly
rented by the large farmers to the small and marginal
farmers. Lack of regular supply of electricity and higher cost
of diesel is one of the factor affecting margin of farmers.
Uneven land is also found in certain places and tal has ood
water retained for a longer period.
5.6.6 Plant Protection
Rice crop gets affected by stem borer, blight, blast, brown
hopper and cut worm. As rice is grown mostly in ooded
condition, pest and disease infestation is high. Farmers
reported that due to small landholdings, their plant
protection activities are less. Many do not realise that their
crop losses are high. Normally, the farmers follow the
recommendation of the retailers. The retailers are
frequently visited by the companies' representatives for
sales promotion. The places where retailers are having
access to institutions like KVK, university, are adopting their
recommendations.
Rats are also a big problem reported by farmers. The
measures to control rodents are less.
After harvesting the paddy is either sold or given to PACs
and nally reaches millers, where it is stored and pest
control measure is adopted.
5.6.7 Soil Testing Services
Department of Agriculture provides soil testing services.
There are mobile soil testing vans which goes to villages
and organise camps for soil testing. There are some private
companies also providing soil testing services. The soil
testing services are available on highly subsidised rates or
nominal charges. But, in most of the areas, farmers
interviewed reported that soil testing facility is not available.
5.6.8 Business Enabling Environment
The key aspects of business enabling environment for rice
in Bihar are:
Ÿ Transportation infrastructure;
Ÿ Financial Services
Ÿ The open mandi system; and
Ÿ The minimum support price mechanism.
5.6.8.1 Transportation and infrastructure
The condition of the main roads was found to be good but
the connecting roads to the village are in poor condition. At
the same time, the transporters are concentrated in the
main hubs. To feed the villages and procurement from the
hub is a challenging task and farmers are again dependent
on small vehicles and agents. This, in turn, increases the
cost and losses during transit. The situation becomes more
challenging after oods. Most of the feeder roads and small
bridges are broken. In some of the cases transporters
report about local police harassment. It was observed that
during the transport, transit insurance mechanism is not
adopted and stakeholders involved also bear a risk by not
taking transit insurance.
5.6.8.2 Financial Services
Farmers are equipped with Kisan Credit Cards and banks
are also very cooperative now, as compared to 5-10 years
ago. Jeevika is also working with groups and organising
the inter-loaning facility. Still the relations between the
producer and buyer is strong and credit is availed in case of
a requirement from the farmer .
5.6.8.3 Mandi
A Model APMC Act was formulated and circulated to the
States/UTs in the year 2003 for adoption. The Model Act
provides for contract farming, direct marketing, setting up
markets in private and co-operative sector, e-trading, single
point levy of market fee, single registration of market 56functionaries, farmer-consumer market etc . APMC Act
was repealed in Bihar in year 2006, post open mandi
systems is functional. In case of rice / paddy neither miller
nor farmers have to pay any charges to the Mandi.
5.6.8.4 Minimum Support Price
The government has set a minimum support price of ₹ 1470
/ qtl of paddy for year 2017. But no producer shared getting
paid this price by traders. Only where the paddy is sold to
the PACS, the producers are paid the minimum support
price.
5.6.8.5 Upgrading
In the rice value chain in Bihar, the PACs, aggregators and
millers play a vital role. There seems to be lack of capital
investment and incentive for upgrading their units. Rice
millers interviewed were keen to upgrade but they are not
sure of the demand of improved grades of rice in Bihar.
Farm equipment suppliers expressed their willingness to
upgrade themselves. Chuda makers are willing to upgrade
but their knowledge about improved technology and
returns after upgradation is limited.
5.6.8.6 End Markets
Rice is sold to consumers by the local shopkeepers and
retailers. Market preference is for coarse rice. But in the big
cities, long grain and ne grain rice is gaining popularity.
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55Agriculture Road Map - Biharwww.nfsm.gov.in/StatusPaper/Rice.pdf page 3-4
56http://agricoop.nic.in/sites/default/files/overview.pdf
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Most of the ne grain rice is imported from other states like
Haryana and Punjab. Local varieties are sold at ₹ 28-30 per
kg. About 10 different types of rice is being sold in the open
market.
5.6.8.7 Inter-Firm Cooperation
Horizontal Linkages: Farmers have been organised into
groups under the various schemes at village and block
level. Each group has 10-15 members and in some cases
upto 35-40 members. Jeevika is playing an important role in
organis ing farmers groups. NGOs l ike AKRSP,
Technoserve, BAIF and Access are also involved in forming
farmers group. Their activities are not only limited to crops,
but also linked to livestock, micronance etc. Farmers have
been benetted particularly in terms of shared labour,
equipment and collective procurement. Still a trust building
is required among the groups before taking up larger
initiatives. Farmers still prefer to deal individually with
traders rather than as a collective.
Vertical Linkages: At the village level, strong linkages exist
between farmers and local traders. Personal relationships
are very strong between them. In times of crisis, farmers are
supported by local traders through loans. The local traders
also inform farmers about the use of inputs, marketing etc.
Vertical integration is not seen in the rice value chain of rice.
The partnership approach is lacking. Farmers do not get
timely or accurate market information. Traders try to keep
the prices offered as low as possible to increase their
prots.
5.7 Scope of Improvement
(Recommendations)
5.7.1 Extension and research:
Participatory Technology Development could be adopted
for effective dissemination of technology. Farmers group
formation and linkage with extension services is another
important area for improvement. The challenging areas
where ood incidences are likely, intensive training and
capacity building measures need to be taken with the help
of line departments. Use of ICT through normal mobile SMS
services regarding ood warning and recommendation of
cultivation practices could be adopted on a larger scale.
5.7.2 Package of Practice and Post-
Harvest know how
Capacity building of farmers and training them about post-
harvest technologies can be undertaken for improving the
value chain. There is the scope for improving the storage
facilities with the farmers and collectors. This will help in
reducing the storage losses. As there is not much
uctuation in prices, storing for a longer period may not
yield much prot, but reducing the post-harvest storage
losses will add to the overall protability.
Storage of rice for farmers' own consumption is
challenging. Weevils damage is reported. The use of
fumigants or chemical could be researched to replaced
with low cost nitrogen / CO2 gas ushing systems.
Ÿ Storage facility at village level could be created
e x t e n s i v e l y t h o u g h PA C S a s w e l l a s b y
entrepreneurship mode
Ÿ Warehouse construction at mandi level/miller level to
create the nance linkage with institution
5.7.3 Input Availability
Village level input availability centres could be created. The
same can also be routed through PACs. As far as availability
of Biofertilisers are concerned, it would be better to have
them manufactured in the state itself through universities,
zonal research centres and KVKs.
Availability of ood and drought resistant seeds varieties
should be made available.
5.7.4 Farm Implements
There are various small scale equipment available with
manufacturers. They keep on experimenting with
implements based on the feedback received from the
farmers. Orienting manufacturers towards integrating
renewable energy for running the implements will be
useful. As a higher proportion of labour cost is on inter-
cultural operations and sowing/transplanting (adding upto
37 percent), there is scope of increasing the use of farm
implements.
5.7.5 Irrigation Facilities
Adoption of Water Stewardship and Water Efcient
Technologies will be helpful in controlling production costs.
There is need to store the water for the crops in the Rabi
season.
5.7.6 Plant Protection
To reduce losses, availability of inputs ar village level is
required. But, for a sustainable practice, non-chemical
control measures in the post-harvest produce should be
worked upon and the manufacture and distribution of
biological agent should be promoted.
5.7.7 Soil Testing Services
Distribution of soil testing kits and its service availability
through gram panchayats would be benecial for further
the cause of soil testing among farmers. At the same time,
farmers also need to be trained to adopt recommendations
based on soil test results.
5.7.8 Business Enabling Environment
The key aspects of the business enabling environment for
the rice in Bihar are:
· Transportation infrastructure
· The open mandi system and
· Ensuring the minimum support price mechanism.
5.7.8.1 Transportation and infrastructure
There is scope of improvement for road connectivity and
alternate transportation means which are cost effective.
5.7.8.2 Financial Services
Formation of FPOs and collective collateral for purchase of
inputs in time could be worked upon. At the same time,
equipping more farmers with Kisan Credit Cards will help
them access credit at lower rates. Increasing the
penetration of PACS (Input/Credit) will therefore also
increase the availability of credit and access to inputs
leading to signicant value addition in the pre-production
phase.
5.7.8.3 Mandi
From traditional way of negotiations by traders, a
transparent system could be worked upon, but this
requires a lot of efforts and policy level decisions.
5.7.8.4 Minimum Support Price
For benets of MSP to benet the farmer, it is important to
have farmer's policy level dialogues and better
coordination amongst different departments and farmers/
FPOs/ PACS.
5.7.8.5. Upgrading
Tradition rice mills are running on diesel or electricity and
use of renewable energy sources using Solar/wind energy
could be explored. There is also the possibility of using
pneumatic based operations instead of using conventional
conveyors. Many technological improvement could be
researched for chuda making, which presently is highly
labour and fuel intensive.
5.7.8.6 End Markets
Branded Chuda and other speciality rice could be
promoted through retailers. Once there will be an increase
in demand for specialty rice in the local market, farmers will
tend to grow such varieties and millers will also try to
upgrade their technologies to process speciality rice. This
will help in reducing the dependency on import of premium
rice from other states.
5.7.8.7 Inter-Firm Cooperation
Horizontal Linkages: Organising the farmers into FPOs
and organising business meets with the traders and buyers
will help farmers to increase their bargaining power. There
is a need to motivate farmers towards enterpreuernship
skills. At the same time, the understanding about collective
marketing and aggregation will help farmers in not only
reducing the other overheads and losses but also
negotiating a better offer for themselves.
Vertical Linkages: Vertical linkage can be strengthened by
moving from individual approach to SPO approach.
Partnership approach should be work upon and value
chain establishment should be oriented to include many
different stakeholders who can help in the process of
improving in value chain efciencies like nancers,
Government Departments, input suppliers, etc. There is
dire need to create a system for transparent market
information system. Speciality rice is not promoted.
6. Lentil Value Chain
6.1 Introduction
Lentil is a highly nutritious pulse and its grains are mostly
used as dal (whole or dehulled). It contains 25 percent
protein, 0.7 percent fat, 2.1 percent mineral, 0.7 percent
bre and 59 percent carbohydrate. It is also rich in 57phosphorus and carotene . Lentil is a traditional crop in the
Gangetic plains of UP, Bihar and West Bengal. The dual
purpose of lentils as source of protein in human diet and
nitrogen xation ability in soil has gained importance in 58farming in these states . Lentil is an important Rabi crop in
this region due to low water and input requirement and 59higher protability .
Lentil can be grown on a variety of soils However, it cannot
tolerate waterlogging and even short exposure to
waterlogging can harm the crop. The production in deep
sandy loam soils having high phosphorus and potassium
content is also poor. Lentil is also sensitive to boron, saline
and sodic soils. Rainfall of 350 mm to 550 mm is enough for
lentil cultivation.
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57Lentil in India – An overview, K M Sindgh and A K Singh
58Joshi 1998
59Reddy and Reddy 2010
55Agriculture Road Map - Biharwww.nfsm.gov.in/StatusPaper/Rice.pdf page 3-4
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Canada is the largest lentil producer with production of 1.98 million MT, followed by India with 1.10 million MT. Turkey,
Australia, Nepal, and Bangladesh are among the largest producers of lentil after India. Although India is the second highest
producer of lentil, domestic consumption in India is very high and Indian exports are very limited. The share of lentil in total
pulses export from India is also comparatively low.
Lentil is exported from India to Sri Lanka (43.39 percent), Bangladesh (18.11 percent), UAE (8.35 percent), Egypt (3.98
percent) and USA (3.67 percent). India is also importing lentils on a large scale to sufce high domestic demand. Most of the
import comes from Canada (89.58 percent), USA (7.47 percent), Australia (2.88 percent), Turkey (0.03 percent) and
Mozambique (0.03 percent). The share of lentil in overall pulses import is as provided below:
Table 27 : Share of Lentil in total pulses export form India
60However, if compared with international market, domestic prices are always high .
Bihar is the third largest producer of lentil in India after Uttar Pradesh and Madhya Pradesh. Bihar's production of lentil for
2014-15 was 140 thousand MT from the area of 152 thousand hectares and productivity of 821 kg/ha. The data on area,
production and productivity for the last three years in Bihar is shared in table below. It can be seen that there was a decline in
area coverage, production and productivity in the three years between 2012-13 to 2014-15.
Table 28 : Share of Lentil in total pulses import in India
Table 29 : Area, production, and productivity of Lentil in Bihar
6.2 Actors
6.2.1 Input Suppliers
Lentil being a leguminous crop can x nitrogen in the soil, reducing nitrogen requirement from chemical and other organic
sources. Seed is the major critical input in lentil production. Farmers are still using old varieties like Aruni, Panthmasoor 4 and
pussa Vaibhav etc which have not been replaced for a long time. Anguri is slowly being introduced to the farmers through the
BAU seed production system. The plant breeding department of BAU during interactions agreed that the seed supply chain is
very weak. In addition, inputs like sulphur, zinc and phosphorus are the only recommended fertilizers. However, application of
zinc and sulphur is limited and not common among farmers.
6.2.2 Producer
61In Bihar, lentil is grown as a subsistence crop and not for commercial purposes . Most of the lentil is cultivated under rainfed
conditions.
The seed rate for lentil is 38 – 40 kg-1ha. The seeds are treated with Trichoderma and thiram/carbendazim. While the local 62Agricultural University recommends rhizobium treatment , during FGDs at Jagdishpur, Parora, and Baraiya it was found that
only 60 percent farmers have adopted rhizobium treatment. The normal sowing time for the crop is second week of October,
but due to weather shifts, sowing has also shifted in recent years to mid-November when the temperature drops to 200C, the
ambient temperature for germination of seeds.
The spacing followed is 30cm X 10cm. L entil grows like a bush and hence maintaining the optimum spacing is necessary to
get good yields. Lentil is majorly grown as sole crop. However, the department of agriculture and agriculture universities are
trying to promote it as an intercrop with maize and green gram(moong). In elds where short duration paddy is cultivated,
there is high soil moisture content in soil and farmers take advantage of this soil moisture to cultivate short duration maize 63which is then followed by lentil . Intercropping of mustard with lentil is also recommended.
The popular varieties in Bihar are SBL 668, Plant lentil 406 / 639 / 8 and IPL 2/3. Plant lentil is a long duration (135 to 140 days)
variety with resistance to rust and it is used for sequential or intercropping. Plant lentil 406 is drought resistant variety with 115
to 120 days duration. Arun is a 30-year-old variety which is still popular in Bihar, HUL 57 and Anguri are slowly gaining in
popularity in Bihar.
The recommended dose for lenil is 20:20:20 kg of N:P:K per hectare with basal does of zinc of 15 kg-1ha. Sulphur is also 64recommended at the rate of 30kg-1ha . During eld visits in Bhagalpur, it is found out that farmers are not applying
recommended dosages resulting in good vegetative growth but low reproductive growth and poor yield.
Water stress situations during owering stage can reduce owering in lentil. If water stress condition persists for more than 15
days, one protective irrigation of up to 10 cm is necessary.
Short duration varieties can be harvested within 110 days while long duration varieties are ready for harvesting within 135 to
140 days. Accroding to the farmers, the average yield of lentil in Bihar is around 1 MT-1ha while the Bihar Agriculture University
claims that it is 1.2 to 1.5 MT-1ha.
Wilt is an important disease causing 30 percent reduction in yield and occurrence is very frequent.
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60Commodity profile of pulses 2016-17.
61Interaction with Departet of Agriculture, Bihar.
62Interaction with Dr Rajendra Prasad Central Agricultural University, Pusa.
63Field survey ICSD, India
64Package of practices for lentil, BAU.
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Table 30 : Cost of production and benet ratio of producer
While producers bear input cost of ₹ 2,630/- per hectare, their total expenditure on labour is ₹6,770/- per hectare. The total
production cost of lentil for one hectare is ₹9,400/-, while revenue generated is ₹33,600/. Farmers net income in the
production of lentil from one quintal is ₹3,025/-.
6.2.3. Aggregators
Aggregation is a unique feature in the lentil value chain. Unlike most other agricultural value chains, in lentil, aggregation is
done by the retailer grocers as well as traders. Due to subsistence farming, marketable surplus with farmers is less than 10
percent of total production. Farmers use this small quantity to repay the credit availed from retailers or traders.
Trade with retailers in small quantities leads to low transparency in price discovery. Farmers are forced to sell the produce at
the given rates due to credits they have availed and there is no xed price or differential prices for good quality or excess
quantity. The lack of premium for quality is the biggest constraints for price discovery in lentil marketing. The system is not
regulated and lack of licensing of business is also leading to an oligopoly of retailers.
While the aggregator or primary traders get ₹ 95/- per quintal as margin toward lentil trading, the cost of the trader is ₹ 4,305/-
per quintal.
Primary traders are also active in lentil value chain. They either source commodity directly from farmers or from retailers.
Quantities sourced from farmers are very little or negligible since few large scale farmers supply to primary traders.
6.2.4. Wholesalers
Wholesaling in lentil is a very small business in Bihar as small quantities are involved. However, most of the quantities from
wholesaler are purchased by Dal millers from outside the state. The established costs and margins for wholesaler are as
below:
Table 31 : Cost and margin of lentil Aggregator
Table 32 : Cost and share of Lentil wholesaler
Wholesaler cost is Rs. 4750/- per quintal and margin per quintal is Rs. 150/- per quintal.
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6.2.5. Processors
Dal milling is necessary as whole grains attract weevils resulting in destruction of large quantities. As commercial scale dal
mills are not present in Bihar, most of the lentil goes outside the state for processing.
6.2.6. Wholesalers
The whole saler buy the processed Dal from outside the state, most of this being supplied from UP and MP, where there are
many processors with commercial processing plants. Most of the wholesalers in the local markets (Mandis) conrmed that
they are purchasing the processed dal from Indore and Kanpur APMC.
6.2.7. Retailers
The retailers are serving a dual purpose that is of aggregation and dal sale. The cost for the dal retailers is ₹ 8,469/- per quintal
and the margin is ₹ 2,30/- per quintal. Consumers' price of dal is ₹ 8, 700/- per quintal.
6.3 Factors of Relationship
6.3.1. Support System
Table 33 : Cost and margin of lentil dal wholesaler
Table 34 : Cost and margin of lentil dal retailer
Extension Agencies
Ÿ Focused towards increasing production.
Ÿ Targeted increase in area under lentil cultivation by DoA.
Ÿ Promotion of new varieties like K-75 by DoA.
Ÿ Private extension services from input supplying companies.
Ÿ Overall extension for climate awareness is poor.
Ÿ Important programs promoting lentil are NFSM, ISOPOM, MMA.
Research &
Development
Ÿ Least focused crop
Ÿ Farmers use old varieties, adoption of new varieties is limited.
Ÿ Development of wilt resistant varieties is required.
Ÿ Low seed multiplication creating shortfall in availability of seeds.
Ÿ Important programs in research are AICRP MULLaRP.
Ÿ IIPR, BAU, Dr RPCAU, Pusa are involved in R & D.
Meteorological
support
Ÿ Producers depend on news published in newspapers / TV channels.
Ÿ Most of the data published for national level or state level.
Ÿ Local information is based on experience and traditional methods /
calendars.
Ÿ IMD published information is the only source
Insurance
Ÿ PMFBY and NAIS two schemes operational in insurance.
Ÿ Central and state government subsidies are available for crop insurance.
Ÿ Insurance for Lentil is covered in few districts.
Ÿ Insurance not popular among farmers.
Ÿ Compulsory participation for loan availing farmers
Ÿ Settlement of claims is tedious process and takes time.
6.3.2 Business Facilitation
Finance
Ÿ Most of the support to traders is in the form Cash-credit facility
Ÿ KCC not popular among farmers.
Ÿ Producers depend on land lords, input suppliers, traders, relatives and friends.
Ÿ Farmer groups and women SHGs are alternate source of nance.
Ÿ Network of nationalized banks and credit cooperatives is limited.
Ÿ No crop specic dedicated schemes are available.
Markets
Ÿ Traders dominate, retailers performing as aggregators.
Ÿ APMC Act not enacted, no regulating authority established
Ÿ Indirect promotion to illegal trade without licensing
Ÿ Infrastructural issues like road, street light, running water, shops, yards,
warehouses and weighing mechanisms
Ÿ Quality parameters not standardized
Ÿ No real-time price discovery and dissemination
Ÿ Dependency on international market due to high import.
Government Policies
and schemes
Ÿ CACP declared MSP of ₹ 3,400/- for 2016-17
Ÿ Procurement by government agencies like FCI is very limited
Ÿ Rate offered by aggregators always below MSP
Ÿ Government promoting processing through food park scheme, NMFP, SIDFP
Ÿ Import of lentil in large quantities reduces the prices in local market, affecting
producers and traders
Ÿ Market distortion due import and MSP
Ÿ Dependency on international market due to high import.
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6.4 Transaction cost analysis
Factors affecting the TC at variuos level as follows:
Figure 15 : Spread of Transaction of Cost in Lentil Value Chain
Table 35 : Percentage spread of cost at different actors' level of lentil value chain
6.4.1 Transaction cost of various Value Chain actors
The transaction cost analysis in lentil value chain in Bihar
was done for different VC Actors. Involvement of various VC
Actors with varying volumes results in signicantly different
transaction costs at each level. Producer and Retailers
handle the minimum stocks henceforth bear lowest risks,
whereas actors like Traders and Processors are handling
the larger volume, henceforth bearing maximum risks. But,
it is important to understand that transaction risk for
producer is low as compared to the actual risk of individual
producer because of climate uncertainties and other
factors. Processors and Traders lower the risk by
developing good forward and backward linkage. Policies
play a major role for risk minimization. The weak
institutional setup also increases the transaction cost at
each level. The analysis in above table shows that
Transaction Costs could be signicantly reduced by
aggregation/FPO-centric models at the producer's level
because of economies of scale, whereas at the trader and
processors level, it could be reduced by adoption of
improved transfer and monitoring systems and stock
handling. Quality and grading standards can also unlock a
huge margin that can be transferred to the producer
enhancing the farm-gate price. Uncertainty about the
market, quality of commodity and legality (export) involved
in the activities also adds to the transaction cost in Bihar.
6.4.2 Producers
Lack of market information and knowledge about tapping
opportunity is the main challenge for the producers. The
search cost for producers involves interaction with traders,
fellow farmers accessing market information through
newspapers, phone calls and the internet. Contacting the
business link either for input or nish product from the
market, is the main cost involved for the producer. At the
same time, there are local traders, to whom the producer
sells the produce. The observation indicates that producers
spend approximately ₹ 1,458/- per MT for his produce of 1.5
MT from one hectare. For producers, the screening and
bargaining costs are very high in comparison to search,
monitoring and enforcement cost. To make the VC more
efcient, this cost has to be reduced by strengthening the
local institution (promoting aggregation/FPO) and making
the market more transparent and accessible for the
producer. In this context, modern technology should be
used for online sale, pledging the stock, etc. Grading and
quality improvement of produce are important to reduce
transaction cost, which could be improved by extension
services and capacity building programs.
6.4.3 Traders
In the state, traders are having fairly good contact with
processors (small, medium and large). In this case, the
search cost is minimized but they are paying high cost
towards the bargaining and enforcement cost. For traders,
storage plays a huge role, as most of the time, the stock are
transferred immediately. The enforcement cost for the
trader is also higher than that for the producer. One trader
handles on an average 50 MT of lentil in a year with a
transaction cost of ₹ 81/- per MT. The trader is taking the risk
of quality assurance and payment uncertainties because of
the non-contractual setup of the trading in the market. More
transparency in the Government system and improvement
of production quality will reduce the transcation cost of the
trader which will ultimately help in strengthening the VC.
6.4.4 Processors/ big traders
Lentil processing capacity is limited in the state and is
available in different capacities from small and medium
size. As power supply is a constraint, the processors use
diesel and this increases the processing costs. The
transparency levels are very low. The enforcement
expense, transfer and monitoring and bargaining cost are
high. The processors and the big trader approximately
handle 400-500 MT in a year which means their transaction
cost per MT is ₹ 52.50 which is low. As processors handle
the largest quantities, they are also absorbing more risk in
legal transaction, auditing and bribery. Though at this level,
the cost of the transaction is low but bringing in more
transparency, legal contract between buyer and seller and
minimizing the enforcement expenses can make the VC
more vibrant, improving the market dynamics and minimize
the cost for the producers.
6.4.5 Retailers
Retail sales of dal or whole lentil is not diversied because
of a common variety of lentil. However, it is observed that
average retail is having a business of 3-5 MT in a year so his
transaction cost is ₹ 1,170/- per MT. The major cost for the
retailer is the bargaining cost at both seller and buyer end.
Quality of the stock is also not guaranteed as there is no
certication mechanism for the stock.
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6.5 Risk Analysis based on Transaction Cost VC Assessment
6.6 Constraint and opportunities in lentil value chain
Old varieities and subsistence farming are limiting production potential. However, lentil offer excellent diversication option to
small and marginal producers from ood affected areas where high siltation is recorded. Being a leguminous crop, lentil has
high potential for improving soil carbon content.
Aggregators play key role in entire value chain after producer. They offer market to farm produce though it is in small quantities
and have quality issues. Aggregators also play retailer's role by marketing nished product (dal).However, they are
constrained with lentil being traded against other commdities (like barter system) and face quality issues. The opportiunity for
aggregators lies in extending input services and products, which may change production practice and commercialise
production.
Table 36 : Risk analysis of Lentil
Table 37 : Constraints and Opportunities matrix of Lentil Value Chain
6.7. Recommendations
6.7.1. Producers
Ÿ Intercropping is not very common in lentil. However, it can always be used in intercropping with paddy based or maize
based cropping system. This will ensure income diversication in case of adverse climatic situations and consequent crop
loss.
Ÿ Contingency planning in adverse climatic condition must include lentil as it is sturdy crop and has the capacity to perform
well in adverse conditions.
Ÿ Short duration, wilt and rust resistant varieties developed by various institutions can be promoted through participatory
technology development (PTD) methods in pilot projects
Ÿ Seed production programmes are being implemented in specic pockets to ensure availability of seeds to farmers.
Foundation and breeder seeds are distributed to farmers and FPOs on a priority basis for seed production. This
programme can be further scaled up to form seed villages and seed hubs. Seed banks at the local level also need to be
developed.
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Ÿ Region specic package of practices needs to be developed and demonstrated to farmers through extension programs to
ensure proper resource utilization andincrease in yields .
Ÿ Mechanization will reduce the cost of cultivation and increase efciency by reducing the time taken for completion of
operations. However, implements can be developed for harvesting and threshing of lentil.
Ÿ Farmer producer organizations can be developed to provide alternate market opportunities, reducing the dependency on
aggregators and improving negotiating ability of individuals through a collective approach.
6.7.2. Traders
Ÿ Activities like trading and retailing needs to be segregated through licensing and stricter regulations to avoid illegal
practices.
6.7.3. Processor
Ÿ Small scale dal mills can be promoted to serve the purpose of processing at the village level and for providing services to
consumers. This can be taken up by individuals as well as by farmer groups. It will incubate entrepreneurs and generate
employment at the village level.
Ÿ MSMEs can be promoted for commercial production to sufce national demand and export nished product. This can be
done by attracting private investments in processing or by public private partnership (PPP) mode, through the support of
existing government schemes and by accessing nance and grants from various development agencies.
Ÿ Supporting infrastructure like warehousing and transportation can also be developed to promote and motivate
commercial processing.
Ÿ Different schemes for promotion of processing can be tapped to attract private investors in the state by providing
subsidies and tax relaxation.
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Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Annexure 1: Value chain Maps
Maize VC map. Rice VC map
7372
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Lentil VC map Annexure 2: Maize production: climate context
7574
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
65
66
65Rabi Maize Opportunities and challenges, Directorate of Maize research.
66Dr B Gangaiah et-al, IARI.
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Annexure 3: Field visit details
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Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Annexure 4: Transaction Cost Analysis Of Maize Value Chain (in INR)
7978
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
8180
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Annexure 5: Transaction Cost Analysis of Paddy Value Chain (in INR)
8382
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
8584
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
8786
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Annexure 6: Transaction Cost Analysis of Lentil Value Chain (in INR)
8988
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
9190
Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
92
Value Chain Assessment of Climate Resilient Crops in Bihar
93
Value Chain Assessment of Climate Resilient Crops in Bihar
Notes
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)
Notes
94
Value Chain Assessment of Climate Resilient Crops in Bihar
Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)