AGRICULTURE SITUATION IN INDIA

Trim 2

PGDM-Rural Management

Batch 2013-15

Prof Vineel Bhurke

Learning objective

• To impart knowledge to students about current position of Agro production and agribusiness in India vis-a-vis global markets.

Assurance of Learning (AOL) and Evaluation

• Lectures and Group discussions

• Quiz 10

• Assignment 10

• Presentation 10

• Written exam 20

Learning Resources

Lecture 1

• Current status of agriculture sector in Indian economy – Article (Capital Market)

• Agriculture situation – Which are the aspects?

• Past – Where we come from

• Importance of Agriculture

• Land issues – farm size, crops, productivity

Reading assignment

• Current status of agriculture sector in Indian economy – Article (Capital Market)

• Top 3 observations

Phases in Indian Agriculture

• PHASES: 1) Self sufficient & balanced economy (before British) 2) Food imbalance in British raj, poor productivity& production, famine hit, ill-

administration, clutches of Zamindars & land lords.

• FOOD STAGES (After independence): • SHIP TO PLATE. • PLOUGH TO PLATE (FOOD SUFFICIENCY) • PLATE TO PLOUGH (MODERN FOOD HABITS)

• Agriculture • Large dependency; state subject; largest employment provider. • Control: state and central govt. • State: water storage, irrigation, distribution • Central: policy matters.

AGRICULTURAL SITUATION IN INDIA • LAND USE, PRODUCTION, CROPS

• ERA WISE EFFECT • BEFORE BRITISH REGIME: Self sufficient villages, trade – only village restricted, 3- distinct classes: agriculturists, non agriculturists & officials.

balanced food system. (n.a.: village artisans& manuals), payments in kind. • BRITISH REGIME: Forced adoption of commercial crops (indigo, jute, lac etc), food imbalance, poor suffered, control through zamindars, imbalanced social structure.

FAMINES

12 famines (1765-1858) ; 20 famines (1886-1908)

• Reasons:

food imbalance

monsoon failures

administration failures

Localized movements of food grains

• Types:

1) Food famines

2) Purchasing power famines

Agriculture sector: Space in Indian economy

• 65% agro dependent; 1/4th natl. income; largest employment provider.

• Development plans from 1st five year plan till today • Green revolution led to food sufficiency (1960-1970) • Export earnings from tea, coffee, cashew, spices, tobacco,

rice, cotton , raw sugar etc • Raw material supply: textile, jute, cigarettes, paper

industry. • Stress on horticulture: sustainability • Capital market: tractors, machinery, input industry,

pumps & spray equipments • Dependency on core industries, power, petroleum input

industry

SIGNIFICANT ACHIEVEMENTS of Indian Agriculture sector

1. Largest producer:

Fruits, Cashew, coconut, spices-black pepper, ginger, raw sugar & total cattle population and milk production.

2. Second:

Vegetables, wheat, rice, ground nut, sugarcane, inland fisheries.

SIGNIFICANT ACHIEVEMENTS… 3. Fishery exploitation initiated (7,500 kms)

4. Organic farming, contract farming, PPP involvements

5. Organized poultry

6. Exploitation in meat & meat products

7. ICT & meteorological support increasing

8. Crop insurance extended

9. Progress in PHT & FPI and exports of processed products

10. FDI in FPI (100%), soon in multi-brand retail (51%)

11. Farmer friendly market reforms: direct marketing, PPP, ICT support, contract farming

12. MSP: Minimum Support Price

Lecture 2

Indian Agriculture

• Contributes 17% of GDP

• Provides food to 1 Billion people

• Sustains 65% of the population

• Produces 51 major Crops

• Provides Raw Material to Industries

• Contributes to 1/6th of the export earnings

• One of the 12 Bio-diversity centers in the world with over 46,000 species of plants and 86,000 species of animals recorded

Indian Agriculture: Global Contribution

• India is world’s third largest producer of agricultural commodities after China and USA.

• India produces: – 16 percent of the world’s milk,

– 41 percent of mangoes,

– 30 percent of cauliflowers,

– 28 percent of tea,

– 23 percent of bananas,

– 24 percent of cashew nuts,

– 36 percent of green peas,

– 10 percent of onions

Crop classification:

• Food crops, oilseeds, fiber, horticultural, plantation crops.

• Horticultural crops bring sustainability, more & regular income

• National horticulture mission; farming system approach module

Cropping pattern in India

• Of the total 329 million hectares, 124.58 million hectares are devoted to raising food crops to provide food security for the country.

• Rice, wheat, sorghum, maize, pearl millet, finger millet, minor millets, pulses are the major staple crops.

Cropping pattern in India..

• The country produces about 240 million tonnes of food grains.

• Groundnut (peanut), sesame, sunflower, rapeseed, safflower, soybean and linseed are the important oilseeds.

• Important commercial crops are sugarcane, cotton, jute, tobacco and potato and major plantation crops are tea, coffee, cocoa, rubber, coconut, arecanut.

Cropping pattern in India…

• The country also produces spices such as pepper, cardamom, ginger, chillies, coriander, garlic, cloves and nutmeg.

• Horticultural crops include tropical to temperate fruits, vegetables, flowers, cashewnut, many root and tuber crops and medicinal and aromatic plants.

• Fruits and vegetables including onion and potato contribute 20% of the total agricultural output of the country.

Agriculture situation in India

LAND…

India: Land Use Pattern

• Seventh Largest Country in the World.

• Total Geographical Area - 328 million hectares.

• 56% of the land is arable and can be used for agriculture.

• Second Largest Country with arable land after USA.

• India has a land frontier of 15,200 km (9,445 mi) and a coastline of 7,517 km (4,671 mi).

India: Land Use Pattern

• Although India occupies only 2.4% of the world's land area, it supports over 15% of the world's population.

• Population Density: 349 people/sq. km. or 904 people /sq. mi.

• Net Area sown - 142 million hectares.

• Gross Cropped Area – 190.8 million hectares

LAND USE PATTERN • TOTAL: 329 MN HA (100%) • Net Sown: 143 “ (43.50%) • Forests 75 “ (22.80%) • Fallows: 100 “ (30.40%)- usable • Others: --- 11.33% • Cropping pattern is governed by- 1) physical & 2) economic factors.

• Physical: soil condition& type, rain fall pattern, climate etc. • Economical: size of farm, input availability and financial condition. • *Seasons: kharif, rabi, summer • Crops: kharif- rice, jowar, maize, bajra, cotton, sugarcane, vegetables,

groundnut • Rabi- wheat, barley, gram, mustard, vegetables, potato • Summer: mung, vegetables, • Seasonals: vegetables; annual • Perennial: fruit crops

SUBSISTENCE IN FARMING

• Farming system approach • Commercialization • PPP involvement • Community approach • Legislations against fragmentation • Av. Land holding: • 1951: 0.92 ha/ capita • 1981: 0.48 “ • 2000 0.33 “ • 2007 0.30 “

7 / 12 extract

7 / 12 extract

FARM SIZE AND PRODUCTIVITY

• An ideal farm size (economic holding) is that which permits optimal use of inputs & resources: land, labor, & capital, inputs, market control

• Production & productivity: production is total volume of output; productivity is production/ unit area (acre/ hectare).

• Our total production meets domestic demand and surplus for export.

• Productivity is much below than international figures. • GDP share: 44% (1973-74) ------ 26% (2000)… Between 3-4% today

SUBSISTENCE IN FARMING

• Reasons for small holdings

• Generation wise fragmentation

• Decline in joint family system

• Rural indebtedness (forced land sale)

• Practice of multi tenant leasing

• disadvantages: land wastage, litigations, input under-utilization, water management difficult

• efforts for consolidation: laws, limits on land sale-size

Farm size and productivity

• Reasons of low productivity: • Low holding, • Insufficiency in input distribution & utilization, • Corruption, • Monsoon dependency, • Insufficient irrigation, • Loose linkages, • Indebtedness, • Exploitations in market price, • Inadequate laws.

Farm size and productivity • Positive changes are occurring: • Globalization, • Simplified Laws, • WTO Pressure, • Corporate & MNC Support, • Commercialization, • Credit, Market Support, GOI Initiatives, • PHT and FPI, PPP Participation, • Optimal Input And Resource Utilization, • Strengthening R& D Programs, • Effective ‘T & V’ and ‘ToT’, • Credit Promotion, Awareness of Vital Programs on Irrigation, • Increased PPP, Market reforms & direct markets, • ITC support, • “Contract farming”, opportunity of global open markets.

Farm size and productivity Positive changes are occurring

Lecture 3

• Agricultural inputs

• Role of agricultural inputs

• Current status

• Agri inputs - Business aspects

The challenge

The world’s human population is projected to increase to 9.2 billion by 2050

Demand for cereals will increase by almost 50% towards 2050

Indian scenario – Agriculture and Food

Food grain production increased from a mere 50 million tonnes to over 227 million tones in the last six decades.

Production increased by 11 times in Wheat, 4 times in Rice.

Cotton production increased by 11 times.

Oil seed production increased by 5 times.

Indian scenario – Agriculture and Food

Though production index has risen considerably, the food index has not increased proportionately.

Production index = Total food produced per land area

Food index = Food produced per person

INDIAN AGRICULTURE – Trends and challenges • Arable land, likely to reduce to 100 mill by 2020 (afforestation and

environment concerns)

• Per capita availability of arable land to decline

• Number of farmers would reduce

• Inputs, particularly water, may either be in short supply or expensive

• Focus on productivity

• Yield levels plateauing

• Manage biotic (pests, pathogens, weeds) and abiotic (drought and salinity) losses

• Post harvest losses (10-30%)

• Produce more to feed rising population, estimated 1.4 bn by 2025

INDIAN AGRICULTURE – Trends and challenges

• Increase productivity and at least double food production with declining land and water availability and limited farmers

• Technologies in the areas of seed development that would ensure good yield even under constraints of water and land

• Matching of seed with fertilizer, water management and evolving pre- harvesting techniques under different soil conditions

• Nutritional deficiencies: Average intake of vitamins, proteins and other micro nutrients grossly inadequate

• For Food and Nutritional security, Newer production techniques and technologies suited to Indian agriculture to be explored – including biotechnology

How to bridge the demand-supply gap ?

• Increasing the yield - ? Yields have nearly stabilized for cereals

• Expansion of farm lands - ? In Asia, nearly 95% of the potential cropland has already been utilized. In Africa, there are socio-economic, political constraints and environmental concerns. In Latin America, through conversion of rain-forests

How to bridge the demand-supply gap ?

• Optimizing conversion efficiency - ?

Supply of Quality inputs

Efficient use of inputs

Effective research & extension

AGRICULTURAL INPUTS

AGRICULTURAL INPUTS

• CONSUMABLES

Seeds

Fertilizers

Agro-chemicals

• DURABLES

Equipment & Machinery

Agri-input business in India

Seeds(Rs.8000 cr) +

Fertilizers(Rs.65000 cr) +

Pesticides(Rs.10000 cr) +

Farm implements including tractors, seed drills, harvesters and others (Rs.400 cr)

Micro irrigation systems (Rs.3000 cr)

Activity

• Collect and observe brochures of agri inputs

• List agri input companies

• Seeds, Fertilizers, Agrochem, Machinery

Role of Agri-Inputs

• To enhance Productivity

• To increase profitability of operations

• To ensure Sustainable Food security

FEATURES OF AGRICULTURAL INPUTS

• Derived demand: Purchased for production of crops and are used as per demand based on multiple factors.

• Similar to consumer and industrial goods:

Promotion and distribution is similar to consumer goods.

Derived demand similar to industrial goods. Bulky and high cost items. Personal selling is important.

FEATURES OF AGRICULTURAL INPUTS • Technical selling:

The farmer needs solutions to problems such as low yields, nutritional deficiencies, pests and diseases. The sales person has to visit the field, identify the problems and offer solutions. He as to play the role of a Plant Doctor

• Heterogeneous customers: Farm Size Crops grown Irrigation facilities Income Education Traditional belief/ Progressive practices Life style

FEATURES OF AGRICULTURAL INPUTS

• Demand forecasting is a challenge Uncontrollable factors:

Rainfall Output prices Govt schemes Incidence of pests and diseases

• Distribution The product has to be made available with retailers at village or Mandi at short notice, based on demand

• Handling the stock and receivables is a challenge

Activity

• Estimate cost of cultivation of an agricultural crop

• What are the major input and their costs ?

• What are their proportions ?

• What it means ?

Agri inputs costs - Typical distribution

5

10

20

25

40

Agri Input costs %

Seed

PlantprotectionLabour

Fertilizer

Seed as an input

• Seed is a living material and has finite life span • Seed is the most important input • Seed is the “Carrier of technology” - Seed is the

only vehicle to carry superior genetics with high yield potential and biotech traits to the farmer.

• Seed offers “low cost - easy to deliver” solutions for raising the crop productivity.

• It is a high involvement purchase • Seasonal and narrow demand window • Seed as an input is irreversible

AGROCHEMICAL Vs SEED

• AG-CHEM PRODUCT - CHEMICAL SHELF LIFE - 2 YEARS PLACEMENT - MOSTLY AFTER KNOWING CROP ACERAGE FORECASTING - ONE YEAR IS SUFFICENT PRICE SENSITIVITY – HIGH PRODUCT CHARACTER – GENERIC PRODUCT PERFORMANCE – UNIFORM PRODUCTION – FACTORY COMPLAINTS - JUST AFTER APPLICATION SHOWING PERFORMANCE - IMMEDIATE DEMAND - MOSTLY UNIFORM

• SEED BIOLOGICAL MAXIMUM 9 MONTHS BEFORE THE START OF THE SEASON

NEED TO FORECAST ATLEAST FOR 3 YEARS LOW UNIQUE VARIES DEPENDING ON AGRONOMY FARMER FIELD CAN COME AT ANY TIME AT THE END SEASON SEASONAL

Activity

• Collect and observe brochures of Seed companies

• Collect and observe packets of seeds

• What are the specifications mentioned ?

• What are their implications ?

World seed market

• Market value USD 42 Billion

• Top players – USA, China, France, Brazil, Germany

• India ranks 6th with USD 1500 Million value

The World's Top 10 Seed Companies - 2007 seed sales (US$ millions) - % of global proprietary seed market

1. Monsanto (US) - $4,964m - 23%

2. DuPont (US) - $3,300m - 15%

3. Syngenta (Switzerland) - $2,018m - 9%

4. Groupe Limagrain (France) - $1,226m - 6%

5. Land O' Lakes (US) - $917m - 4%

6. KWS AG (Germany) - $702m - 3%

7. Bayer Crop Science (Germany) - $524m - 2%

8. Sakata (Japan) - $396m - <2%

9. DLF-Trifolium (Denmark) - $391m - <2%

10. Takii (Japan) - $347m - <2%

Top 10 Total - $14,785m - 67% [of global proprietary seed market]

Source: ETC Group

INDIAN SEEDS MARKET(2009-10)

Crop seed

Cereals

Vegetables

Cotton

Sunflower

Others

Total

Value (Rs crores)

2000

1300

1600

300

300

5500

INDIAN SEED MARKET COMPOSITION

• Farm saved seeds: 75%

• Commercial seeds: 25%

• Of the commercial sector:

Private 76% and public 24% ( by volume)

Of the private sector:

organized is 57 % (with research capabilities)

small sector / largely unorganized is 43% (no research)

Video – Indian Seed Industry

• What is the market size?

• What are phases of Indian Seed industry?

• Public and Private sector

• Salient features of regulatory framework