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L E A D P R E S E N T A T I O N
B Y
D R . K . G . K A R M A K A R
P R O F E S S O R , S P J I M R
2 5 T H O C T O B E R 2 0 1 3
AGRICORP- 2013 Financing Agriculture- Session V
INDIA’S WEALTH
50 A.D- 50% of Roman empire’s wealth to pay for Indian exports (Handlooms, Spices, Diamonds)
1575 A.D- 25% of World GDP contributed by India
2011 A.D- 54% population is BPL-MDP Index
Largest irrigated land-2nd largest arable land
Largest producer of wheat, milk, pulses, spices, tea
2nd largest producer of rice, fruits, vegetables, sugarcane
3rd largest producer of coarse grains, edible oilseeds, fish
110 Million farmers in 126 Agro-economic zones
Productivity/ PovertyP R O D U C E I N D I A N A V G . W O R L D A V G . B E S T A V G .
R I C E ( K G / H A C ) 3 3 7 0 4 3 0 9 9 7 3 1 - U A R
W H E A T ( K G / H A C ) 2 8 0 2 3 0 8 6 3 1 0 8 - U S A
C O R N ( K G / H A C ) 2 3 2 4 5 1 0 9 9 6 5 8 - U S A
M I L K ( K G / A N . / Y R . ) 1 1 4 5 2 3 0 9 1 0 6 8 6 - I S R
POVERTY DIMENSIONS - 2011 CENSUS
47 .2% -TVS, 41 .6%NO BATHS
63.2% -PHONES, 53.1% -NO TOILETS
44.8% -BICYCLES, 43.5% - NO HOME WATER TAPS
3.5% -CEMENT WALLS, 6 .3% HAVE PCS/LAPTOPS
3.1% -INTERNET, 4 .7% FOUR WHEELERS
The Need for ActionThe population of developing countries is expected to remain mostly rural until 2020. Most of the world’s poor are concentrated in rural areas, with livelihoods that are strongly linked to agriculture.
Innovations for Competitiveness and Efficiency
Innovations in farmer organizations that improve managerial skills in order to promote:
• Economies of scale and scope
• Strategic partnerships with suppliers and buyers to secure sales
• Specialized support services from private or public partners to comply with market requirements and facilitate finance
• Lobby for improved regulatory framework that enable investments in agriculture
Use of innovations for competitiveness and efficiency
Innovative ICT applications (e.g. the use of mobile phones) can reduce informational problems and transaction costs to service rural areas.
Mobile phone’s exponential growth in the developing world represents an opportunity for MFIs to service agriculture.
0
10
20
30
40
50
60
70
80
Africa Asia Latin America
2003
2008
Number of Subscriptions per 100 people (millions)
Innovative tailor-made strategies to enhance agricultural competitiveness require an integral view of agricultural value chains.
A diverse set of services and products can be designed for:
• Pre-harvest activities: e.g. input provision, updated market information, contract farming, forward contracts, insurance
• Post-harvest activities: e.g. warehouse receipts linked to loans, local value addition, improved marketing agreements, product bulking
Use of Innovations for Competitiveness and Efficiency
• No liquidity problems
• Inputs available from eKutir
• Quality service and de-risking done
• Better Portfolio Management
• Enhanced Productivity
• More Income
Farmers
• Good Market & Captive Customers
• Value added services• Less Risk and more
Income• Less transaction
costs • More products with
credit from input suppliers
eKutir entrepreneurs
• No credit transactions by farmers for inputs
• Instant Payment to Farmers
• No liquidity crunch
Local Traders
• Less Risk and Transaction costs
• Outsourcing of Banking operations to eKutir
• More market access
Banks /MFIs
• Assured quality of farm produce
• Captive Farmer groups• Adherence to GAP
standards
AgriProcessors
• Benefits from inputs and outputs
• Better Productivity• Enhanced Incomes
A Happy
eKutir Farmer
Post Intervention
Phase
Present Credit Arrangements
• Credit is inadequate• Credit not given in
time• Banks perceived as
alien organisations• MFI’s only
concentrate on credit disbursal
Farmers
• Farm Credit - a risky Portfolio
• Small and Marginal Farmers are Non bankable
• Lack of concern for food security
• No value added services offered
Banks & MFIs
• Money lenders –Last resort
• No increase in productivity
• No increase in income
• Cycle of perpetual poverty
Impoverished Farmers
Harvesting Management
Tool
Marketing Management
Tool
Farmers Advisory Tool
• Registration of the Farmer• Registration of different
buyers
• Registration of Farmer• Registration of
Traders/Buyers• Commission on marketing
from the Farmers
• Registration of the Farmer for advisory
• Registration of different advisors
De-Risking the Small-Holder Farmer
Crop Planning Tool
Farmer Risk Analysis Tool
Farmers Financial Tool
• Registration Charges from the farmer for giving objective advisory
• Charges from other farmers
• Registration Charges• Charges from the
Bank/FIs for giving risk analysis Report
• Registration of the Farmer
• Commission from banks for cost of financial transaction
De-Risking the Small-Holder Farmer
Soil Nutrient Management
Tool
Seed Selection Tool
Pest & Disease Management
Tool
• Registration of the farmer• Registration Charges from the
Fertliser /Soil Nutrient Vendors
• Commission/Profit for selling nutrients/supplying nutrients
• Registration of the Farmer• Seed Vendors’ Registration• Commission on selling seeds
• Registration of Farmers• Registration of Vendors• Commission on selling of
pesticides
De-Risking the Small-Holder Farmer
Exporters / Wholesalers
Processors
Local Traders & Processors
Producer Groups
Farmers
Input Suppliers
Banks
Non-bankFinancial Institutions
Private Investors& Funds
Cooperatives / Associations
Local MFIs / Community Orgs
Financial Service
InstitutionsValue Chain Actors
Product Flows
Financial Flows
Technical Training
Support
Services
Business Training
SpecializedServices
Certification/Grades
Using the Value Chain for Financing Agriculture
INTEGRATED Agriculture Model
INCREASE PRODUCT
PRODUCTIVITY DEVELOPMENT
ADEQUATE + TIMELY KNOW-HOW
REPAYMENT + FEEDBACK
SECURITY
ASSURED QUALITY
PRICE PRODUCE
HI - TECH INPUTS
CREDIT
MARKETS
R & D/AGRONOMY
SUPPORT
Climate Water
Soil Labour
RURAL INFRASTRUCTURE GAPS
25.3 Million Acres of Cultivable Farm Depend on Monsoons for Water
55067 Rural Habitations have no Access to Safe Drinking Water
66802 Rural Lack Roads and 1.46 Lakh Kms. of All-Weather Roads needed soon
23 Million Rural Households in 1.25 LakhVillages have no Electricity
66822 Villages have no Telephone Connectivity
QUALITY RURAL INFRASTRUCTURE NEEDS
District/Block Infrastructure Plans
Rural Service Providers
Cost Recovery and Disputes Resolution
Appropriate Technologies and Innovations
Visionary Leadership for Economic Opportunities Leading to Rural Employment and Economic Revival
Improvement in Rural Services Leads to Social and Economic Empowerment
Enhance Economic/Physical/Electrical/Knowledge Connectivity as Per PURA norms
WAREHOUSE LOGISTICS
Food/Groceries account for 54% of retail trade
Entry of FDI in Retail Marketing revives farmers’ hopes Domestic market needs, reduce export trade volumes
Thailand, Costa Rica, Viet Nam, Philippines have organised production supply chains for Exports
Rs. 58000 crore post-harvest losses in India due to:
Poor quality infrastructure, inefficiency, short shelf-life, lack of warehouses/ pre-cooling chambers/reefer vans/zero-energy chambers, poor transportation, lack of markets, roads/bridges, cold storages and A/C Tech.
POST-HARVEST TECHNOLOGY NEEDS
Entire Focus on Pre-harvest technologies to boost Production ignoring Infrastructure and post-harvest.
India is 2nd largest producer of Fruits/Veg. but annually 30% lost due to supply chain gaps.
Continued wastage and lack of processing leads to lower prices, impoverishment and even suicides
Urgent need for electricity with constant supply load factor, market connectivity, warehouses and limited agro-processing facilities for farmers
Existing agricultural subsidies like free electricity, subsidised diesel, fertilisers, water, largely wasted
Farmers need timely credit, quality inputs w/o controls
NEED FOR IMPROVED /QUALITY LOGISTICS
New service providers, technology upgrading, innovative processes to improve rural logistics
Reduction in logistics costs estimated at 13-14% of GDP, is urgently needed
Logistics costs high due to inefficiencies, low truck speeds, high turnaround times, supply chain gaps.
Poor packaging and distribution networks, cold storage/warehousing sector problems need study.
Continued wastages at different stages of the food supply chain need to be analysed to reduce waste.
WASTAGES IN FOOD SUPPLY CHAIN
Producers
RAIN
CONSTRAINTS
HEAT
HUMIDITY
CONTAMINATION
Pre-Process
Broken Grain, ExcessiveDehulling,Trimming
Transport
Spillage, Bruising, Breakage, Leakage
StorageInsects, Moulds Bacteria, RodentsBirds, Sprouting,
RancidityOver-ripening
ProcessingInefficiency, Excessive Peeling, Polishing,Trimming
Marketing
Unsafe foods Quality Losses
Customers
GAP ANALYSIS IN WAREHOUSE STORAGES
Year Storage Req. Availability Gap in lakh MT
2007-08 1075.8 653.6 422.1
2008-09 1119.0 677.5 441.5
2009-10 1155.5 693.4 462.1
2010-11 1204.1 725.0 479.1
2011-12 1198.0 761.0 437.0
2012-13 1228.0 802.0 426.0
2013-14 1240.9 848.6 392.3
2014-15 1217.6 901.6 316.0
NEED FOR LICENSED WAREHOUSES
Indian farmers realise 30-35% of produce value as compared to 65-70% by developed nation farmers
Lack of negotiable warehouse receipt system especially for agricultural commodities was felt
Lack of modern warehouses and cold storages felt
Lack of rural infrastructure a major hindrance to rural farmer prosperity as also APMC Acts
Warehouse receipts can be a prime trade tool and can help farmers access finance more easily
Allows banks to improve lending quality as loans are against goods deposited in warehouses
STEPPING UP WAREHOUSING CAPACITY
In view of record food grains production and Govt. purchases, all States need to rapidly expand warehouse capacity to avoid wastage in food grains
The National Food Security Bill is expected to be approved by Parliament requiring huge increases in warehouse capacity and stop leakages in PDS
While the National Warehousing Act was passed in 2007, the Warehousing Development and Regulatory Authority was set up only in October 2010.
Rural economy benefits with agri-business impacts for banks, traders, State/Central Government etc.
RAPID CREATION OF RURAL WAREHOUSES
CISS Rural Godown Schemes of MOA,GOI thru’ banks and for cooperatives thru’ NCDC
Constr. Rural Godowns under FCI Scheme, MF&CS
Constr. Rural Godowns under Agri Mkt Infr Scheme of MOA. All schemes benefit big business
Urgent need for setting up small rural godowns(100 -2000 Mt capacity) to benefit smallholder farmers
Creation of small low-cost godowns by individual farmers or by Farmers Clubs, JLGs, NGO’s on jt. basis would enhance holding capacity of smallholder farmers and ensure better financial margins
STIMULATING WAREHOUSE CREATION
Creating Special Fund to provide low-cost funds to banks for on-lending, leading warehousing capacity
Need for a Fast-track Project for new Warehouses on PPP mode in partnership with FCI/CWC/SWCs with low-cost funding support
Urgent need for creation of warehousing capacity both by smallholder farmers and entrepreneurs
Difficult for Central/State Governments to provide funds at concessional rates to banks unless concessional refinance is provided with institutional tie-ups.
STRATEGIES AND SYSTEMS
Follow best practices like multi/relay cropping and commercial agriculture
Adapting technology and blending mechanisationwith manual labour
Need for drip irrigation, polyphone cultivation for water conservation
Scientific Techniques for cultivation of foundation/breeder seeds
Greenhouse cultivation and plant tissue culture
ADDITIONAL FARM INCOME AND DE-RISKING
Diversification into Dairy, Animal Husbandry and Fisheries Sectors
Eco-tourism initiativesOrganic Farming (Dabholkar’s LEISA
Method) Small Warehouses at PACS and PanchayatsWeather-based Crop Insurance and
Subsidised Crop Insurance Extensive use of warehouse receipts by small
holder farmers.
SYSTEMS IMPROVEMENT AND INNOVATIONS
Farmers Clubs and Farmers Associations
JLGs/SHGs and other microfinance instruments
Improved Gobar Gas Plants, Solar Lamps, Bio Digesters
Forestry Models for Saline/Submerged/Waste lands
Healthcare/Livelihoods/Education Facilities in Rural Areas
Chip-based Kisan Credit Cards and Mobile Banking
Better Advisory and Accounting systems for Farmers
(eKutir Model or Shiroli-Khurd Model)