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Agirculture
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Agriculture in India
Overview
Justification: Importance of Agriculture
Definition and brief history of Agriculture
Present position of Indian Agriculture in the World
Analysis using “Porter’s Competitive Advantage framework for Nations”Brief Case : Mango Value Chain
A short video on Indian Corporates in Ethiopia
Summary , Q&A
Justification: Importance of Agriculture
Definition and brief history of Agriculture
Present position of Indian Agriculture in the World
Analysis using “Porter’s Competitive Advantage framework for Nations”Brief Case : Mango Value Chain
A short video on Indian Corporates in Ethiopia
Summary , Q&A
Overview
Importance of agriculture(1/3)
SURVIVAL ( physical, mental- short term , long term) – First S in 6 S framework
To those who are hungry, God is bread- Gandhi 1946
“Everything else can wait, but not agriculture”- Nehru 1947
UNICEF 2006: India has the largest no of malnourished children in the world (57m/146m)- an index of widespread poverty and deprivation
15 % GDP, 60% people
An Indian tragedy of extensive poverty and deprivation persisting under the conditions of impressive progress in the industrial and services sectors will continue so long as we refuse to place FACES before FIGURES.- M.S. Swaminathan, Chairman, National Commission on Farmers, 2006
As per ESCAP Studies, Persistent poverty and widening inequality is the result of decades of neglect of agriculture, despite it being the mainstay of the poor.
Food Security , Nutrition Security: Art. 21 of Constitution of India
Importance (2/3)Driver of Economic Growth
Agriculture(Cereals &
Pulses)
Industry(Food
Processing)
Services (Retail)
Consumer
Every Job created in Agriculture creates another 1.5 Jobs in the Economy
Every dollar of value generated in agriculture results in another $1.75 value addition to the Economy. (Virginia University Study , 2008)
Every 1 % reduction in unemployment increases GDP by 3 % (Okun’s Law)
GDP of Indian Agriculture needs to grow at a rate of 4 % to achieve an overall GDP growth rate of 9 %
Importance (3/3)Driver of Growth With Equity
Agriculture 58
Services 57
Industry 14
Industry 29
Services28
Agri 14
2.04
2.07
0.24
Share of Workforce
GDP per capita
Share in GDP
Assumption: Total Workforce: 100 persons, Total GDP: Rs.100
Justification: Importance of Agriculture
Definition and brief history of Agriculture
Present position of Indian Agriculture in the World
Analysis using “Porter’s Competitive Advantage framework for Nations”Brief Case : Mango Value Chain
A short video on Indian Corporates in Ethiopia
Summary , Q&A
Definition
Defining Agriculture
All forms of activities connected with growing, harvesting, and primary processing of all types of crops, with the breeding, raising and caring for animals, and with the tending , gardens and nurseries . ( Joint ILO/WHO Committee on Occupational Health, 1962.)
Main Economic Activities:
Crop Cultivation
Forestry
Fishing
Livestock rearing
Horticulture
Timeline of Indian Agriculture (1/3) – pre independence
Why History: We are product of History; Indian Agricultural problems have roots in the history
Ancient India: Indus Valley Civilization- Urban Civilization- Agri was the mainstay of the Economy- Large Granaries.
Vedic Civilization- Based in Agriculture & Livestock
Medieval Period: Indian Spices- Attraction for International Trade & imperialist interests. British rule: Robert Clive – Fought for land and land revenue, Land as a tradable commodity, contract farming method, beginning of systematic study of agriculture.
Timeline of Indian Agriculture (2/3) – post independence
Post-Independence- phases : Agriculture-Agribusiness-Agro Industry; Land Reforms, Critical analysis of Green Revolution
Timeline of Indian Agriculture (3/3) – Present context
Structure
Traditional Farming
Contract Farming
Corporate Farming
Technology
Subsistence Farming
Conventional Farming
Organic Farming / Biodynamic Farming
Present position
Justification: Importance of Agriculture
Definition and brief history of Agriculture
Present position of Indian Agriculture in the World
Analysis using “Porter’s Competitive Advantage framework for Nations”Brief Case : Mango Value Chain
A short video on Indian Corporates in Ethiopia
Summary , Q&A
Present Position of Agriculture
Data regarding production , export & import of main agri produces
India’s position in global agriculture
Data as to land holding pattern
Profit position of Indian Agriculture
Key crop varieties in India
Leading food grain-producing states in India
Agricultural products in India
India in Global Economy
Yield of selected crops in India, China, Asia-Pacific and World, 2004-06 (Kg/ha)
Source: FAO/RAP, 2007
Hunger alarming in parts of Asia: 2010 Global Hunger Index (GHI)
Source: von Braun, 2011
Innovative Capacity- Compared
Land Holding Pattern of Traditional Farmers
Corporate Farmers in IndiaNo
Company Area (acres)
Description
1. IEEFL, Pune (Subsidiary of Ion Exchange India Ltd)
1700 1. Lands bought at a rate of Rs.25000 per acre
2. Certified Organic Production of Fruits
2. Jamnagar Farms Pvt Ltd ( a Subsidiary of Reliance – Mukesh )
7500 The largest Mango Orchard in Asia
3. Anil Dhirubhai Group 3500 Fruits & Vegetables
4 Field Fresh ( Bharti+ Rothschild)
4300 Multi product Farm
5 Sathuj Agriculture Pvt Ltd, New Delhi
5000 Vegetables & Fruits
6 Nijjer Agro, Amritsar 4000 Vegetables & Fruits
7 Vimal Dairy, Ahmedabad 1200 Dairy Production
8 SYP Agro, Ahmedabad 2300 Onions & other Spices for Export Market
9 Agri Gold , Hyderabad 1800 Fruits for Export Market
Few Indian Corporate Farmers Outside IndiaNo
Company Country Area (ha) Purpose
1. Karuturi Agro Products
Ethiopia 300000 Palm, Cereals & Pulses
2. Ruchi Soya Industries
Ethiopia 152649 Soyabean
3. KS Oils Indonesia 130965 Palm plantation
4. Sterling Group Argentina 19000 Peanuts & Olive
5. Olam International Uruguay 63000 Dairy, Palm, Peanuts
6. Varun International Madagaskar 232000 Rice, Corn, Pulses
7. Shree Renuka Sugars Brazil 133000 Sugarcane
8. Chadha Agro Ethiopia 100000 Sugarcane
9. Vedanta Harvests Ethiopia 50000 Tea & Spice
10 Neha International Zambia 13000 Maize, oilseeds
11 Adani Group Argentina 23000 Edible Oil & Pulses
Profit Position of Agriculture Two Ends of the Spectrum of Farmers in India
A Marginal Farmer in India
Land Cultivated: 0.75 Hectares
Investment: Rs.12,200
Total Returns Expected: Rs.20,800
Labour Input: 5-6 months of work by farmer, his adult son & daughter-in-law
Net Profit: Rs.8600 or Rs.1720 per month
Amount each of the members would have earned had they worked as daily wage for 30 days: Rs.1800 (Rs.60 per day)
Source: Times of India, New Delhi, April 4, 2008.
A Corporate Farmer - Karututi Global (Rs in Lakhs)
Total Income: 63872.65
Total Expenditure: 46226.38
PBT: 15635.24
PAT: 15497.45
No.1 Global Cut Flowers Producer and Trader
Source: www.karuturi.com- annual report 2011.
Overview
Justification: Importance of Agriculture
Definition and brief history of Agriculture
Present position of Indian Agriculture in the World
Analysis using “Porter’s Competitive Advantage framework for Nations”Brief Case : Mango Value Chain
A short video on Indian Corporates in Ethiopia
Summary , Q&A
Porter’s Competitive advantage Framework for Nations
FACTOR CONDITIONS
DEMAND CONDITIONS
RELATED & SUPPORTING INDUSTRIES
CONTEXT FOR FIRM STRATEGY & RIVALRY
GOVT.
Factors Influencing the demand
Increasing population around the World
Increase in wages and Urbanization
Diversification in the Consumption pattern
Health Consciousness among Consumers: Organic food
A.D.2000
A.D.1000
A.D.1
1000B.C.
2000B.C.
3000B.C.
4000B.C.
5000B.C.
6000B.C.
7000B.C.
1+ million years
8
7
6
5
2
1
4
3
OldStoneAge New Stone Age
BronzeAge
IronAge
MiddleAges
ModernAge
Black Death—The Plague
9
10
11
12
A.D.3000
A.D.4000
A.D.5000
18001900
1950
1975
2000
2100
Future
Billions
Source: Population Reference Bureau; and United Nations, World Population Projections to 2100 (1998).
World Population Growth Through History
Continents
America
Africa
Asia
Europe
0 1000 2000 3000 4000 5000 6000
942
1051
4216
740
1068
1444
4780
746
1216
2300
5284
725
Projected population 2050 Projected Population 2025 Population 2011
Source: Population reference bureau
Population Estimates of various Continents
Millions
Indian Population projection and age structure
Demographic Indicators 2000 2005 2010 2015 2020 2025
Total Population(millions) 1010 1089 1159 1229 1305 1380
Age Distribution (percent)
0-14 years 35.7 33.3 29.9 26.7 25.0 24.5
15-64 years 59.8 62.0 65.0 67.7 68.7 68.3
65+ years 4.5 4.8 5.1 5.6 6.3 7.2
Median Age 23 24 25 27 29 30
Source: Indian Demographic scenario-2025, P.N. Mari Bhat, Population Research Centre, Institute of Economic growth, Delhi, June 2001.
Opportunities of India’s urbanization to 2030
5 times – the number by GDP will have multiplied by 2030
590 million people will live in cities, nearly twice the population of the United States today
270 million people net increase in working-age population
70 percent of net new employment will be generated in cities
91 million urban households will be middle class, up from 22 million today
68 cities will have population of 1 million plus, up from 42 today; Europe has 35 today
$ 1.2 trillion capital investment is necessary to meet projected demand in India’s cities
Source: Mckinsey Global Institute
Source: The Rise of India’s Consumer Market (May 2007), McKinsey Global Institute
Source: The Rise of India’s Consumer Market (May 2007), McKinsey Global Institute
Per capita Food Consumption projection (kgs)
Per capita food demand for cereals
by crop and region,1997 and 2020
of food items in India at GDP of 7
%. (Unit: Kg)
Source: Surabhi Mittal, Structural Shift in demand for food, August 2006
Source: IMPACT projections, June 2001
Diversification in the Consumption Pattern
Consistent GDP growth of 5% to 6% upto 2050
Increased consumption of Value-added Processed Food, RTE foods, and shopping etc.
Changing perception of alcoholic beverages in India from ‘taboo’ to ‘socially acceptable
Source: Xavier Cirera & Edoardo Masset, Income Distribution Trend and Future Food Demand
Market Potential for Organic Products
Source: www.iccoa .org
AGRICULTURAL POLICIES
Policy of food self-sufficiency in staple foods – rice and wheat
In the 1960s and 70s, widespread adoption of high yielding rice and wheat varieties occurred
Policies initially focused on expanding cultivated area, land reform, community development, and restructuring rural credit institutions
Trade was strictly regulated through both quota restrictions and high tariff rates
Together, these initiatives led to dramatic leaps in agricultural production and made India self-sufficient in food grain production at the national level
AGRICULTURAL POLICIES
Production gains from Green Revolution technologies continued through the mid-1980s and then slowed
Input budgets began to strain govt. budgets
Unlike reforms in other emerging economies , the series of reforms instituted since 1991 in India left its agriculture sector relatively untouched, except for the removal of export controls
2 major impacts of 1991 reforms Increased per capita incomes and strengthened domestic demand Reduced industrial protection and improved agriculture’s terms of trade
AGRICULTURAL POLICIES
However, growth of the sector has actually slowed since the mid-1990s
Apparently contradictory trends lies
with India’s agricultural policies and
their performance
India’s main policy goals are To attain food sufficiency To ensure remunerative prices to farmers To maintain stable prices for consumers
POLICY INSTRUMENTS
Minimum Support Prices
•The Commission for Agricultural Costs and Prices recommends MSP for key commodities•MSP benefits have been capitalized into the value of land and fixed assets•Higher production costs and pressures to raise MSPs every year
Food Subsidies
• FCI purchases food grains from farmers at MSPs
• Sells at subsidized prices through PDS
• Food subsidy prices have almost trebled in the past decade
POLICY INSTRUMENTS
• Complex regulatory framework• Food-processing industries were limited by
regulation to small-scale capacities• State linked firms have been favored in
transportation, marketing and distribution of agri-food commodities
Regulated Markets
• Subsidizes fertilizer, power, fuel, irrigation
• Input subsidies have doubled in the past decade to about $8 Billion
Input Subsidies
• Import liberalization for agri-food trade remains slow
• In 2001, replaced quantitative restrictions on imports of all agricultural products with import tariffs
• A wide gap between applied and bound tariff rates
Agricultural Trade Policy
POLICY OUTCOMES AND CHALLENGES
The combination of administratively determined output prices and consumer subsidies has undermined the role of market forces in India’s agri-food sector
Private sector’s participation in the efficient operation of agri-food markets is discouraged
Measures have led to higher domestic food prices
Food subsidies were instituted to minimize the impact of higher food prices on consumers
Input subsidies have contributed to the excessive use of inputs and resulted in a number of agro-environmental problems, such as soil salinity and ground water depletion
The growing cost of input and food subsidies has also contributed to fiscal deficits
POLICY OUTCOMES AND CHALLENGES
Expenditures on subsidies also could have been invested in research, education and infrastructure to improve productivity and competitiveness of the sector
Production of staples was favored
Vertical coordination in the value chain as well as the development of the horticultural industry were hindered
Most agriculture related responsibilities are under state jurisdiction
Existing policies have benefited special interests which oppose significant reforms
RECENT POLICY DEVELOPMENTS
National Agricultural Policy was introduced with an aim to attain annual growth of 4% in agri sector during 2000-20
However, little concrete action has been taken at the central and state level to implement the proposed policy measures
The agri-food sector’s growing subsidy bill and declining investment have been acknowledged but were not addressed
Taken some steps to make agri markets more responsive are Revising the APMC Act to allow contract farming; Removing the reservations for small scale firms on food
processing industries; Removing restrictions on futures trading on many
commodities; Allowing up to 100% foreign ownership in many
agribusiness sectors, except in some forms of retailing and primary production
PROSPECTS
In general, Indian economy has been opening and growing steadily
But, slow growth in the agricultural sector remains a cause for concern
Fundamental reforms are needed to realize the full potential of the sector
More open trade policies and forward-looking domestic policies are to be adopted
The following areas will be critical to the prospects for India’s agri-food sector: Water scarcity and valuation; Reforms in commodity price policy; Public and private investment in rural infrastructure and
logistical services for agri-food value chain; The level of government involvement and potential
crowding out of private initiatives in the marketing and trade of agri-food products
Factor Conditions
Rivalry & Support Industries
Firm Structure, Strategy and Rivalry
Related and Support Industries
Poor Structure and Strategy
No competitive Spirit
Seeds Supplier
Bank Loans
Technology Provider
Fertilizer Company
Processing Companies
53
S
PESTEL ANALYSIS
POLITICAL
Often related directly to the Central Govt.
Rashtriya Krishi Vikas Yojana
MGNREGA
Revamp of Accelerated Irrigation Benefit Program
“India lives in its villages” - Mahatma Gandhi
ECONOMIC [1/2]
“Agriculture not only gives riches to a nation, but the only riches she can call her own” - Samuel Johnson
Micro Finance• Introduced by NABARD• Total 547 banks – 47 Commercial banks, 158 RRBs, 342
cooperative banks are involved in the operation of Self Help Group (SHG)- Bank Linkage Program
• Enabled nearly 32.9 million people in the country to access micro finance
facilities • Institutions must provide a wide range of financial
services including savings and insurance• Role of private sector is crucial
ECONOMIC [2/2]
“The first farmer was the first man, and all historic nobility rests on possession and use of land” - Ralph Waldo Emerson
Inflation Increased material input costs increases the sector’s cost of
production Shifting of production costs to consumers is limited by competitive
imports, thus reducing farmers’ rate of return The low current income from farming motivates farmers to
seek higher support prices and to extend price support policies to more commodities, which in turn results in further higher prices and higher rates of inflation
The high input prices lead farmers to recourse to more non-institutional credit, which ultimately leads farmers into a debt trap
Paying higher prices for imports, even as domestic farmers are given a minimum price barely enough to recover costs, is certainly not justified and hence, the govt. has to focus on the supply side
SOCIAL
“The divine chemistry works in the subsoil” - Nathaniel Hawthorne Harassment by moneylenders Inability to repay debts following crop loss Literacy rate has increased Migration to urban areas Hygienic conditions improved, but not on par with
developed nations Suicides - 1 in every 10,000 farmers commits a suicide Measures taken by the govt. have not yielded desired
results
TECHNOLOGICAL
Agricultural Mechanization
• Replacement of traditional and inefficient machine implements by improved ones
• Outsourcing the Training• 4 Farm Machinery Training
and Testing Institutes• 17 State Agro Industries
Corp.s• Demo of newly developed
agricultural/horticultural equipments
Agricultural Commodities Exchanges
• NCDEX and MCX were introduced in 2003
• Introduced future trading in Agri Commodities
ENVIRONMENTAL [1/2]
Dependency on Monsoon
• Only 40% of farm land is irrigated
• Between June 1 and July 15, rains have been 43 per cent below normal in the crucial Northwest region, the nation's 'Grain Bowl‘
• The cumulative seasonal rainfall between 1st June and 15th July is 27 per cent below normal levels, which has adversely affected the Khariff sowing
Global Warming
• Horticultural crops are more susceptible to changing conditions than arable crops
• Field vegetables will be particularly effected by temperature changes
• Water deficits will directly affect fruit and vegetable production
• Poultry and pigs could be exposed to higher incidences of heat stress influencing productivity
• Increase in disease transmission by faster growth rates of pathogens in the environment
ENVIRONMENTAL [2/2]
LEGAL [1/2]
Irrigation• The policy of entrusting the
maintenance of small irrigation works to the Panchayat Raj organizations has been accepted by many states
• A draft model bill for introducing a legislation to regulate and control the development of ground-water to Prevent over-exploitation and deterioration in water quality
Crop Protection• The Destructive Insects
and Pest Act, 1914, provided for means against the entry of diseases from other countries into India
• A chain of plant quarantine and fumigation stations has been established in all important airports and seaports and land frontiers
LEGAL [2/2]
Fertilizers• The fertilizers (Control) Order,
1957, under Clause 111 of the Essential Commodities Act, 1955 envisaged the statutory control of the prices of three major fertilizers
• The Fertilizers Movement Control Order, 1973, in May 1973 under Clause IV of the Essential Commodities Act, 1955, ensures the equitable distribution of fertilizers in various states and stops the unauthorized inter-state movement of fertilizers
Soil and Water Conservation
• Most of the states have enacted legislation, empowering their governments to take up early anti-soil erosion measures
• Other Acts which have an indirect bearing on the subject of soil and water conservation dealing with the preservation and protection of forests
Brief Case
Justification: Importance of Agriculture
Definition and brief history of Agriculture
Present position of Indian Agriculture in the World
Analysis using “Porter’s Competitive Advantage framework for Nations”Brief Case : Mango Value Chain
A short video on Indian Corporates in Ethiopia
Summary , Q&A
Mango supply chain in TN
Indian mangoes account for 40% of world mango production although they are mainly meant for the domestic market
Less than 5% of the produced mangoes are processed
Mango pulp is the main export product both in terms of volume and value (Babitha, 2009).
Mango pulp accounts for about 20% of the processed fruits and vegetables exported from India (MFPI)
Key locations
Chittoor District of Andhra Pradesh and Krishnagiri District of Tamil Nadu, both in South India, are the main sourcing centers of Indian mango pulp (Mehta and George, 2003)
Krishnagiri is the largest mango producing district in Tamil Nadu, about 6000 metric tons of the varieties Totapuri and Alphonso are used for pulp production (Raj, 2008)
The main weaknesses include : Lack of marketing, Low innovatively produce Few processing varieties, Under capacity performance of the processing plants (on average
of 50 days per year) Poor infrastructural works such as storage and cool chain facilities Repeated power cuts during the period of processing
The major threats for the Indian mango pulp sub- sector include : The availability of other sources that supply mango pulp of good
quality Low volume of mangoes available for large pulp processing
factories due to high fragmentation of mango growers Increased need for high volumes and standardization in the
international market
Weaknesses & Threats
Mango production in TN
According to Raj (2008), there are 385 fruit processing units in Tamil Nadu out of which 80% are small industries with an average capacity of 5,5 tons per day and the remaining units are medium scale with an average capacity of 80 tons per day
Tamil Nadu accounted for 4 to 5,6 % of the total Indian mango production in recent years (National Horticulture Board)
The main varieties of mango grown in Tamil Nadu comprise Totapuri, Sendhuri/Sentharu, Peter and Neeham
Totapuri accounts for approximately 80% of the total production while the others are mainly grown for the regional market with respectively 5%, 5% and 10% of total production
Table 2.1: Major export partners of Tamil Nadu for fresh mangoes and mango pulp.
Source: Domestic & export market intelligence cell
Fresh mangoes Mango pulp
1 Bangladesh (58%) Saudi Arabia (32%)
2 United Arabian Emirates (18%) United Arabian Emirates (18%)
3 Saudi Arabia (6%) Netherlands (8%)
4 Kuwait (3%) Kuwait (7%)
5 UK (2%) UK (4%)
6 Belgium (2%) Germany (2%)
7 USA (2%) Sudan (2%)
8 Bahrain (1%) Canada (2%)
9 Spain (1%)
10 Oman (1%)
Producers
Pre-harvest
contractor
Commission Agent
Customer
RetailerExporter
Processors
Supply chain of mango pulp in India
Importer
Wholesaler
Retailer
Customers
Europe
Value (Rs/kg) fresh mango and mango
pulp
Proportion at the final price
in India %
Proportion at the final price in Europe in %
Farmer price 3 11.3 2.32
PHC selling price 5.25 8.4 1.74
Wholesaler selling price 6.73 5.56 1.14
Processor selling price 9.25 9.5 1.19
Exporter price 26.54 65.14 13.4
Importers selling price Europe 129 79,42
Regulations
The mango pulp imported in the EU territory must comply with general conditions and specific provisions designed to prevent risks to public health and protect consumers' interests
EU declares that the minimum content of mango as ingredient of the concentrated pulp fruit ingredient shall not be less than 30% m/m [mass/mass]
Quality
After processing the mango pulp it is filled into cans, jars or bags of different materials. Depending on the production process the subsequent storage period ranges from 12 to 18 months.
For a mango pulp to be exported from India to the European market, it is a must to be HACCP certified
HACCP is a systematic approach to identify, evaluate and control steps in food processing that are vital to food safety (Trienekens & Zuurbier, 2007)
However, HACCP has not been followed in the pulp industry in India by the majority of small exporters
They generally agree that market access will undoubtedly be increased by HACCP, but they have several difficulties to adopt it (Mehta & George 2003).
Overview
Justification: Importance of Agriculture
Definition and brief history of Agriculture
Present position of Indian Agriculture in the World
Analysis using “Porter’s Competitive Advantage framework for Nations”Brief Case : Mango Value Chain
A short video on Indian Corporates in Ethiopia
Summary , Q&A
Overview
Justification: Importance of Agriculture
Definition and brief history of Agriculture
Present position of Indian Agriculture in the World
Analysis using “Porter’s Competitive Advantage framework for Nations”Brief Case : Mango Value Chain
A short video on Indian Corporates in Ethiopia
Summary , Q&A
75
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