Agri Business Relience

Sanjeev Asthana Reliance Agribusiness 1

Agribusiness Status in India…..Issues and Way Forward

By

Sanjeev Asthana


Flow of Presentation

Indian Agriculture – Snapshot & Challenges

Development Needs

Suggestions and Recommendations


Indian Agriculture - Snapshot

Milk

Largest Producer

91 Mn T

F & V

#2 in the world

129 Mn T

Food Grains

#2 in the world

(218 Mn T)

Cattle / buffaloes

Largest in the world

283 million

Tea

Largest Producer

(0.85 Mn T)

Sugarcane

# 2 in the world

(245 Mn T)

Goat & Sheep

182 million

Fisheries

Marine: 2.7 Mn T

Inland : 3.1 Mn T

Fruits and Vegetables

• 41% of mango

• 23% of Banana

• 24 % of cashew nut

• 10% of onion

• 30% of cauliflower

• 36% of Green Peas.

Meat and Poultry

• 53% of world’s buffalo

• 17% of goat

• Fifth in world egg production

Cereals

• Largest Producer of Pulses

• Second largest producer of Food grains

• Second largest producer of Sugarcane Source: FAO / NHB / Department of Animal Husbandry

All 15 major climates of the World are present in

India

52% of total land is cultivable as against world

average of 11%

India is a multi crop country unlike major ag

economies

We are a large producer and consumer of food


Unit – Million Metric Tonnes

Supply-Demand Gap for Selected Food Items

Source: ICRIER, Surabhi Mittal, Working Paper No-209

Emerging Food deficit is a matter of grave concern……

Huge dependency in veg oils & Pulses on imports


High value agriculture taking roots over traditional crops

Diversifying Agriculture


Big Concerns Today

Supply side equation in production

Low farm realization

Technology and methods out of step ….low yields

Lack of market led agri research

Low investments in agriculture…..virtual collapse

of infrastructure

Distorted resource allocation

The sub par quality and reach of credit flow


Yields in Indian Agriculture are well below Global Benchmarks

0

2000

4000

6000

8000

10000

Indi

a

Banglad

esh

Egypt

japa

n

May

amar

World

Ave

rage

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

India China France Pakistan UK World

Average

Yield Comparisons Wheat

Source: Economic Survey 2004-05

Indian Yields compared to

Global Averages

Yield Comparisons Rice

3122Sugarcane

0711Jute & allied

7741Cotton

14752Oilseeds

13811Pulses

12543Coarse Cereals

3821Wheat

5221Rice

Yield Ranking

Production Ranking

Area Ranking

Global Ranking

Indian Ranking Globally on

Area, Production and Productivity

Low Yield


Missing Information Link

Source of information for farmers mainly other

farmers

6669 69

21

7 7

0

10 97 8 8

1 3 21 1 23 1 21 03

0

10

20

30

40

50

60

70

80

Crop Prices Sorting/grading

of crops

Post-harvest

practices

Perc

en

t o

f F

arm

ers

Other farmers Agricultural traders

Personal observation Agricultural officers

Contract Buyers Input suppliers

Mass Media Other

Source: World Bank Agricultural Marketing Survey 2005

Issues:

Formal extension system defunct

Info out of step with market need

Low penetration…. of orgn sector

Demand impulse slow to reach

Leading to

Severe SND imbalance

Price volaitility

Extremely low tech adoption

Time to reach, delivery mode and quality of info is crucial……


Research Agenda

Research needs to work seamlessly with

market

High quality research but limited outreach

Interface with private sector and farmers

Ag education has to be contemporary

R&D efforts must be in sync with market

Policy to create a better PPP in research

Structured links between lab and farm


Declining Share of Public Sector Outlays and

Expenditure under Agriculture & Allied Activities

Source: Planning Commission, New Delhi

(Rs. Crore)

Five Year Plan/Annual Plan Agriculture and Percent Share of

Allied Activities* Total Agriculture and Allied

Activities to Total

Plan Actual Plan Actual Plan Actual

Outlays Expenditure Outlays Expenditure Outlays Expenditure

1 2 3 4 5 6 7

Ninth Plan (1997-02) 42462 37239 859200 941041 4.9 4.0

Tenth Plan (2002-07) 58933 56997 1525639 1489395 3.9 3.8

Eleventh Plan (2007-12) 136381 NA 3644718 NA 3.7 NA

Annual Plan (2007-08)# 8558 8544 319992 292337 2.7 2.9

Annual Plan (2008-09)## 10075 NA 375485 NA 2.7 NA

Declining Public Investments

Resource appropriated by subsidies

Limited Private sector investment

Positive Impact of recent Govt programs being felt…..


Fertiliser Subsidy (Rs in Crores)

Skewed Resource Allocation: Fertilizers

Source: The Fertiliser Association of India

Large Subsidy to few states

Same states tend to benefit more from FCI

procurements

Focus should be on creating avenues to

increase farm income

Resource constraints will challenge recapitalization of agriculture


Credit Access

The agricultural credit growth is significant

About a quarter of agricultural output

High proportion in agricultural inputs

However

Just about 40% farmers bank through formal system

Just about a fifth have access to a bank loan

Small and marginal farmers…..only 10% can access a bank loan

High lead time for a loan disbursement

Govt policies spurring increased formal sector lending to agriculture


Mark-ups

Consumer

Retailer

Sub-Wholesaler

Wholesaler

Market level

commission agent

Consolidator at

Village level

Small /

marginal farmer

< 25%

< 6%

< 10%

< 8%

< 10%

Total mark-up in the chain

Total margin - 60 to 75 %

Margin from farmers to

wholesaler - 30-35%

Wastage - 15-25%

Transportation - 10% approx.

Farmers get 25-30% of consumer price

Source - FICCI Agricultural Summit 2006

Source - FICCI Agricultural Summit 2006


Farmer

Village Commission

Agent

Mandi / Localagents

Wholesalemandi

Distributor

Transportation

Processor

Retailer

Consumer

• Low yield / non-standard quality• Price de-linked from market

• Unscientific and unhygienic

handling

• Poor market access• Loss in trade passed onto farmer

• No infrastructure for handling /

grading

•Price quality correlation not assured

• Unscientific method leading to loss of quality / damages

• Inadequate infrastructure

•Rampant wastage•Opportunistic profiteering

• No control on quantity / quality of raw material

• Lack of infrastructure leading to loss of quality

• Lack of infrastructure leading to loss of quality

• High prices• Limited choice

Farmer

Village

Commission

Agent

District

Commission

Agent

WholesalerSub

WholesalerRetailer Consumer

Non value adding players

Disjointed Supply Chain


Marketing Infrastructure - Shortages

Considerable expansion but still

Serious regional disparities

Rural roads (about half the villages)….high return proposition

Grading at farmer level - 7%

Storage – about 30%

Cold storage capacity - 10% of production

Inadequate facilities in yards & rural markets

Losses at pre-market stage(Est) Foodgrains 7%

F&V 30%

Spices 10%

Large pipeline of aggressive plans under PPP mode on the anvil


Underdeveloped Processing Industry

Fruits and vegetables

2-3% of produce is

processed

8% to 37% lost in storage

and transportation

Inadequate storage and cold

chain

Inadequate processing and

marketing infrastructure

Grains 3% is lost in storage

Country % Processed

M alaysia 83%

South Africa 80%

Phillipines 78%

Thailand 72%

Brazil 70%

USA 65%

India 2-3%

Source : NHB


GOI Strategy for Agricultural Marketing Development – Major

Initiatives

15 State Govts: amended APMC Act

Adopted Warehousing Regulations Act

Private sector warehousing/transport companies in procurement for

FCI

Enactment of the Food Safety and Standards Bill 2005

Incentives to agro-processing industries for fruits and vegetables.

Developing 30 mega food parks: "from the farm gate to the retail

outlet".

Recent Developments

Major steps in right direction……lot more needs to be done


SABMiller India: Contract farming agreement with barley farmers

Adani Agrifresh: Large investment over next 3 years in supply

chain

Cadbury India Ltd: to promote cocoa farming in 50,000 acres

Mahindra: potato seed development through contract farming

Himalaya Drugs: Sourcing 70 per cent of herbs from farmers

PepsiCo: Introduced high-yielding seeds

International Development Enterprises (India) (IDEI): Identifies

and develops appropriate technologies that help small farmers

Reliance Retail: Established ‘farm to fork’ pan-India network

Agribusiness – Private Initiative

Major initiatives on ground………however scale is the key


Lab to Farm – Need of the Hour

Market driven research holds the key

Redefine research agenda - adopt and operate as per local needs

Increase public-private partnership in agricultural research

Mobilize private sector as a catalyst to link lab to farm

Allow usage of public research infrastructure on PPP basis

Scientist and University Fellows can associate with private sector

Research Institutes may adopt and develop package of farm practices

Large potential to harness the potential of Research Institutions


Government Support

Upgrade the existing agri marketing infrastructure

Conducive institutional environment to attract private

investment in agri value chain and food-processing

Consistency in reforms & rules and regulations

Deregulation of market….with reasonable controls

Finetune the role play of various agencies

Need to carry forward the momentum in reforms at accelerated pace


Thank You!

Agri Business Relience

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