Need for Efficient and Robust Agri Value Chain in India

The agriculture sector in India has undergone significant structural changes indicating a shift from the traditional subsistence towards a market oriented one. The rural economy has moved from exclusive reliance on agriculture to a service dominated one that has a stabilizing influence on rural incomes. The decrease in agriculture’s contribution to GDP has not been accompanied by a matching reduction in the share of agriculture in employment.

However, within the rural economy, the share of income from non-farm activities has increased. Since agriculture forms the resource base for a number of agro-based industries and agro-services, it would be more meaningful to view agriculture not as farming alone but as a holistic value chain, which includes farming, aggregating, processing, warehousing (including logistics) and retailing. The term “value chain” describes the full range of activities that are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to final consumers, and final disposal after use.

In agriculture, value chains have always been in existence in the sense that farms carried out production and the final consumer accessed the produce, with the produce itself traversing through several channels and players. The degree of organization and governance of the value chain while improving continues to be a challenge. The existence of several middlemen, absence of information about other links in the chain and inability to invest in improving the performance in almost every part of the chain led to inefficiencies and lower incomes especially in the lower end of the chain. The recent initiatives have focused on improving technology of production, processing, quality control, creating processing facilities that add value to raw produce and aggregation near farms to ensure higher share of consumer prices for the producer. Creation of technology based commodity exchanges for price discovery, investments in marketing infrastructure such as warehouses, cold stores, cold chain logistics, innovations in trade finance products such as collateralized warehouse receipts and institutional interventions such as farmer collectives are changing the quality of value chains in agriculture. Agricultural value chains are difficult to organize and stabilize in countries like India with a large number of small farm holdings. The production and aggregation parts of value chains have to be made efficient in order for the small farms to realize higher returns. Building the confidence of farmers to move away from subsistence farming to market oriented farming, and increasing their awareness on application of improved inputs and adoption of higher technology of cultivation are important interventions in creating a sustainable value chain. 

Aggregation of several small farms pose challenges in terms of highly dispersed collection of produce, transport arrangements, and quality assurance mechanisms at every level. These not only entail costs but also time outlays in the aggregation process. The production effort has to be organized in clusters so that the distances and time are kept within manageable levels. Shri Manoj Rawat, Head, Agribusiness, RBL Bank , Mumbai highlighted the need, means and the importance to the Krishi Jagran Team.

Why do we need a Agri Value Chain?

The first on foremost thought that comes to my mind is to “Make the country free of hunger”.

In simple terms what Agri Value Chain means 

Capturing the value created along the Agriculture chain from pre sowing to food harvest or in other words capturing value created from “Farm to Fork”.

The Agri Value Chain is needed to-

  1. Prevent Colossal Wastage of Agriculture Produce “billions of dollars” loss to economy
  2. To ensure that share of Farmer in consumers wallet can increase, which is merely 25-30% as compared to western market where it goes as high as 50-75%
  3. Demand for MSP regime will automatically go away and farmer can expect a rightful price for the produce
  4. Ensure optimal management of natural resources and mother earth which is being abused 
  5. Make that India becomes “Global Hub for Food Industry”

Unfortunately India remains the Chronic Hunger Capital of World despite the fact that our country

  1. Grows more 260 Million tonne cereals enough to feed our population
  2. Contrary to Country is Food Surplus in many ways
  3. Largest producer of milk in world
  4. Second-largest producer of fruits and vegetables
  5. Largest in many other commodity

What a paradoxical situation?  

We grow more. We waste even more. 

We waste more food than that produced by Developed and Rich nations.

India is among the biggest food wasters in the world, reportedly wasting an estimated Rs. 900,000 million worth of fruits, vegetables and grains every year and year on year.

  1. India wastes  wheat  equivalent Australia grows in a year
  2. We waste more fruits & vegetables than that consumed by United Kingdom in a year   & so on…

The irony is despite such a wasteful situation, India accounts for the highest estimated number of hunger stricken people, about one in every four such people in the world. On Global Hunger Index (GHI), India ranks 63rd, out of the 78 hungriest countries, significantly worse than neighbouring Sri Lanka (43rd), Nepal (49th), Pakistan (57th), and Bangladesh (58th).

India lacks efficient markets fails to facilitate the “Producer find the best Buyer and Buyer identify the best supplier”.

While there is no dearth of market places,  there lack efficient market linkages

More than 7200 + Regulated Markets 

More than 22220 + Regular Periodic markets in primitive shape

India has thousands of un-organized Haats, fairs, assembly markets

Marketing System follow a very subjective practice, has promoted monopolistic practices, procedures and market inefficiencies

There is lack of grading infrastructure & no accreditation 

No premium for quality- unscientific post-harvest handling- Heavy loss to GDP

Market is controlled by middlemen as who add little value 

Linkage may farms to markets grossly inadequate

Non-existent Logistics and Information technology interventions.

System is only production oriented and detrimental to processing & value addition 

Few challenges which the Agri-markets face

Unpredictability about supply

High variation in Quality

Short Shelf life and High Wastages in Supply Chain

Licensing Barriers across markets

Lack of scientific Market Infrastructure in Agricultural Markets

High Incidence of Market Charges

High cost of Transportation

Non-available Credit Facilities

Farmers realise un-remunerative value for produce

Market Focus on production only not preservation and processing

Exploitation by Middlemen/Traders

Lack of Logistics and scientific management of information

To develop efficient Agri Value Chains, there is crying need for Reforms, better market information and use of Information Technology.

Undertake reforms that attracts large capital and skill based investment in Agri-Supply Chain sector

Market Information with regular surveys to ensure rightful price to producer 

Provision of warehouse and credit facilities in vicinity of production centers

Transparency and fair trading in Mandis /market yards

Implementation of new APMC across the country

Ensure provision for direct sale of produce by producers to retailers and processing agencies

Focus on prevent colossal losses to agriculture product 

Create a Unified and Vibrant Agri-marketing system that promotes efficiency and value addition

t is important understand Agri Supply Chains must remain as “work-in-progress” and continuously evolve

To conclude “Agri value chains” should keep tab with developments in Agriculture segment, policies, global market and consumer needs with the following being centre

Need for focus on “Improving Preservation” rather than just “ Increasing Production”. Colossal loss of food produces. This could increase GDP of country by 1% and increase farmer’s price realization by 10-15%.

Need for “Process in India” rather than just “Grow in India”. Agro-Processing sector to be considered an important component of supply chain.

Ensure realization of Rightful price to farmers rather than prolonging the “MSP” based regime. Possible by reducing the intermediation cost from existing 50-70% to 30-40%, a realistic target.

Solution for Agri Value Chain challenge in not merely more Investment but in truly “unlocking & enabling” the investments that have already made over the years and bringing focus on improving the efficiency of what has already been created. This sector already has billion of rupees grossly underutilized investments

The situation in India demands to “needle”  the various factors into a single thread that would provide end-to-end solutions for efficient market and better price discovery for producer, processor and consumer and develop efficient “Agri Value Chains”, which may ultimately create a “hunger free & properly nourished” India.

No matter whatever development happens in technologies, mankind will still need Food and Water to “survive” unless we are able to develop smartphone that can be “munched and chewed” when you feel hungry and can also be used for communication and messaging.

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