tag:blogger.com,1999:blog-9181230069984035972024-03-25T06:58:38.971-07:00Shiv's Third EyeBeyond what the Two eyes see!Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.comBlogger56125tag:blogger.com,1999:blog-918123006998403597.post-37930797263327230712021-08-05T05:25:00.000-07:002021-08-05T05:25:30.732-07:00Raising Farmer Incomes through Value Addition to Wheat<p><span style="font-size: 12pt;">Wheat Products Promotion Society of India organized a </span><a href="http://wppsindia.org/webinar/" style="font-size: 12pt;">webinar</a><span style="font-size: 12pt;"> last month, and this is a gist
of what I spoke on the subject:</span></p>
<p class="MsoNormal"><u><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">First principles of value addition <o:p></o:p></span></u></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">When there’s a gap between consumer needs and farmer’s
production, one has to bridge it through value addition. Broadly, there are
four gaps, offering four types of value addition opportunities. </span></p><p class="MsoNormal"></p><ol style="text-align: left;"><li><span style="font-size: 12pt; text-indent: -18pt;">What product does the consumer want?
The Form.</span></li><li><span style="font-size: 12pt; text-indent: -18pt;">Where does the consumer want it? The Place.</span></li><li><span style="font-size: 12pt; text-indent: -18pt;">When does the consumer want it? The
Time.</span></li><li><span style="font-size: 12pt; text-indent: -18pt;">How does the consumer want it produced?
The Process.</span></li></ol><p></p>
<p class="MsoNormal"><u><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">The Form<o:p></o:p></span></u></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">Besides the basic wheat, products can be classified in
two segments: </span></p><p class="MsoNormal"></p><ol style="text-align: left;"><li><span style="font-size: 12pt; text-indent: -18pt;">Products from Milling – Basic Chakki
Atta as a wholesome staple, a key source of energy & nutrition; Versatile Maida
& Other Flours for different end uses in cooking at homes, industrial and
specialty bakery</span></li><li><span style="font-size: 12pt; text-indent: -18pt;">Products from Extraction – Starch,
Gluten Protein, Germ Oil, Vitamins, Minerals, Omega Fatty Acids etc. used in
many industries like food, pharmaceuticals, nutraceuticals, textiles, paper,
skincare etc.</span></li></ol><p></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">We are still at a nascent stage in India in many
products, so there is plenty of headroom.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">In normal course, the value so added is retained by
the processors and brand marketers, because the farm end is commoditized. For ploughing
back a larger share of this value added, farmers have to push what’s called the
“Value Offer Point (VOP)” downstream along the chain. <o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">VOP can be pushed by using one or more of the three
levers, (1) variety, (2) growing practices, (3) post-harvest practices. <o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">India grows a large range of wheat varieties, but they
often get comingled along the outdated supply chain system. The identity of the
varieties must be preserved until the consumption point for the value to be
captured. Also, the growing and post-harvest practices must ensure cleaner &
consistent quality of wheat that improves the yield or enhances the manufacturability
in the mills and subsequent processing. <o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">This is easier said than done, because the wheat
production is primarily driven by the Minimum Support Price (MSP) based Public
Procurement System. Consequently, barring a few pockets, majority of the
farmers focus on producing “fair average quality” wheat.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">On the other hand, it is important for the industry to
work in partnership with farmers to influence the farming practices and the
logistics. The new farm laws, when they see the light of the day, will enable such
a partnership.<o:p></o:p></span></p>
<p class="MsoNormal"><u><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">The Place & The Time<o:p></o:p></span></u></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">Wheat is produced in about 25% of India’s districts
(largely north and central) but is consumed across the length & breadth of
the country. Therefore needs to be transported from production to consumption centers.
<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">Wheat is a Rabi crop in India and harvested in less
than three months from mid March to mid June, but is consumed round the year.
Therefore needs to be carried for twelve months.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">Value along these two dimensions of place and time is
often added by the traders and the arbitrage pocketed by them. <o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">Farmers can push the VOP by enhancing their holding
power through three levers, (1) expanding the near-farm storage capacity, (2)
increasing the post-harvest financing facility to be able to hold, and (3) accessing
the commodity derivative markets for hedging the price risk inherent in long
holding.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">The recent One Nation One Price OMSS (Open Market
Sales Scheme) that fixed one price across the country and through the year is
adversely impacting the farmer. <o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">While the scheme is attractive from the perspective of
a consumer and processor in the non-wheat-growing region, it puts a cap on the
in-season prices of wheat in the growing region, as the trade stays out of
buying & holding because it is not economical.<o:p></o:p></span></p>
<p class="MsoNormal"><u><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">The Process<o:p></o:p></span></u></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">This is a new fourth vector of value addition, arising
from the demands of the more conscious consumer looking for food produced more
sustainably. Based on the water consumed in production, the carbon foot print
along the chain, the way waste generated in the process is managed etc. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">The challenges of this dimension are also similar to
the first one, given the need for traceability.<o:p></o:p></span></p>
<p class="MsoNormal"><u><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">Conclusion<o:p></o:p></span></u></p>
<p class="MsoNormal"><span lang="EN-US" style="font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">There’s plenty of scope for value addition along all
the four dimensions and for ploughing a fair share of such value to the farmer,
but there are two imperatives for this potential to be realized:</span></p><p class="MsoNormal"></p><ol style="text-align: left;"><li><span lang="EN-US" style="font-size: 12pt; line-height: 107%; text-indent: -18pt;">Policy should not distort markets</span></li><li><span style="text-indent: -18pt;">Industry and farmers must work in
partnership</span></li></ol><p></p>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com3tag:blogger.com,1999:blog-918123006998403597.post-35787089305825704862019-08-19T06:39:00.002-07:002019-08-19T06:39:20.084-07:00Dynamics of Crop Diversification <div dir="ltr" style="text-align: left;" trbidi="on">
<span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">One routinely hears recommendations for crop diversification, saying that B crop is more profitable than A crop. The dynamics of crop diversification are more complex than that. In my experience, every farmer evaluates the B vs A trade-off, using a five-dimensional model, often intuitively. And, each of the dimensions have further nuances too.</span><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">1. For sure, </span><b style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">net profit from one crop vs the other</b><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">, is the most important variable. But, such profit will be seen from a twelve-month cycle perspective. At times, the chosen crop, depending on its duration from land preparation to harvest, limits the choice of next crop (or prior crop) that can be planted. Hence the twelve month cycle. I am keeping the cases of even longer term options like trees, out of the argument when I said twelve months. Profitability trade-off, often, also involves assigning value to the crop byproducts consumed off-farm for livestock or at home.</span><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">2. Another important factor is the </span><b style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">effort involved in growing one crop vs the other</b><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">. Some require more tender care or frequent monitoring vs the other. Or more physical drudgery. One crop may need more farm labour for an operation. Trade-off decisions then involve whether sufficient number of people are available within the family or one needs to hire. Then there are nuances, like labour barter – “I work on your farm and you work on mine”, if the window of that activity has flexibility of time.</span><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">3. Going beyond labour, the next factor involves </span><b style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">access to resources</b><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">, such as farm inputs, or credit to buy the inputs. Some of the resources place constraints on which crop can be grown; water for example, be it ground water, or canal water with the attendant restrictions, if any, on the release quantum and timings. Soil and climatic conditions, of course, are the more fundamental factors that limit choices of crops.</span><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">4. The fourth dimension is </span><b style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">knowledge required to grow different crops</b><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">. At a basic level, certain generic good practices on growing a crop like land preparation, planting density, irrigation and fertigation cycles, crop protection should the need arise, post-harvest activities etc. Then, every farmer requires certain contextualized knowledge on managing the crop as the growing conditions evolve, in terms of temperatures and humidity, besides any implications of the crop planted in the previous season, or limitations on the resources required etc.</span><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">5. Finally, probably most importantly, the </span><b style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">risks involved in growing one crop vs the other</b><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">. There are risks first in the production stage and then in marketing the crop produced. Some crops are more vulnerable to weather variations than the others. This is more important today, when the extreme variations have become the order of the day. Market risks include the extent of price volatility and liquidity of demand for a crop.</span><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><br style="-webkit-text-size-adjust: auto; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;" /><span style="-webkit-text-size-adjust: auto; background-color: #fff9ee; caret-color: rgb(34, 34, 34); color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.399999618530273px;">The market conditions will throw up a natural bias for one or the other crop in a given region for a profile of the farmer each season. If the Government or any other agency (say, a food processing company) would like to promote a particular crop or variety, first step is to make an assessment if the wind is hitting the tail or the head along all these dimensions and take advantage or neutralize respectively, so that the proposed crop is in the best all-round interest of the farmer.</span></div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com6tag:blogger.com,1999:blog-918123006998403597.post-9495312985911381092019-04-14T08:00:00.000-07:002019-04-14T08:00:06.084-07:00e-NAM: Opportunities as an Integrated Market Platform for Agricultural Produce<div dir="ltr" style="text-align: left;" trbidi="on">
On the occasion of the <a href="http://pib.nic.in/newsite/PrintRelease.aspx?relid=138891" target="_blank">third anniversary of e-NAM</a>, I post this blog, envisioning the opportunities for the platform beyond merely linking mandies.<br />
<br />
There are four sources of arbitrage that offer an opportunity to capture value and raise farmer incomes:<br />
1.<span class="Apple-tab-span" style="white-space: pre;"> </span>Price difference between the producing and the consuming regions<br />
2.<span class="Apple-tab-span" style="white-space: pre;"> </span>Price rise between the harvesting season and a few months later<br />
3.<span class="Apple-tab-span" style="white-space: pre;"> </span>Gap between the price a consumer pays and the price a farmer receives<br />
4.<span class="Apple-tab-span" style="white-space: pre;"> </span>Price a consumer is willing to pay for superior value, such as safety through traceability<br />
<br />
e-NAM is primarily built to capture the value from the first of these opportunities, i.e. the price difference between the producing and the consuming regions. e-NAM can also play a key role as an integrated market platform and capture the value from the other three opportunities by working in conjunction with other initiatives of the Government and / or Private Sector.<br />
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1. The basic logic of capturing value from the price difference between the producing and consuming regions is to extend the participation of buyers from across the country, going beyond the physical mandies (APMC Market Yards). In order to that, the e-NAM ecosystem has to integrate a few critical activities like quality assaying, payment mechanism, and logistics to actually enable long distance buyers to participate. I am glad, e-NAM has added or in the process of adding these features in different locations. It is important to keep the costs of these services competitive vs the post-mandi physical chain’s so that they do not eat away the arbitrage between regions and leave nothing for the farmer. One must recognize that our traditional intermediary system is very efficient in this regard.<br />
<br />
2. For capturing value from the price rise between the harvest season and a few months later, e-NAM has to integrate with the Commodity Derivative Markets and enable its participants to determine prices linked to Futures and Options. Any farmer would love to sell his output at the time of planting using an Options embedded forward contract, which works exactly like a Minimum Support Price mechanism.<br />
<br />
3. To capture value from the huge gap that typically exists between a consumer and farmer price, e-NAM has to plug into initiatives like ITC e-Choupal. The roles of each of these platforms are different. While e-NAM enables competitive discovery of quality-factored spot prices for physical goods, Derivative Markets enable discovery of future prices by standardizing product quality, ITC e-Choupal enables discovery of different consumer segments for different varieties and qualities of the produce<br />
<br />
4. By integrating e-NAM with GrAM, the latest Government initiative to create more spokes in the form of <a href="http://pib.nic.in/newsite/PrintRelease.aspx?relid=176062" target="_blank">Gramin Agricultural Markets</a> that are in proximity to production clusters. This enables improved traceability and identity preserved supply chains in the public domain, much like ITC e-Choupal has been able to do in a private network.<br />
<br />
As e-NAM evolves into an integrated market platform, APMC Markets can transform themselves into Post-harvest Service Organisations to work with the farmers to improve quality and lower costs. <br />
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Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com8tag:blogger.com,1999:blog-918123006998403597.post-25066871865825721422018-05-07T07:16:00.001-07:002018-05-07T07:16:21.539-07:00Economic Diplomacy for Development<div dir="ltr" style="text-align: left;" trbidi="on">
The “<a href="http://www.isb.edu/deccan-dialogue/agenda" target="_blank">Deccan Dialogue</a>” is a conference jointly organised by the Ministry of External Affairs, Government of India and the Indian School of Business on the theme “Economic Diplomacy for Development” on 6th May 2018, in Hyderabad.<br />
<br />
Here’s a summary of my remarks in a panel discussion at the conference, the session’s theme being, “Taking economic diplomacy to the grassroots for strengthening development partnership”<br />
<br />
Friends, I will use the time allotted for my opening remarks to make three brief points, and pitch with the Conference Organisers for one action at the end!<br />
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Firstly, the word “development” in the conference theme, auto-suggests that one sector we should strategically focus on is “agriculture”. Because agriculture engages half of our workforce, with per capita incomes that are just about one-fourth of that of the rest of the professions. For this reason, we should work on raising incomes of the farmers, with as much importance as we give to creating new jobs. On the other hand, providing food security to the growing population of the world is another developmental concern. At a global level, one calculation estimates that we need to produce as much food in the next forty years to feed the people, as we had produced in the last eight thousand years in aggregate. Yes, you heard it right! Can you visualise how daunting the task is? <br />
<br />
Growing more food by increasing farm productivity sounds like a simple solution that can raise farmer incomes and feed the world simultaneously. No, actually doing it is not as easy! That brings me to the second point I wanted to make. That solution to this problem lies in elevating the issue to the level of economic diplomacy, the other part of this conference theme, rather than treating it as business-as-usual activity. Because, we need to increase the farm productivity factoring the twin realities of ‘changing climate’ and ‘depleting natural resources’ such as water and top soil. These mega-challenges require collective action at global level and access to technology seamlessly across borders. This requires diplomatic engagements. Also, while the Hon’ble PM has given the call for “Doubling Farmers Incomes” and the Centre supports the implementation with several schemes, agriculture is a State subject and onus of action lies with the States. Given the extent of Agro-climatic heterogeneity among states, the other phrase much-mentioned since morning, “Competitive Federalism” comes into play. Each state must make efforts to raise their farm productivity within the realities of their states and must therefore look for global country or state partners who have natural reciprocal dependencies to enter into sustainable arrangements for mutual benefits.<br />
<br />
In this context, economic diplomacy must move beyond the routine Trade & Investment Policies, FTAs etc. These policies and agreements, of course, do lay the necessary foundation. They must also move beyond placing Economic Attaches in the Embassies. Such presence also, of course, we must have, to assist exporters, and we did experience significant progress on this front. The third point I wanted to make is about the role of the Track II Diplomacy, involving the Private Non-Government Sector. Even assuming, global collaborations are done and access to technology is arranged through Track I, at the point where the till hits the soil, to translate these agreements into income for the farmers and products for the consumers, it is the private sector that has to play a crucial role. Just more production won’t be enough, robust value chains must be built. Chains that transmit demand signals to the production system and for linking the produce to the markets with minimal waste. To facilitate management of production and market risks. To process and add value. Even to help Governments identify reciprocally beneficial global partners relevant to each ecosystem. And so on…<br />
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Finally, I would like to pitch for one action before I close: Since morning there has been a lot of chatter about formalising Deccan Dialogue along the lines of the ‘Raisina Dialogue’ in Delhi and the ‘Gateway of India Dialogue’ in Mumbai. I urge this forum to create a permanent Agricultural Track in the ‘Deccan Dialogue’ in Hyderabad to carve out a niche position for itself.<br />
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Thank you 😊</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com8tag:blogger.com,1999:blog-918123006998403597.post-38992567809244450252018-03-03T06:29:00.000-08:002018-03-03T06:33:46.481-08:00Creating Cross-sector Partnerships for a Sustainable CSR<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<i style="mso-bidi-font-style: normal;">This is an outline of
my talk at the CSR Conference organized by the Madras Chamber of Commerce and Industries,
Chennai on 2 Mar 2018<o:p></o:p></i></div>
<div class="MsoNormal">
<i style="mso-bidi-font-style: normal;"><br /></i></div>
<div class="MsoNormal">
A partnership becomes meaningful when its accomplishment as
a whole is greater than the sum of achievements of its parts! As is
self-evident, the word “part” is an integral part of a “partnership” <span style="font-family: "wingdings"; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-char-type: symbol; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin; mso-symbol-font-family: Wingdings;"><span style="mso-char-type: symbol; mso-symbol-font-family: Wingdings;">J</span></span><o:p></o:p></div>
<div class="MsoNormal">
<span style="font-family: "wingdings"; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-char-type: symbol; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin; mso-symbol-font-family: Wingdings;"><span style="mso-char-type: symbol; mso-symbol-font-family: Wingdings;"><br /></span></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Let’s take a step
back, look at the parts in the context of today’s conference, understand their
roles and achievements todate:<o:p></o:p></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><br /></b></div>
<div class="MsoNormal">
Some five thousand years ago, our society organized itself
into three broad parts.</div>
<div class="MsoNormal" style="text-align: left;">
</div>
<ol>
<li>For Profit Businesses: Provide goods &
services to consumers, create employment, generate <b style="text-indent: -0.25in;">wealth</b><span style="text-indent: -0.25in;">, pay taxes </span></li>
<li>Governments: Foster competition among
businesses, tax them, deploy the resources on common physical & social infrastructure
for the <b style="text-indent: -0.25in;">welfare</b><span style="text-indent: -0.25in;"> of people </span></li>
<li>Not for Profit Non Govt Organisations: Keep a
tab on 1 & 2 on behalf of people, for their general <b style="text-indent: -0.25in;">well-being</b></li>
</ol>
One can granulate further and make more parts, like academia
(but they could be made up of any of these parts, as in academic institutions for
profit or set up by Government or not for profit), or media (again could be any
of these three parts). There are also For Profit Social Enterprises and Not for
Profit Businesses. Keeping those nuances aside, for the sake of ease, let’s
recognise these three parts for our narrative and move on.<br />
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
What has this socio-economic structure achieved in terms of
wealth, welfare and well-being in these five thousand years? </div>
<ol style="text-align: left;">
<li>As of this evening, we have lived through 17% of
this year 2018. That's two out of twelve months. But, do you know that we have
exhausted 29% of the natural resources our earth can regenerate in the same twelve
months? Which means, we have lived on the resources borrowed from our children
and their children. Actually, stolen from them! This description is just a recast of Earth
Overshoot Day, some of you would be familiar with. That was 2<sup style="text-indent: -0.25in;">nd</sup><span style="text-indent: -0.25in;">
August in 2017. </span></li>
<li>T<span style="text-indent: -0.25in;">op 1% of the richest people on earth own 50% of
all wealth. And, the bottom 50% own a meagre 1%. A statistic we can all be very
shameful of… </span><span style="text-indent: -0.25in;"> </span><span style="text-indent: -0.25in;"> </span><span style="text-indent: -0.25in;"> </span><span style="text-indent: -0.25in;"> </span><span style="text-indent: -0.25in;"> </span></li>
</ol>
These "inglorious" achievements were recognized a few decades ago and we have set for ourselves
what we called Millennium Development Goals then. We didn’t get very far, so we have
re-set for ourselves Sustainable Development Goals, now to be achieved by 2030.<br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">For a more balanced achievement
of wealth, welfare and well-being, as envisaged in SDGs, we need to see ourselves
as “partners” in the mission than merely as “parts” doing our own bit. All
hands must be on the deck. 2030 will just be here, like tomorrow! Each part does
have a different and complementary role in this new “partnership” approach.<o:p></o:p></b></div>
<ol style="text-align: left;">
<li>Government: For scale. Not just for funds, but
for its machinery that’s spread across the nook and corner. </li>
<li>NGOs: Terrain knowledge. Social mobilization.
Community empowerment. For, there’s no better bet than empowered communities to
achieve sustainable development. </li>
<li>Businesses: Surely, not for the CSR money they are manadated to spend. The mandatory
CSR spend, aggregating to Rs 25,000 crores, doesn’t even add up to four days of
Government’s budget on welfare! It’s actually for their project and financial management
capabilities. More importantly, for their entrepreneurial energies, innovation, and
for designing the much-needed impact-making interventions. </li>
<li>In addition to the three parts I had outlined
earlier, I will call out a fourth part: Technical & Scientific
Establishments - these could be from any of the three sectors - for their domain knowledge and for continuous action learning. For designing best
practices based on science and evidence. Otherwise, the interventions end up
shortsighted.</li>
</ol>
<b>It’s easy to play the
words, parts and partners, but it is not easy to actually forge and foster partnerships.
There are more broken and failed partnerships, than there are successful ones. It’s
important to recognize the barriers to partnerships before we move any further. </b><br />
<ul style="text-align: left;">
<li>Entrenched prejudices colour actions and
communications:</li>
<ul>
<li>Businesses
and Governments think NGOs are too micro-focused and inefficient.</li>
<li>Governments
and NGOs think Businesses are too profit-minded and there’s always something
ulterior in their social motives.</li>
<li>NGOs
and Businesses think Governments are just outlay focused and its officers are corrupt.</li>
</ul>
</ul>
<ol style="text-align: left;"></ol>
<ul style="text-align: left;">
<li>Work cultures and practices lead to operational friction and frustration:</li>
<ul>
<li>NGOs
can’t fathom the need for institutional systems & controls. “Can’t you just
trust us?” is their exhortation. </li>
<li>G<span style="text-indent: -0.25in;">overnment
is too siloed and procedure oriented and end up pushing all action to the last
quarter of a year! Do you know that some 27 approvals are required to translate
an MGNREGA project idea into a reality? </span></li>
<li>Businesses
expect execution like clockwork, which doesn’t make sense when social capacity
of underprivileged communities needs to be built.</li>
</ul>
</ul>
<ul style="text-align: left;">
<li>And, once partnering starts, there’s a new
problem! Of adversarial posturing by each partner, due to perceived threat to their respective territories.</li>
<ul>
<li>We
know our bit. You don’t need to tell us!</li>
</ul>
</ul>
<div class="MsoListParagraph" style="margin-left: 1.0in; mso-list: l1 level2 lfo4; text-indent: -.25in;">
<o:p></o:p></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">With odds stacked so
badly against partnerships, how do we make partnerships work? Let me share a
three-point formula, based on our experience of implementing ITC’s CSR projects
in partnership with some 85 NGOs, 9 Governments, and 15 Technical &
Scientific Institutions:<o:p></o:p></b></div>
<div class="MsoNormal" style="text-align: left;">
</div>
<ol>
<li>Co-create
projects from the beginning. Conceptualise multi-stakeholder projects after
explicitly recognizing the complementary strengths of each partner, and how
without any one of them the outcomes would fall short of the community needs. </li>
<li>Design
a predetermined review rhythm. A platform of key members of each partner to
review progress and remove roadblocks. This way, the engagement becomes more
evidence based and resolution focused; otherwise, there’s lot of finger
pointing based on different perceptions. </li>
<li>O<span style="text-indent: -0.25in;">ne
of the partners must become an Orchestrator of the partnership and take on the
primary responsibility for the project outcomes. To convene and harness the
collective power. To make things work.</span></li>
</ol>
<br />
<div class="MsoNormal" style="text-align: left;">
Thank you.</div>
<div class="MsoNormal">
<o:p></o:p></div>
<br /></div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com6tag:blogger.com,1999:blog-918123006998403597.post-90056440069943619632017-11-29T22:00:00.000-08:002017-11-29T09:48:20.898-08:00Agriculture: Twenty Years from Now...<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
<i>Following is a summary
of my remarks in an “Agri Panel” at the Global Entrepreneurship Summit earlier
today, in response to the question, “What do you think will be game-changing
about how we think about agriculture, twenty years from now?”<o:p></o:p></i></div>
<div class="MsoNormal">
<i><br /></i></div>
<div class="MsoNormal">
Soon after the panel moderator sent me this very interesting
question a couple of days ago, the first thing I did was to post this question
on Twitter, Facebook, and LinkedIn to crowdsource thoughts from my friends. There
were nearly two hundred unique responses! They added up to twenty pages of
text, without counting the number of pages in the links I received.
Overwhelming, isn’t it? <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
All I am doing now is to simply synthesize those inputs and
share with you <span style="font-family: "wingdings"; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-char-type: symbol; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin; mso-symbol-font-family: Wingdings;">J</span><o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The future of any system is shaped the current aspirations
of the key stakeholders. Let’s take a look at the aspirations of the consumers,
producers and the society at large…<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Consumers</b> want
sufficient <b>quantity</b> of food (because
we would be nearly nine billion by then, and on average richer than today),
that is <b>tasty</b> (although, a friend
did say in lighter vein, “since we will have nano-bots in our blood streams, and
since our memories could be uploaded on to cloud, maybe we don’t need food and
therefore no agriculture; we probably just need some electricity, or batteries,
or just a few hours of exposure to sun ;-), is <b>safe</b> (you are all consumers here, don’t you agree that harmful
chemicals in food is your topmost concern?), <b>nutritious</b> (scientists say that most of the world is suffering from
invisible hunger), and all of these at reasonable <b>prices</b>! <o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Farmers </b>want <b>higher incomes</b> (as you know, per capita
income of farmers around the world, especially in emerging economies, is far
lower than the general per capita) with <b>lower
risk</b> (weather and disease related production risks, price volatility).
Their labour deserves more <b>dignity</b>
(as it is, hardly any youth from the next generation wants to be a farmer) and
they deserve better <b>quality life</b> (as
in, the conveniences and comforts that are common in urban settings). <o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Society at large</b>
would like agriculture to <b>conserve
natural resources</b> (water and top soil, for example) and where possible,
actually renew them. Agriculture needs to be <b>resilient to climate change</b> (the summer rains and warm winters,
extreme climate episodes like heavy downpours on one hand and droughts on the
other, etc), and again, where possible, <b>positively
impact climate change</b> (sequester carbon, minimize greenhouse gas emissions
etc).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
An interplay of these different - at times conflicting -
aspirations gives rise to three distinct scenarios, all of which will co-exist
in twenty years. Let me label them: Farms as Factories, Homes as Farms, and
Back to Basics!<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Farms as Factories:</b>
By using the metaphor of factories, all I am saying is that the consistent
quality of output will be produced, crop after crop, by leveraging the evolving
<b>technologies</b> – both <b>farming</b> (like seed, nutrients, farm-equipment,
agronomy practices etc) and <b>digital</b>
(IoT, block chain, hyper-spectral imaging, GPS / GIS etc). A friend called
them, <b>“hardware, software, and liveware”</b>).
Another friend went to the extent of visualising a <b>self-managing seed</b>! These seeds will analyse the experienced
conditions like soil, weather, water etc and invoke the necessary embedded
features that would maximize the yield and quality. This may sound like fantasy
today, but those of you who are familiar with experiments on seeds with
multiple layers of coating in the past may very well say this could be a
reality in twenty years!<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Homes as Farms: </b>I
am sure, you have heard of vertical farming, balcony farming, kitchen gardens
and such other names. Once supply chains are established to supply DIY-type
mini production units, seeds, nutrients etc to the households, this phenomenon
will expand more rapidly. This food is safe without any doubt in the consumer
mind, and zero carbon miles! Business Models are also in the works for another
kind of service. If you are not adventurous enough to grow crops in your backyard
yourself, you can simply let out the space to Service Providers who can grow crops
on a BOO model. Besides experts growing the crops in this model, a colony-level
kitchen garden is more optimal than a household level garden. And a third
model, which is not a ‘home-as-farm’ strictly speaking, is a partnership
between a group of, say, five thousand, consumers and a community of, say, five
hundred farmers. I know of several such partnerships across cities, built as
WhatsApp Groups integrating even the e-commerce functionality. <o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Back to Basics: </b>Much
of today’s ills of agriculture are due to chemical-intensive mono-cropping
paradigm. A more sustainable future scenario would be an integrated farming
system consisting of polyculture, permaculture, organic compost, bee-keeping,
animal husbandry, renewable energy. In fact, I already see some farms where
solar energy brings larger revenue than the conventional crops. <o:p></o:p></div>
<div class="MsoNormal">
As the panel went forward, there were other questions, but
for now I am wrapping up this post without covering them.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
As always, comments are most welcome <span style="font-family: "wingdings"; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-char-type: symbol; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin; mso-symbol-font-family: Wingdings;">J</span> This is a live and lively
topic! </div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com37Hyderabad, Telangana 500095, India17.389434005189496 78.48632812516.905378505189496 77.840881125 17.873489505189497 79.131775125tag:blogger.com,1999:blog-918123006998403597.post-81340977069998516822017-08-17T09:10:00.000-07:002017-11-29T09:10:53.938-08:00Andhra Pradesh: A Role Model in Agriculture & Allied Sectors - Marching towards Doubling Farmers’ Incomes<div dir="ltr" style="text-align: left;" trbidi="on">
<i>This article was originally written for Andhra Chamber of Commerce, Chennai for their 90th Anniversary Souvenir</i><br />
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><u><span lang="EN-IN" style="color: blue; font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;">The State’s strategic location and bountiful natural resources,
supplemented by smart investments in infrastructure made it a leader at an all
India level <o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">Andhra Pradesh’s
significant contribution to India’s agricultural sector is validated by the
leading position the state occupies in the production of several major crops.
The state is not only known as the “rice bowl of India”, but also ranks either
first or second in the production of maize, groundnut, mango, papaya, lemon,
chilli, turmeric, fresh water fish and prawn.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">The state’s abundant natural resources –
river systems such as Godavari, Krishna, </span><span lang="EN-IN" style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%;">Tungabhadra,
Penna etc., and a wide variety
of soils – support a diverse cropping pattern across the five agro-climatic
zones. On its part, the Government has ensured propagation of sustainable
farming practices, making Andhra Pradesh a pioneer in technologies such as
micro irrigation and balanced fertiliser use based on soil health mapping. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">Further, the State’s strategic location with
980 kms of coastline, fortified by several ports, makes it a gateway to the
East and South East Asia, promoting the agri-exports from the State. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">The inspiring vision of the Hon’ble Chief
Minister is to make Andhra Pradesh amongst the three best states in India by
2022 and the most developed state by 2029. Agriculture sector has a vital role
to play in achieving this goal, with the sector currently contributing 23% of
the GSDP, and offering livelihoods to nearly 60% of the state’s population. A
corollary objective is also to double farmers’ incomes by 2022. </span><b><i><u><span lang="EN-IN" style="color: #0070c0; font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></u></i></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><u><span lang="EN-IN" style="color: blue; font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;">Agriculture in Andhra Pradesh has immense potential: Realising this
requires regionally differentiated strategies and sharper market orientation<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">Raising the agriculture
budget for 2017-18 by 12% over the previous year, to Rs 18,214 Crores, the
state has already demonstrated its commitment to the cause. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">In addition to the
ambitious Pattiseema project that brought water to the drought-prone
Rayalaseema region besides stabilising the Krishna Delta, several
drought-proofing technologies have also been deployed in the rainfed districts
of the state, making state’s agriculture more resilient. Various other steps to
raise the productivity, viz. seed supply, farm mechanisation, access to credit,
extension services to popularise scientific practices etc., will all go a long
way in raising the growth of agricultural sector and increasing farmer incomes.
<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">Actually, as a state-wide
average number, the per-capita income of an Andhra Pradesh farmer is already
higher than the national average. The focus must now shift to dealing with the
regional variations within the state, which are quite significant. A Guntur
farmer earns four times that of a Srikakulam farmer, while a Nellore farmer
more than twice that of a Kurnool farmer.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">Raising productivity is a
very important task, given the head-room that’s available, but higher
productivity does not necessarily lead to larger farmer incomes, as a tomato
farmer in Madanapalle can woefully vouch for, or the mango market in Nunna is a
mute witness to, every time the production of those crops is bumper. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">Only a fundamental shift
in the approach can mitigate this risk. We must move away from finding markets
for whatever is produced to producing what the consumer wants. Such
demand-driven value chains can bring enormous benefits to the farmers if they
are able to align production to market signals. This means a more regionally
differentiated and sharply market-oriented production strategies. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">For example, diversifying
into horticulture and mastering the associated post-harvest operations are more
critical for Kurnool, while communicating the nutritive value of millets to
consumers in metro-cities is a prerequisite before the production is stepped up
in Anantapur. The same objectives could be achieved by raising the food-safety
quotient for chillies in Guntur and prawns in Nellore in order to service the
global customers. On the other hand, the secret might be in putting special
efforts to market the organic coffee from Araku valley that could help multiply
farmer incomes from that region. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><u><span lang="EN-IN" style="color: blue; font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;">This strategy also provides a great opportunity for extensive
corporate participation in execution, supplementing Government’s efforts <o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">In a way, such
participation by corporates is also an imperative, given their ability to build
consumer-focused businesses more effectively. Recognising this, Government of
Andhra Pradesh has already initiated a Public Private Partnership Project
linking Farmer Producers Organisations (FPOs) with Corporates in 2016, with an
explicit goal of doubling the farmers’ incomes. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">This partnership approach
provides a comprehensive crop production & marketing framework, integrating
the strengths of all the stakeholders to support the small & resource-poor
but very resourceful farmer. The government provides a favourable business
ecosystem through investments in basic infrastructure in the project area, and
converges all the subsidies being given to the farmers under different schemes.
Agri Business / Food Processing companies bring in market linkages and the
required technology along the full crop value chain as per global standards,
and also be responsible for the overall project management and the
deliverables. Where necessary experienced NGOs are brought in to assist in
formation of farmers’ groups and their capacity building.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;">ITC Limited is also a
committed partner in three such projects covering agriculture, horticulture and
aquaculture segments, targeted at both domestic and export markets. By the time
these projects scale, ITC intends to further widen the scope by integrating the
various initiatives into the “digitally plug & play ready” e-Choupal 4.0 to
support a large number of IT-based agri-services start-ups in reaching out the
farmers across the state. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-top: 12.0pt; text-align: justify;">
<span lang="EN-IN" style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 150%;"><br /></span></div>
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><u><span lang="EN-IN" style="color: blue; font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;">With these innovative initiatives, the State is well on its way
from the Green Revolution days to the Golden Revolution era in the agriculture
sector as an integral part of the Swarnandhra Vision 2029 <o:p></o:p></span></u></b></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com2tag:blogger.com,1999:blog-918123006998403597.post-89600640319760532282017-07-25T09:05:00.000-07:002017-11-29T09:05:58.097-08:00ITC e-Choupal 4.0<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="text-align: left;">
<span style="font-size: 14pt; line-height: 107%;"><i>This was an interview given to Commodity India Magazine. Reposted here: </i></span></div>
<div class="MsoNormal" style="text-align: left;">
<span style="font-size: 14pt; line-height: 107%;"><i><br /></i></span></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;">CI: We came to know that you are
about to launch the next version of ITC e-Choupal, called 4.0. Can you tell us
something about that? Actually, please tell us about e-Choupal 1.0 to 3.0
first.<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">SK: In a
sense, it’s not the next version, as much as it’s the next tier, because e-Choupal
1.0 to 3.0 continue to operate and reinforce one another…<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">The
e-Choupal 1.x series is about re-engineering the agricultural supply chains to
make them more efficient and effective. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">For example,
1.1 eliminated the non-value-adding costs along the supply chains of oilseeds
and grains – such as, multiple handling costs & transaction charges – by
enabling competitive price discovery of the price of farm produce in the
village itself instead of farmers taking their produce to the mandi, which
resulted in the avoidable additional costs. Free access to Internet through the
e-Choupal Sanchalak, prices published on the echoupal portal, quality
assessment system and quality-factored pricing mechanism at the e-Choupals in
the village have made this possible. Because of this re-engineering, farmers
net revenue increased while ITC’s gross costs reduced. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">In 1.2, the
identity of each variety of a commodity (eg wheat) and its unique
characteristics were preserved along the supply chain by virtue of direct
buying from the farmers. Specially developed blends of such multiple varieties
offered value-added products to the diverse needs of the different segments of consumers
(eg atta of different colour, texture, taste, water-absorbing capacity,
broken-starch content etc). Because of this re-engineering, ITC was able to
build winning brand (Aashirvaad) and the farmers received better prices for the
varieties in demand, instead of the usual average price that is equivalent to
the lowest common denominator.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">In 1.3, the
traceability is pushed one-step further upstream to the practices followed on
the farm (eg prawns) to ensure food safety and deliver the same to the consumers
around the world. Similar innovations in 1.4 to 1.6, each suiting the dynamics
of different agricultural commodity.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">The
e-Choupal 2.x series is about reimagining the infrastructure built for
re-engineering the supply chains as a platform, and improving the delivery of
products & services into rural India. The reverse flow…<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">If 2.1
delivered agricultural extension services through Choupal Pradarshan Khets, 2.2
to 2.4 delivered agri inputs, financial services (Kisan Credit Cards, Insurance)
and FMCG. 2.5 brought modern retail experience to the rural consumers by
co-locating hypermarts at Choupal Saagar Integrated Rural Service Centers. Each
Choupal Saagar is positioned at the hub of a cluster of e-Choupals, housing a
commodity warehouse, soil testing centre, fuel station, food court etc.
Similarly, 2.6 to 2.8 deliver other goods & services relevant to the rural
production or consumption.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">To deliver
the 2.x services effectively, ITC partnered with several businesses,
governments & government agencies, not-for-profits etc combining their
domain strengths with e-Choupal’s terrain knowhow and on-ground presence.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">Bundling the
strengths of e-Choupal with those of the partners brought together in Tier 2.0
ITC e-Choupal became a more complete rural ecosystem. In the 3.x series, the
whole ecosystem is offered as a service, as an EaaS model, to bring more
platforms to the rural markets…<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">3.1
connected rural youth to vocational skilling and employment markets, and 3.2
connected the farmers to the farm-machinery based service providers. Choupal
Haats became 3.3, providing rural marketing services through a unique
interactive engagement platform for the rural consumers. As many as ten million
consumers annually across the e-Choupal geographies. More platforms are work-in-process,
as we speak.<o:p></o:p></span></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;">CI: So, how many e-Choupals exist
today?<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">SK:
Actually, after e-Choupal 1.0, the number of e-Choupals is a redundant metric.
In its evolution into a platform and then an ecosystem, the media for
interaction naturally expanded to mobile phones, Farmers’ Field Schools,
Choupal Haats etc. So, while for record, there are 6100 e-Choupals, a better
metric would be an outreach to 40,000 villages through one or the other medium.<o:p></o:p></span></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;">CI: That’s a mind-boggling evolution
through three tiers in seventeen years! Now, can you tell us about e-Choupal
4.0?<o:p></o:p></span></b></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">SK: In a
way, e-Choupal 4.0 is an aggregation of e-Choupal 1.0 to 3.0, but more “plug
& play ready” for partners in the rapidly growing digital economy.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">In addition
to the conventional agri input selling and agri output buying companies, you
are seeing hundreds of agri services start-ups in the recent past. From
hyper-local weather forecasts to support systems for precision agriculture;
from sensors for smart irrigation to drones for crop-health monitoring; from
image processing for disease recognition to predictive analytics for epidemic
management; from next-gen farm management to online consumer outreach directly…
the list is unending!<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">Most of
these start-ups have brilliant technological solutions to everyday farming
problems, and their business models are relevant across the country. Their
technology is scalable too, but a large majority of them find it difficult to
reach the farmer physically beyond their own local areas. With the rest of the
agricultural ecosystem like ground-truth correlation, quality assaying,
logistics, credit ratings, payment etc having not evolved enough, for each IT
based solution to offer value to the farmer as a point solution. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">e-Choupal
4.0 becomes an aggregator for all such services after integrating them with the
on-ground presence of ITC’s agribusinesses across 70,000 villages (this goes
beyond the reach of e-Choupal 1.0 to 3.0) and offers a meta-market to the
farmers. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">Two
prototypes are already in their second season. First one, for example, is about
building a community of seed producers and consumers focusing on
open-pollinated seeds in which the seed companies have low interest (because
there are no hybrids) and the farmers are saddled with impure seeds (because of
low seed replacement ratios). From among the same community, there are seed
processors, seed certifiers, seed financiers until the planting season and so
on. In effect this is a self-managing community accessing all the relevant agri
services through e-Choupal 4.0 platform.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">Our plan at
this time is to roll out the full-scale e-Choupal 4.0 by late 2018, by fusing
multiple such communities across agriculture, skilling, health care etc.<o:p></o:p></span></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;">CI: That’s a grand vision! But, do
you think rural telecom infrastructure is geared to support such a platform?<o:p></o:p></span></b></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">No doubt,
the infrastructure is still evolving. The penetration of low-cost bandwidth and
the smart gadgets in rural India will reach an inflection point in a couple of
years. The idea is to build partnerships and refine the business model by then.
<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">In any case,
even where farmers have personal smart phones, the preference is for assisted
service. Like the e-Choupal Sanchalak who was key in executing 1.0 to 3.0,
service providers dedicated to each identified group of farmers will be key in
4.0 as well. The Sanchalak numbers will multiply manifold.<o:p></o:p></span></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 107%;">CI: What’s the role of government
policy in all these plans?<o:p></o:p></span></b></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">SK: Right
from tier 1.0 to tier 3.0, the ongoing reform of agricultural policy has played
a key role in expansion and evolution of e-Choupal. When 1.1 was first
conceived, the APMC Act wouldn’t allow an agri produce marketing transaction
outside the mandi. Since then a few states reformed their APMC Act and
e-Choupal could operate in those states. Now, as part of doubling farmers
incomes goal set by the Hon’ble Prime Minister, a new Model APMC Act is being
proposed. Once implemented, this will open several possibilities for e-Choupal
4.0.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">Similarly,
allowing futures as a commodity derivative since 2003, and now options, the
price risk management for the farmers as well as the processors like us becomes
more institutionalized, laying ground for transacting much larger volumes of
commodities.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14pt; line-height: 107%;">
</span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;">The new GST
regime, where basic agricultural commodities are exempted from tax, more
transactions will happen in the formal sector because the tax-evading
unscrupulous do not have an advantage any more.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 107%;"><br /></span></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com5tag:blogger.com,1999:blog-918123006998403597.post-78245580853279820392017-07-17T08:59:00.000-07:002017-11-29T08:59:58.562-08:00Reforms in Agricultural Marketing: A Requisite for Doubling Farmers’ Incomes by 2022 <div dir="ltr" style="text-align: left;" trbidi="on">
<i>This article was written for CII Economy Matters. Reposted here.</i><br />
<br />
<br />
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">Since the time Prime
Minister Shri Narendra Modi gave a clarion call to double farmers’ incomes by
2022, much has been written on the subject, and many ideas have been floated.
This is a complex challenge, and many paths need to be pursued simultaneously. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">Broadly there are
three paths:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;"><b>First is raising
farm productivity.</b> This will cover productivity per unit of land, water,
labour, other farm inputs, and cost of cultivation in general, besides
increasing the cropping intensity, by leveraging the large investments being
made in irrigation – both macro and micro. Since there is enough headroom to do
this, one can see a sizeable portion of the “doubling” coming from this route. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;"><b>Second is
diversification into high value crops and expand the various on & off-farm activities
related to agriculture.</b> This will cover growing vegetables & fruits, agro-forestry,
increased livestock activity, setting up solar farms, as well as adding value to
the products on the farm through grading & sorting, and adopting organic
and safe-food practices. Since a substantial segment of consumers is seeking
variety and quality of the food on the plate, is concerned about the safety of
food being consumed, and is willing to pay a premium for convenience, one can
see a sizeable portion of the “doubling” coming from this route as well.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;"><b>Third is through
linking farmers to the markets smartly. </b>This will include lowering the
transaction costs along the value chain to plough back a larger share of
consumer price to the producer, as also to reach the safe & quality food to
the target group of consumers thereby raising the value delivered and capturing
a fair share of that value as well. It is this third route I want to write
about in this piece, because without the requisite action on this front, the
efforts put in the first two will only result in further distress to the
farmer.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">Higher production
(route 1), especially of perishables (route 2) has ironically resulted in lower
prices for the farmer often, only because the market linkages are poor! Instead
of doubling, we may be halving farmer incomes if we simply accelerate on route
1 and 2 without clearing the roadblocks that are existing on the marketing
front! <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">Actually, what I
am calling roadblocks have all been excellent policy measures and institutions when
they were first conceived several decades ago, and have contributed to doubling
farmers’ incomes a few times since then. It’s just that the context is
different now and those very instruments have become road blocks!<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">Agricultural
Produce Marketing Committees (APMC) governed by the different State APMC Acts (of
1960s and 70s vintage) were major saviours of farmers, who till then were at
the mercy of the village traders to sell their produce. In the absence of
channels for market price information, farmers had to rely on the same traders
for price discovery. Under the APMC regime, well laid-out market-yards and
sub-yards were constructed around the country to display individual farmers’
produce for quality assessment by the participating buyers. An auction system
was put in place for competitive price discovery. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">Over time,
however, since this was a monopoly system, transaction costs rose for the
farmers in terms of commissions charged by the Agents licensed by the APMCs, not
to mention malpractices in some mandis in terms of quality assessment,
weighment and even cartelisation during price discovery. Also, since the farmer
had to transport his produce even before price discovery, the sunk costs put
pressure on him to sell at whatever price offered. Withdrawing the produce from
auction means more costs with no guarantee of price some other day. More
importantly, an unintended consequence of the auction-based price discovery mechanism
is the nature of relationship between the farmer and the other players in the
downstream value chain. The transactional nature of this relationship didn't
lend itself to the possibilities of agribusinesses or food processors helping
farmer with production technologies or post-harvest practices, barring a few
exceptions. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">Appreciating these
gaps, the APMC Act was remodelled in 2003, allowing farmers to directly market
to consumers / businesses, or contract-farm, as also letting private sector to set
up marketplaces. Not all states have adopted that Model Act, and among those
adopted, many have prescribed Rules that are not in the spirit of the Act.
Although some progress has been made, this reform remained largely on paper.
Meanwhile, an electronic National Agriculture Market (e-NAM) was launched last
year. While this has removed the physical boundaries of a mandi in a farmer’s
neighbourhood and he can theoretically sell to an Agent in any other mandi, the
real benefits will accrue only after assaying and logistics systems get integrated.
In any case, this doesn't solve the relationship issue. More recently, the
central government has released an improved model APMC Act for stakeholder
consultation. Hopefully, this time around, the adoption by the states is
quicker and more widespread.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">Another important
instrument used by the Government to aid green revolution, half a century ago,
was the Minimum Support Price (MSP) mechanism. This removed the market price
risk for the farmer and gave him confidence to invest in high-yielding
varieties of wheat & paddy and fertilisers. The Government’s need to buy
these food grains for public distribution (PDS) to the low-income consumers
complemented the MSP system, and gave muscle to the Food Corporation of India
(and some state government agencies) to be able to stabilise the price
volatility. With the number of crops multiplying, and many of them being
perishables, implementing such an MSP + PDS system in so many crops across
India is next to impossible. Consequently, the farmer has no clue about the
post-harvest price he would realise while he decides on the specific crop to
plant from among several crops. Often, he decides based on the previous season’s
prices. Many a time, this results in excess production of a crop that was in short
supply in the previous season. It is also likely that imported stocks of the
same product that were brought in to make up the previous year’s deficit.
That’s a double whammy for the farmer. How often we have seen a farmer smiling
at his bountiful crop that’s ready for harvest, but crying just a few weeks
later, because the new market price won’t even fetch the cost of harvesting and
transporting to the mandi. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">A practical
alternative to government declaring MSPs to a large number of crops – and undertaking
buying operations, not knowing how to deal with the challenges of storage and
marketing of fast-perishing products – is the commodity derivative markets.
Both futures and options. Indeed this is how the world has been managing the
risks arising out of uncertainty of prices for a long time. When we were a
shortages economy, the government had banned trading in commodity derivatives,
with the belief that financialisation of physical markets fuels inflation
through excessive speculation. With the change in the context of food &
agriculture sectors, futures were allowed to be traded in 2003 by reforming the
Forward Contracts Regulation Act (FCRA). Options were also to be introduced
soon after. However, this optimism was short lived when the food prices went
through the roof in 2007, due to the shortfall in global food production.
Futures trading in some commodities was promptly prohibited. A case of shooting
the messenger for carrying the bad news! Since then, the futures were slowly
opened up. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">More recently,
options have also been permitted. Next steps can surely be calibrated, taking
market evolution and the related risks into account, but those steps must
surely be taken. There’s often a criticism that small farmers cannot directly
participate in the derivative markets, so what good these institutions are for
them. This is where aggregators come in, whether they are producers’ collective
enterprises themselves, or agribusinesses / food processors who can price their
physical transactions with the farmers by linking to the futures or embedding
options into their pricing formulae. By adopting these instruments, farm production
responds to the market signals continuously and creates equilibrium on a
dynamic basis. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
<span lang="EN-IN" style="font-size: 12.0pt;">While a reform in
FCRA enables timely price discovery & risk minimisation through vibrant
derivative markets, the reform in APMC Act enables real-time demand discovery
& value maximisation through seamless physical markets. A surer way to
double farmers’ incomes than merely raising the agricultural GDP…<o:p></o:p></span></div>
<br /></div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com3tag:blogger.com,1999:blog-918123006998403597.post-11444791454092040722017-07-11T09:17:00.000-07:002017-11-29T09:17:58.569-08:00The 101 of Agricultural Marketing in India <div dir="ltr" style="text-align: left;" trbidi="on">
This article was originally published by QuintBloomberg at: <br />
https://www.bloombergquint.com/opinion/2017/07/11/farmer-crisis-the-101-of-agricultural-marketing-in-india-s-sivakumar-itc<br />
<br />
<div class="MsoNormal">
<b><i><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Scene 1:</span></i></b><i><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"> Attracted by the market price
of Rs 50 per kilogram, farmers plant onions only to stare at a price of Rs 5
per kilogram by the time they are harvested. Often it's not even worth taking
those onions to the market, as the cost of transporting and selling are also
not recovered!<o:p></o:p></span></i></div>
<div class="MsoNormal">
<i><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></i></div>
<div class="MsoNormal">
<b><i><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Scene 2:</span></i></b><i><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"> You go to buy groceries or
vegetables and fruits. Unless you dig to the bottom of the heap and select each
piece yourself, you won’t get the quality stuff. With things like pesticide
residues, you may not even be able to make that pick well, holding the produce
in your hand.<o:p></o:p></span></i></div>
<div class="MsoNormal">
<b><i><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></i></b></div>
<div class="MsoNormal">
<b><i><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Scene 3:</span></i></b><i><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"> You pay a price of Rs 40 for a
kilogram of tomatoes and complain about the high prices; at the same time, the
farmer who produced them, and sold at Rs 12 per kilogram, laments about
unremunerative farming!<o:p></o:p></span></i></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">These are the
all-too-familiar symptoms of the out-of-date agricultural marketing system in
India. In a way, these pains are inevitable as our food and agricultural
economy transitions from what was a ‘production driven supply chain' to a
‘demand driven value chain’ system. Although both the central government and
several state governments have taken steps to facilitate the transition, the
institutions built more than five decades ago still dominate the market,
extending the pain for the farmers, consumers and businesses alike.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">The mechanism of
Minimum Support Price assured farmers to step up wheat and paddy production,
without the fear of a post-harvest price fall, and brought about a green
revolution. That was then. Today’s consumer is not living in an economy with
shortages anymore. She is looking for variety, quality, safety and convenience
in the food basket. It is well-nigh impossible for any government to manage
support price operations in grains, oilseeds, pulses, milk, eggs, vegetables, fruits,
sugarcane and twenty other such commodities. The world over, such price
uncertainties are managed through derivative markets.<o:p></o:p></span></div>
<div class="MsoNormal">
<b><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></b></div>
<div class="MsoNormal">
<b><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">De-risking
Volatility in Perishables<o:p></o:p></span></b></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Large farmers and
farmer collectives hedge their risks by selling futures or buying options
before planting. Much larger volumes are sold by farmers to the businesses
operating in the agriculture space, and food processing companies, through
options-embedded forward contracts. These companies, in turn, hedge their risks
on the derivative markets. Only recently has the Securities and Exchange Board
of India (SEBI) allowed options in commodities. One earnestly hopes that these
markets start soon and mature without taking too long.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Another way the
world has dealt with the falling prices of perishables soon after harvest is
through processing – freezing, pulping, dehydrating, milling, curing, crushing,
and so on – for consumption through the year. Food processing in India is still
very nascent compared even to many emerging economies. Given the apprehension
of consumers that processing basically means adding unsafe preservatives, it is
quite an effort for the authentic manufacturers and brand owners to convince
the consumers that processed food is safe and hygienic. Recent efforts by the
Food Safety Standards Authority of India (FSSAI) will go a long way in raising
consumer awareness.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Another challenge
in making processed food popular is the price barrier. A large part of the
incremental price is made up of taxes. Historically, processed and branded food
has been considered a rich man’s purchase and is taxed heavily. Although the
tax rates have been brought down for some products in the new Goods and
Services Tax regime, there is a need for further reduction, considering this is
an important vector available to raise farmers’ income.<o:p></o:p></span></div>
<div class="MsoNormal">
<b><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></b></div>
<div class="MsoNormal">
<b><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Bringing In Quality
Checks<o:p></o:p></span></b></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Let’s look at the
challenge in the second scene now. The reason why ungraded produce travels all
the way and comes to the consumer is that the conventional <i>mandi</i> system
has incentivised the same. Starting with the visual inspection based pricing
done by the <i>adatiyas</i> (traders representing sellers) at the <i>mandis</i>,
the produce moves along the chain, and everyone gains by passing off a bad
apple or two in the average quality heap. Those of you who studied economics
know the problem of information asymmetry from Nobel laureate George Akerlof's
paper on “<i>The Market for Lemons</i>” and how the average quality
deteriorates with time.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Because of the APMC
Act framework of the 1960s vintage, the buyer-seller relationships in the <i>mandi</i>
have been purely price-based and transactional. Consequently, most agriculture
businesses did not engage with the farmers directly which could have ensured
product integrity, built traceability or facilitated grading at the farmers
end. In the states where the APMC Act was amended in the 2000s, such direct
engagement became possible. The pioneering work done by ITC e-Choupal in this
space is well known.<o:p></o:p></span></div>
<div class="MsoNormal">
<b><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></b></div>
<div class="MsoNormal">
<b><span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Intermediaries and
Commissions<o:p></o:p></span></b></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">As far as the
difference between the consumer and the farmer prices is concerned, some
mark-up is natural. After all, the produce has to move across distances, incur
handling costs, bear losses on account of perishability, buffer the margins for
quality variations due to visual inspection and the costs of aggregating
produce from small farmers, and then disaggregation to reach out to the retail
points.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">The very high
markup is because the old APMC Act gave monopoly power to the mandis, which led
to higher transaction costs and commissions structure.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Because the
Essential Commodities Act could be invoked at any time in any commodity,
rendering the large scale investments in storage and handling infrastructure
unviable, the value chains remained fragmented. This resulted in a series of
intermediaries needed to connect the farmer with the consumer.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">The 2017 Model APMC
Act recognises the role of legitimate players along the supply chain and
expects that the provisions of Essential Commodities Act would be used only
against the unscrupulous hoarders. Hopefully, this Act will be adopted by the
states without wasting much time, which would then usher the necessary
investment.<o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;">Farm productivity
may be raised by the different initiatives of the government, but the same will
translate into higher farmer incomes only when these agricultural marketing
reforms are carried out.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial Narrow",sans-serif; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN;"><br /></span></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com4tag:blogger.com,1999:blog-918123006998403597.post-71448709027244327782016-11-02T06:08:00.002-07:002016-11-02T06:08:55.414-07:00Scaling-up Sustainability Solutions<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
This blog-post is built around my talk at the WBCSD Annual Meeting held in Chennai last month.<br />
<br />
<b><u>The Background:</u></b><br />
<br />
2015 was a year of ambition that saw the adoption of the historic Paris Agreement and the Sustainable Development Goals (SDGs). World leaders committed to building an inclusive and thriving low carbon economy, and the SDGs provide us with an all-encompassing agenda for developing our societies while addressing the critical issues of poverty, inequality and environmental degradation. This unprecedented framework for action calls upon each of us to contribute, and forward-looking companies are translating ambition to implementation at scale.<br />
<br />
Among other things, the event showcased how companies can capitalize on the new opportunities and economic incentives while contributing to the SDGs, thanks to WBCSD business solutions that align to their strategy and operations. <b>The session in which I spoke zoomed in on how corporate leadership has scaled up solutions in India, and how this can be applied around the world. </b>I shared ITC’s experiences in this regard.<br />
<br />
<b><u>Scale at which ITC operates:</u></b><br />
<br />
Over the years, ITC has designed and implemented several large-scale programmes to create sustainable livelihoods, enrich the environment and address the challenges of climate change. I illustrate the scale using a couple of examples…<br />
<br />
<div style="text-align: left;">
<b>ITC’s soil & moisture conservation programme</b> promotes local management of water resources by facilitating community-based participation in planning and executing watershed projects. Nearly 8,000 water harvesting structures have been constructed under this initiative, covering a total area of about 650,000 acres. It’s difficult to visualise that scale, and for a lay-person anything beyond the sight of a naked eye is big! It may be easier, if I use the analogy of Geneva Lake, a large water body most of the audience present must’ve seen; then imagine the whole city of Geneva of which this large lake is a small part. The area covered by ITC through the soil & moisture conservation intervention is 160 times the size of Geneva city! Yes, a hundred and sixty times.</div>
<br />
<b>ITC’s Farm & Social Forestry programmes</b> have greened more than 560,000 acres through tree plantations by enabling financial, technical and marketing support to small and marginal farmers. Again, this acreage by itself may not make sense, other than appearing as some large number. Let me add, that those trees have sequestered more than 5,000 kilo tonnes of CO2, which is equivalent to keeping as many as one million diesel cars off the road, based on specific emission factors! Yes, a million cars.<br />
<br />
<b>The ITC e-Choupal initiative</b> is a powerful example of a development model that delivers large-scale societal value by co-creating rural markets with local communities. With a judicious blend of click & mortar capabilities, ITC e-Choupal has triggered a virtuous cycle of higher productivity, higher incomes, and enhanced capacity of farmer risk management, larger investments and higher quality and productivity. These services reach out to some four million farmers. Again, just to visualise the scale, may I say that every Indian farmer could be brought into such a network, with not more than thirty companies operating at this scale.<br />
<br />
All these, while ITC’s revenue has grown tenfold over the last twenty years! Profits grew 33 times and the Total Shareholder Returns grew at a CAGR of over 23% <br />
<br />
For more details do read the GRI - G4 compliant, comprehensive, <a href="http://itcportal.mobi/sustainability/sustainability-report-2016/default.aspx">Sustainability Report of ITC</a>.<br />
<br />
<b><u>The How of This Scale:</u></b><br />
<br />
Essentially a three-dimensional approach. Focus. Outcome Orientation. Innovation.<br />
<br />
<b>Focus:</b><br />
<br />
Imagine a Venn Diagram. The focus of our efforts is on those areas that converge from three angles. First, the development challenges that matter to the nation. Second, those interventions that create enduring value for our stakeholder communities. As many as 250,000 people participated directly in a “Needs & Priorities Assessment” exercise in the PRA format, earlier this year. Third, those initiatives where our interventions can multiply the impact significantly by virtue of their touch-points with our value chains or their geographical vicinities.<br />
<br />
The resultant key focus areas, viz. livelihoods for the poor, sanitation, gender equality, vocational skills, education, and climate action mirror the important global SDGs too.<br />
<br />
For a deeper understanding, you can browse through ITC’s <a href="http://www.itcportal.com/about-itc/policies/corporate-social-responsibility-policy.aspx">CSR Policy</a> and <a href="http://www.itcportal.com/about-itc/policies/sustainability-policy.aspx">Sustainability Policies</a>.<br />
<br />
<b>Outcome Orientation:</b><br />
<br />
Often, sustainability interventions are designed as point solutions. They do make a difference, but not at scale. For example, provision of information or knowledge to small holder farmers. This is certainly one component of the services provided by ITC e-Choupal. While this is a necessary condition, this won’t, by itself, raise their incomes. The information and knowledge need to be often translated to investments on the farm. But, given the inherent risk associated with farming, farmers hesitate to make those investments. This is where our livestock and such other interventions that bring supplementary incomes come into play, which enhance the risk bearing ability of the farmers. Once the intent to invest is there, the next challenge is gaining access to the recommended inputs, credit, crop insurance, farm machinery etc. The intensity of agriculture has a bearing on natural resources like water and top soil. Without a community effort, individual farmers get trapped in the tragedy of commons and exhaust these resources, and face an unsustainable future. This is where our soil & moisture conservation interventions come into play. And so on…<br />
<br />
Thus, commitment to the eventual outcomes - and doing whatever is necessary as well as sufficient - only can demonstrate the impact and involve the communities on larger scale.<br />
<br />
This integrated approach of ITC and the impact is well documented in a <a href="http://www.apaari.org/publications/itc-e-choupal.html">report published by APAARI</a>.<br />
<br />
Outcome is not a static target but a dynamic goal as the communities evolve. New goals get set on an ongoing basis to make the programmes contemporary and strengthen their enduring relevance. For example, in the sixteen years since the first e-Choupal was rolled out, the model is in its fourth version now!<br />
<br />
<b>Innovation:</b><br />
<br />
Investment in sustainability initiatives at this scale cannot be sustained by merely keeping a portion of the profits aside. With our Chairman, Mr Deveshwar articulating the paradigm of “responsible competitiveness” for growth, the entrepreneurial energies of the whole organisation are harnessed to innovate business models that improve business competitiveness while creating sustainable livelihoods and enriching environment.<br />
<br />
“<a href="http://www.itcportal.com/about-itc/ChairmanSpeakContent.aspx?id=1111&type=B&news=chairman-2011">Making Markets Work for Green GDP and Sustainable Livelihoods</a>” is the theme of one of his speeches at ITC’s Annual Shareholders Meeting.<br />
<br />
More importantly, co-creating solutions together with the participating communities makes the innovations relevant. This approach also synergises the complementary strengths of the multiple stakeholders, and helps execute the programmes at scale. Call it a PPPP – Public Private People Partnership – approach, if you will…<br />
<br /></div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com5tag:blogger.com,1999:blog-918123006998403597.post-64047186125517481842015-09-26T08:41:00.000-07:002015-09-26T08:41:55.082-07:00Nuances of the Agricultural Value Chains in India<div dir="ltr" style="text-align: left;" trbidi="on">
<em>Earlier this week, I gave a talk on the subject in a Workshop of Development Professionals. One of the participants prepared this summary:</em><br />
<em></em><br />
<span lang="EN-IN"><span style="font-family: Calibri;">Drawing upon his extensive experience of
setting up and managing businesses based on value chains in agricultural
commodities, Sivakumar took off from where the previous speaker left.<span style="mso-spacerun: yes;"> </span>He said that he would reconcile the two
seemingly conflicting points of views brought up in the previous session. On
one hand, farmers as well as consumers feel that the intermediaries in the
value chain are getting all the cream at their expense. The other was the large
body of research which says that there is no evidence to conclude that
middlemen in any specific commodity sector are making any more returns than
justified by the value they add through capital they invest, the costs they incur
and the risks they take. Once he had done that, he said, he would propose a
sort of “tool kit” that the participants could use to address the
inefficiencies in the value chains. <o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">He said that the situation in India was
characterized by small ticket size, large geographic dispersion, and lack of
homogeneity on both the producer and the consumer end. To reach the agri produce
to appropriate buyers located elsewhere, seeking products at different times,
and in different form, required the middlemen to discover mechanisms such as
larger than required risk cover, substituting skills for instruments and local
knowledge for things like credit rating or quality testing or bank reach. They
then instituted less than "global optimal" solutions. The research on
market efficiency in whichever commodity focussed on "local"
connections between two subsequent legs of a value chain and these were
competitively shaped leading to the conclusion about market efficiency. Yet,
from the point of view of global marketplace, Indian value chains were very
inefficient since the summation of local optimal efficiencies did not add up to
a global optimum for the whole value chain because of the non-value adding
costs and unwarranted risks. This explained the simultaneous existence of
"efficient markets" as tested by economists at micro level with gross
inefficiencies in aggregate. <o:p></o:p></span></span></div>
<span lang="EN-IN"><span style="font-family: Calibri;">The adverse impact of the inefficiency – in
terms of higher costs and risks – have been pushed to the weakest link in the
chain, namely, the small farmer! As a result, the producer’s share of a
consumer rupee remained low. Also, neither the full market opportunity from the
evolving consumer preferences, nor the full production potential of India’s
rich agro-climatic conditions have been realised. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">He therefore suggested that any work to
improve the lot of small farmers cannot be a “point” solution; interventions
are needed to improve efficiencies of the value chains as a whole, by
transferring the costs and the risks to the most capable players along the
chain. <o:p></o:p></span></span></div>
<span lang="EN-IN"><span style="font-family: Calibri;">Citing his own experience in setting up ITC
e-Choupals, he laid out an approach to build the "tool kit". He then
talked of two points that move along the value chain: the first is related to
how much a producer would be willing to go down the value chain to reach out to
the consumer and the other as to how much a consumer would be willing to go up
towards production side. For the former, he talked of producers willing to push
their “value offer points” by reaching out to the consumers in terms of vendor
managed inventory. For the latter, he talked of contract farming as an illustration
of consumer extending the “order penetration point” up the stream in the value
chain. <o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">By studying what he called the “transaction
velocity” metrics, he said it would be possible to identify the non-value
adding transactions in a value chain and then eliminate them through suitable
interventions. ITC e-Choupals, for example, eliminated the physical movement of
goods from farmers to APMC and then from there to the factories through
competitive price discovery at farmer’s doorstep. Through different business
models, ITC reaches out to 70000 villages in 220 districts across 16 states of
the country giving them a competitive edge in sourcing.<o:p></o:p></span></span></div>
<span lang="EN-IN"><span style="font-family: Calibri;">Next he talked of “identity preservation” of
the product along the value chain to mix & match the heterogeneity of
production to cater to the heterogeneity in demand. Giving an example, he said
there were 16 major wheat types grown in the country and 7 major atta types preferred
by the consumers in different regions of the country. By setting up suitable
sourcing, storage, and movement systems – both physical and information flow –
to ensure that right wheat went to right mills and the right atta to market, ITC
could capture and retain a huge market share in the Rs 5000 cr branded atta
market. <o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Third he talked of “intensity of information”
embedded in the products and using it for the purpose of deriving extra value
for the producers. This comprised things like organic produce, responsible
produce, IPM produced stuff etc. for which some segments of consumers are
willing to pay more if there is evidence of the claim of the produce being what
it claims to be. <o:p></o:p></span></span></div>
<span lang="EN-IN"><span style="font-family: Calibri;">Fourth he talked about moving from backyard
production to collective production systems, wherever “mass production to
production by masses” ratios are favourable. He gave the example of small
animal holders coming together for collective dairy farming. <o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">He strongly recommended that it would be
more productive for new entrants as well – irrespective of their size of
operations – to start thinking in terms of steps to move towards a “global
optimum” in their value chains rather than either engaging in a zero sum game
of deriving more value by reducing someone else's earning or by competing within
the existing system alone.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com3tag:blogger.com,1999:blog-918123006998403597.post-4365990857653801392015-05-13T09:39:00.000-07:002015-05-13T10:06:09.658-07:00Rural is more about doing it the right way: Effective Execution of Strategies<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<b style="mso-bidi-font-weight: normal;"><u><span lang="EN-IN"><span style="font-family: Calibri;">The
Event Theme:<o:p></o:p></span></span></u></b></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Rural India is the next growth destination.
The aspirations of today’s rural consumers, who are “better-connected” and
“more-aware”, are rising. They are fuelled further by their increasing incomes.
“Why” marketers should go rural is not a question anymore… The task now is to
devise strategies that can seize this opportunity. The “how” of it!<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">To help marketers navigate this future
effectively, <a href="http://www.rmai.in/">Rural Marketing Association of India</a></span></span><span style="font-family: Calibri;"><span style="mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"> organized a <a href="http://www.ruralconclave.com/">Conclave</a></span><span lang="EN-IN"> with the theme “From
why rural to how rural”.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">The event saw an amalgamation of two
generations of the rural marketing fraternity. Experienced industry veterans joined
the new age professionals to share the best practices and preview the next
practices through <a href="http://www.ruralconclave.com/program.php">panel discussions, presentations and case studies</a>. </span><span style="font-family: Calibri;">
<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<b style="mso-bidi-font-weight: normal;"><u><span lang="EN-IN"><span style="font-family: Calibri;">My
Session Theme:<o:p></o:p></span></span></u></b></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">While some marketers have hopped on to the
rural bandwagon early, many have started exploring more recently. Strategies
that worked in rural markets, as also those that didn't, have been well
documented. Riding on the increasing penetration of mobile devices and
internet, social media and e-commerce are no longer the things of the future in
rural India.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Coming well after the mid-point of the event,
on Day 2, my job was to pick a few widely recommended “hows” (the strategies)
from the preceding sessions, and share my thoughts on “how exactly” does one go
about implementing them.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">I picked four “hows” and went on to
prescribe “how exactlies” based on the lessons from ITC e-Choupal experience…<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;"><u><span lang="EN-IN">How
1:</span></u><span lang="EN-IN"> Because rural is a ‘connected community’ and the
rural people are ‘social’, you must work through “Opinion Leaders” to influence
the buying decisions of rural consumers. <o:p></o:p></span></span></b></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Such Opinion Leaders could be Panchayat
Presidents, Large Farmers, Shop Keepers, Teachers, and so on…<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span style="font-family: Calibri;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-IN">How
Exactly</span></b><span lang="EN-IN"> does one go about finding the right Opinion
Leader relevant to my offering and my context?<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Step 1 is to figure out the exact role such
a person would play in your business model, and accordingly determine the
relevant profile. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">For example, it could be a Value Chain
Intermediary who is making up some missing infrastructure to improve
efficiency. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">Like the way the
village money lender knows whether or not to extend an additional loan when the
previous loan has not been repaid. Despite the missing credit rating
infrastructure, he would know what to do because he knows whether the crop has
failed, or if an unforeseen domestic expense has come up, or if the farmer
simply wants to renege despite having cash on hand.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">Or the way an
Adathiya in the Mandi knows if the lot of agri produce has to be priced higher
or lower than the average. Despite the missing laboratory infrastructure, he
would know whether the lot has more of good, bad or ugly material. With one
look!<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">That’s how the
role of Samyojak came into being in ITC e-Choupal system. One of the roles of Samyojak,
located at Choupal Saagar (the hub of the hub & spoke e-Choupal
architecture) is to disburse cash to farmers. While the Banks offered to do
this job at a cost of 1.0% of transaction value (accounting for the cost of a
bill clerk, a cashier, and a security person, working in two shifts to service
our working hours of 0700-2100), the adathiyas were ready to do this at 0.25%
by combining all three roles into one! We found a Samyojak in the adathiya. He
was making up for the missing cash-less transaction ecosystem. One day, when
the infrastructure is in place, Banks will be able to do this more effectively.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Other example could be an Influencer who
demonstrates the value of an offering through personal usage. Sort of a “lead
consumer”. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">It is important that
the rest of the consumers perceive this person as “one amongst them”. Not the Agent
of a Company, promoting their offerings. Nor should the companies see him as a
Leader of the farmers / consumers as in a Trade Union context.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">Thus, a medium
sized farmer became a Sanchalak in the e-Choupal system. Not a large farmer,
nor a shop keeper or a teacher with whom the majority of the farmers cannot identify
with. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">The Choupal
Sanchalak was the “go to” person for both the villagers (when they had an issue
with the companies riding on the e-Choupal platform) as well as the companies (when
they had an issue with the villagers). Sanchalak was “one of us” for both the
parties!<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">To my mind, this
unique institution of Sanchalak is a bigger innovation in the ITC e-Choupal
model than bringing Internet to the villages when most of them hadn’t even seen
telephones!<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">The social capital
of the Choupal Sanchalak is further enhanced through a public oath he takes in
front of the whole village that he would act a like trustee etc.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span style="font-family: Calibri;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-IN">How
2: Although the rural consumer’s aspirations are more urban-like, you must
tailor-make products for rural consumers and their contexts because rural is heterogeneous
</span></b><span lang="EN-IN">(<a href="https://twitter.com/S_Sivakumar/status/596551259496194048">eg. single razor vs multi-blade systems</a>) <b style="mso-bidi-font-weight: normal;"> <o:p></o:p></b></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">You must co-create with rural consumers,
because you can’t otherwise keep up with the speed with they are changing. They
are not urban consumers with a standard time lapse, as someone said.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span style="font-family: Calibri;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-IN">How
Exactly</span></b><span lang="EN-IN"> do you co-create? This is an often-used but
hardly understood phrase!<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">It may be easier to understand co-creation,
if we first understand what is not </span></span><span lang="EN-IN" style="font-family: Wingdings; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-char-type: symbol; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin; mso-symbol-font-family: Wingdings;"><span style="mso-char-type: symbol; mso-symbol-font-family: Wingdings;">J</span></span><span lang="EN-IN"><o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">Co-creation is not
more research. It is not bringing consumer voice to the boardroom.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">Co-creation is not
crowd-sourcing ideas.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">Co-creation is not
even marketers immersing with consumers and developing empathy.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">Co-creation is not
testing company-centric product designs with the consumers.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Co-creation is giving consumers the tools
and structure that allow them to become designers!<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Sanchalaks – as lead consumers (of crop
management knowledge, for example) – were integral part of the e-Choupal web
portal design team. It was at their instance that a typical “best practices’
content was structured as “current practices, what is right or not right with
them” and “why some practice needs to be changed, and then the recommended
practices”. This helped add credibility to the portal that the scientists panel
understood their context and then only were recommending something else, rather
than a conventional expert style instruction…<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">The structure of periodic village meetings
with all the farmers, further rolled up into Sanchalak Sammelans, helped embed
their insights and inputs into the continuously evolving design of e-Choupal on
an ongoing basis instead of an occasional feedback system…<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">We pleasantly realised that the brand “e-Choupal”
was owned by the community, and that ITC was a mere trustee, when such a
co-creation process articulated the brand tagline as “kisanonke hithme, kisanonka
apna” in the very second year of the initiative.<span style="mso-spacerun: yes;"> </span>The highest level any brand can attain, to my
mind </span></span><span lang="EN-IN" style="font-family: Wingdings; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-char-type: symbol; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin; mso-symbol-font-family: Wingdings;"><span style="mso-char-type: symbol; mso-symbol-font-family: Wingdings;">J</span></span><span lang="EN-IN"><span style="font-family: Calibri;"> <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">When everyone was looking for a
low-cost-last-mile to reach the rural markets, ITC e-Choupal was working on an
intelligent-first-mile by working together with the communities. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN"><span style="font-family: Calibri;">How
3: You must forge partnerships to win in the “high-cost-to-reach but low-ticket-size”
rural markets<o:p></o:p></span></span></b></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Partnerships are relevant from many angles,
<b style="mso-bidi-font-weight: normal;">how exactly</b> do you determine what
kind of a partnership does one forge? <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">I have a product,
you have the channel. Let’s partner to expand outreach?<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">I have a product
targeted at a market. You have a non-compete product for the same market. Let’s
partner and go to market together and cut costs?<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">All such partnerships are eminently
worthwhile. But the best partnership potential is in creating what is called a
meta-market.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">There is a
fundamental disconnect in the conventional markets. Consumers think in terms of
activities; companies think in terms products / services. For example, a car
buyer would think in terms of information to understand the features of cars
available in the market, source of credit, dealer in the vicinity, insurance,
RTA etc. Each of these belong to a different industry, each trying to reach the
consumer independently!<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">What a meta-market
does is to cluster such complementary products / services and offer a complete
solution to the consumer.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt 0.5in;">
<span lang="EN-IN"><span style="font-family: Calibri;">In the context of
agriculture, farmers think in terms of weather forecasts, market prices, access
to farm inputs, credit, insurance, markets for the produce, and so on… The ITC
e-Choupal ecosystem assembled all these players from diverse set of industries
on one platform to offer a seamless market experience to farmers / consumers at
one place, right in the village! As many as 160 organisations ride on this
platform today!<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN"><span style="font-family: Calibri;">How
4: You must leverage technology to operate in the rural markets, because it can
cut costs through remote delivery as well as personalise offerings<o:p></o:p></span></span></b></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">There is so much technology around me, <b style="mso-bidi-font-weight: normal;">how exactly</b> do I use technology? Mobile
advertising, geo-coding?<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Simple! You understand the unfulfilled consumer
needs and the current business processes first, and then see what role
technology can play. Not the other way round.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">For example, when the farmer goes to a mandi
to sell his produce, four transactions are rolled into one. Price discovery,
Sales, Delivery, Cash Collection. The sunk cost of transportation he has incurred
even before discovering the price forces him to sell at whatever he is offered.
Taking the produce back doubles his transportation cost with no guarantee that he
would fetch a better prices next time he comes to sell.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">ITC e-Choupal brought price discovery
process to his doorstep using Internet (supplemented by the quality testing by
the Sanchalak) empowering him to decide when and to whom he would sell without
the pressure of a sunk cost.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">When he sells to ITC, we have the ability
to stack the produce of different farmers in different lots pooled as per our
quality norms rather than the random aggregation done by the adathiya in a
mandi. This helps preserve identity and maintain product integrity, so critical
for the success of our brands.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">A win more + win more solution enabled by
technology </span></span><span lang="EN-IN" style="font-family: Wingdings; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-char-type: symbol; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin; mso-symbol-font-family: Wingdings;"><span style="mso-char-type: symbol; mso-symbol-font-family: Wingdings;">J</span></span><span lang="EN-IN"><span style="font-family: Calibri;"> <o:p></o:p></span></span></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com5tag:blogger.com,1999:blog-918123006998403597.post-79647256727600245002015-02-28T08:21:00.000-08:002015-03-08T01:55:31.684-08:00Union Budget 2015: Agriculture<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Calibri;"></span><br />
<span style="font-family: Calibri;">“By the time of the 75<sup><span style="font-size: x-small;">th</span></sup> year of Indian
independence, …India (has to) become a prosperous country and a responsible global
power… Madam Speaker, I am mindful of the five major challenges I have to
reckon with. Firstly, Agricultural incomes are under stress…” said the Finance
Minister in his speech today.<o:p></o:p></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<span style="font-family: Calibri;">His response to this rightly identified foremost challenge is
embedded in three policy statements made in the budget, two sets of budget
allocations, and some hope.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">The Policy
Statements:<o:p></o:p></span></b></div>
<br />
<div class="MsoListParagraph" style="margin: 0in 0in 8pt 0.25in; mso-list: l0 level1 lfo1; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">1.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: Calibri;">“I
intend this year to work with the States, in NITI, for the creation of a
Unified National Agriculture Market”, promised the FM. Such a unified market
has the potential to transfer a larger share of the consumer price to the
farmer. When the Economic Survey asserts, “If persuasion fails, it may be necessary
to see what center can do, taking account of the allocation of subjects under
the Constitution of India”, one sees some hope in converting this potential
into reality.<o:p></o:p></span></div>
<br />
<div class="MsoListParagraph" style="margin: 0in 0in 8pt 0.25in; mso-list: l0 level1 lfo1; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">2.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: Calibri;">“I
propose to merge the Forward Markets Commission with SEBI to strengthen regulation
of commodity forward markets”, said the FM. Hopefully, this will ensure dusting
the <a href="http://www.prsindia.org/uploads/media/Forward%20contract/SC%20report%20on%20Forward%20Contract%20Regn.pdf">Parliamentary Standing Committee’s Report</a> on the Forward Contracts (Regulation)
Amendment Bill 2010, </span><span style="font-family: Calibri;">and <a href="http://shivsthirdeye.blogspot.in/2014/08/commodity-options-new-age-msp-mechanism.html">introduction of Options</a> and other forward looking instruments. </span></div>
<br />
<div class="MsoListParagraph" style="margin: 0in 0in 8pt 0.25in; mso-list: l0 level1 lfo1; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">3.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: Calibri;">“We
need to cut the subsidies leakages, not subsidies themselves” declared the FM.
Indeed subsidies are needed for the poor; what we need is a well-targeted
system for subsidy delivery. For, these leakages distort the market and act as
disincentive to private investments in the sector. As much as 42% of the grain
distributed in the Public Distribution System leaks back into the open market
<a href="http://planningcommission.nic.in/reports/peoreport/peo/peo_tpds.pdf">per a study</a>.</span><span style="font-family: Calibri;">
The JAM trinity can help in Direct Transfer of such Benefits, minimize distortion
and nurture vibrant markets.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">The Budget
Allocations:<o:p></o:p></span></b></div>
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<div class="MsoListParagraph" style="margin: 0in 0in 8pt 0.25in; mso-list: l1 level1 lfo2; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">1.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: Calibri;">Rs
100,000 Crores is allocated to Rural Infrastructure Development Fund, and various
Long & Short Term Rural Credit Funds. This will surely raise the investment
capacity of the farmer and step up the Gross Capital Formation in the sector,
besides expanding the much-needed rural infrastructure. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">2.</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: Calibri;">Funds
already allocated to the ‘Deen Dayal Upadhyay Gramin Kaushal Yojana’ and the
Scholarships and Loans promised under the ‘Pradhan Mantri Vidya Lakshmi
Karyakram’, will enhance the employability of rural youth in non-farm jobs.
This will improve the ratio of arable land available per agri worker, which is
otherwise deteriorating to unviable and unsustainable levels.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">The Hope:<o:p></o:p></span></b></div>
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<span style="font-family: Calibri;">The Economic Survey reiterated the importance of
agricultural research, extension, irrigation, mechanisation etc as the key drivers
of growth of the sector. Hopefully, the funds allotted under different Government
schemes, such as Rashtriya Krishi Vikas Yojana, the National Food Security
Mission, the Mission for Integrated Development of Horticulture, the Soil
Health Card Scheme, the Pradhan Mantri Krishi Sinchayee Yojana etc, are
channeled to appropriately technologise our farming to deal with the extreme
weather variations which have now become the norm. Many of these schemes have been folded into the new Krishionnati Yojana, and the funding has been curtailed, with the FM expressing hope that the States will put in the required money from the higher allocations they now have from the 14th Finance Commission formula. I hope that hope is not belied...</span></div>
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<span style="font-family: Calibri;">It’s only then that the Amrut Mahotsav of our independence
will be sweet! <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com7tag:blogger.com,1999:blog-918123006998403597.post-31637851527553632882015-02-16T07:12:00.000-08:002015-02-28T07:13:28.214-08:00A New Deal for Oilseeds<div dir="ltr" style="text-align: left;" trbidi="on">
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Despite being one of the largest producers of oilseeds in the world, India’s import dependence has doubled over the past few years owing to expanding consumption of edible oils and stagnating production of oilseeds. The country imported vegetable oils worth $10 billion in 2013-14 compared with $5 billion in 2007-08. If this growing demand has to be met without adding to the country’s current account deficit, oilseed production and domestic manufacture of edible oils have to be ramped up significantly.</div>
<b></b><br />
<b>Yields down</b><br />
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Farm yields of oilseeds such as groundnut, mustard, soyabean and sunflower are barely 50-70 per cent of global averages. Demand for edible oils is likely to increase from 18.3 million tonnes (mt) in 2013-14 to 25.7 mt by 2020-21, with imports expected to touch 15.8 mt rising 40 per cent from the current level of 11.2 mt. It is possible to address this alarming deficit through a set of policy interventions that will enable expansion of area under oilseeds cultivation, increase farm productivity, and improve value-addition within the country.</div>
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<b>Lack of incentives</b><br />
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The farmer gets no incentive to invest in oilseeds, in competition with cheap imported oils in the absence of any import restrictions. The recent removal of export duty on palm products by Malaysia and Indonesia to reduce their inventory has resulted in a spike in imports and a resultant downward spiral of domestic prices, adding to the woes of the farmer. India’s import of vegetable oils is expected to touch a record 12.3 mt in the current year. Avoidable costs such as multiple handling due to APMC regulations, mandi cess, etc make domestic manufacture of edible oil an expensive proposition, limiting the scope for value-addition.</div>
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<b>Strategies suggested</b><br />
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To meet this challenge, CII has recommended a three-pronged strategy: </div>
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One, raising farm productivity through a complete package of practices i.e. new technology, quality inputs and farm-extension services; and linking farmers effectively with markets. The Integrated Scheme for Oilseeds, Pulses, Oil Palm and Maize (ISOPOM) and National Mission on Oilseeds and Oil Palm (NMOOP) need to focus especially on increasing availability of high quality seed material to the producers. The private sector can focus on other inputs, and extension services.</div>
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Two, farmers need to be incentivised to undertake oilseed cultivation through higher price realisations. This can be done by raising import duties to bring prices on parity with domestic cost of cultivation. In due course, as the productivity improvement measures succeed, Indian prices also will be globally competitive. Based on recommendations from CII and other stakeholders, the Government has increased import duty on crude oil to 7.5 per cent from 2.5 per cent and that on refined edible oil to 15 per cent from 10 per cent.</div>
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Looking at the future price trends, there is room for further increase in rates, without hurting the consumer interests. In any case, the bound rates under WTO are also far higher than the current levels. The additional revenue generated can also be ploughed back into increasing oilseed productivity. There is also a need to lower transaction costs in the domestic value chain by lowering the <i>mandi </i>cess to a nominal 0.5 per cent. Reforming APMC Act to allow farmers to sell directly to manufacturers at their factories or warehouses will also fetch them better returns by reducing unwarranted multiple handling costs. </div>
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Three, increasing acreage of high oil content oilseeds is another key requirement. Cultivating more mustard in Punjab and palm in coastal areas can be explored. Between Punjab and Haryana, wheat is cultivated on some 6 million hectares. Part of this could be redirected towards mustard to meet the edible oil demand. This will also help the situation of depleting groundwater tables in these States. More wheat can be grown in the eastern parts of the country.</div>
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The area under oil-palm cultivation can also be increased to provide a rich source of edible oil and crude palm oil, which are widely imported. The Government has identified 19.30 lakh hectares as suitable for plantations. However, oil-palm is cultivated on only about 2 lakh hectares despite two decades of effort. Moreover, a major part of these plantations are still pre-mature and are yet to yield oil-palm. Declaring oil-palm as a plantation crop, along with policy support to allow better germplasm import can attract more investments into the sector.</div>
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The rich agro-climatic conditions of India offer an opportunity to produce a wide range of oilseeds globally competitively, when nurtured with the right policy environment. There is no reason why the country should remain an importer of edible oils for all times to come. </div>
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<span style="font-size: 12pt;"><o:p><span style="font-family: Calibri;"> </span></o:p></span></div>
<span style="font-size: 12pt;"><span style="font-family: Calibri;">Published in The Hindu
Business Line at</span></span><br />
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<span style="font-size: 12pt;"></span><span style="font-size: 12pt;"><a href="http://www.thehindubusinessline.com/markets/commodities/a-new-deal-for-oilseeds/article6902484.ece"><span style="color: blue; font-family: Calibri;">http://www.thehindubusinessline.com/markets/commodities/a-new-deal-for-oilseeds/article6902484.ece</span></a><o:p></o:p></span></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com2tag:blogger.com,1999:blog-918123006998403597.post-50958037623255036592014-09-18T07:19:00.000-07:002015-02-14T07:20:36.834-08:00Food Security Challenge: Re-engineering Solutions for Sustainability<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">Half a century ago, when India faced
one of its most serious challenges in food security, it required a Green
Revolution to bring the country out of the crisis. It was a time when the
country was still battling bitter memories of the devastating Bengal famine.
Food scarcity and inflation had triggered fears of a second disaster. Faced
with the task of feeding an ever-growing population, the government had resorted
to imports and relied on food grants for years. However, it was amply clear
that a lasting solution would be found only when domestic production was stepped
up substantially. <o:p></o:p></span></span></div>
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">It was in this backdrop that a team
of scientists led by geneticist Dr MS Swaminathan set to work, enthused by the high-yielding
varieties of grains developed by the agronomist Dr Norman Borlaug. Their
research gave birth to the Green Revolution in India, which powered a surge in
food production and the consequent decline in food prices. In the years to
follow, India not only became self-sufficient in food, but also reversed its
role of being an importer to an exporter of grains.<o:p></o:p></span></span><br />
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<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">The elements of strategy and
organisation behind the success of the Green Revolution were many, primarily
designed and executed by the Government. <span style="mso-spacerun: yes;"> </span>Scientific farming methods were developed to
exploit the high-yielding varieties of seeds in Indian agro-climatic
conditions. Complementing these efforts of the ICAR-led public research system were
the Seed and Fertiliser Corporations, and the farm-extension services wings of
the state agricultural departments that disseminated the technologies among
farmers. Mega irrigation projects, undertaken through public investments, made water
available to these farmers. Instruments like the Minimum Support Price (MSP)
played a pivotal role in assuring the farmers of economic returns and
translating the new technologies into increased food production. Public
institutions such as Food Corporation of India and the Agricultural Produce
Marketing Yards (Mandis) played their role in operationalizing the MSP mechanism.
Fair Price Shops set up under the Public Distribution System (PDS) sold
essential food items to low-income consumers at affordable prices.<o:p></o:p></span></span></div>
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">The success of the Green Revolution
was not without its negative fallouts. To incentivise agricultural production,
successive governments at centre and in different states introduced direct and
indirect subsidies on key inputs like water, power, and fertiliser. This slew
of subsidies not only caused fiscal deficits to soar, but also created a new
crisis. Excessive ground water exploitation created several hot-spots around
the country, leaving little water for future needs. Imbalanced usage of
nutrients resulted in deterioration of soil quality, adversely impacting the
land productivity. The increasing gap between MSP paid to the farmers and the
PDS price to the consumers distorted markets, stunting the development of
competitive value chains in the food and agricultural sector. <o:p></o:p></span></span><br />
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<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">In order to promote sustainable
agriculture and address the question of food security in the longer term, it is
imperative to break out of the vicious cycle of subsidies and start looking for
newer solutions. Taking cue from the Green Revolution, it is possible to
address the challenge once again through a combination of new technologies and contemporary
institutions that will take technology to the farmers and link them to consumption
markets. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">The changing
context of the Indian food economy <o:p></o:p></span></span></b><br />
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<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">Food security is a priority for every
Government. However, any exercise to address the issue would remain futile unless
one takes into consideration the evolving new market context. With rapid
globalisation and higher purchasing power, today’s consumers are seeking superior
taste, better quality, larger variety, and more convenience in their food products.
The share of cereals in the diets across all socio-economic classes has reduced
in favour of vegetables, fruits, milk and meat. Value-added processed food is
gaining popularity by the day. In this scenario, it is imperative that market
signals reach the farmers, enabling them to continuously align their production
with changing consumer demand patterns and realise better prices. As a large
part of India’s poor are farmers, this would also address the issue of poverty
alleviation. Additionally, raising farmer incomes would whet their risk-taking
appetite and encourage them to diversify into crops beyond grains. This would,
in turn, address the need for nutrition security, a necessity given the
staggering levels of malnutrition in the country today.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">This new context warrants a
transformation in the food and agriculture system that is more fundamental than
what is generally understood. Producing what the consumer wants is quite
different from selling whatever is produced by the farmer. An important
prerequisite for this makeover is a re-orientation from production-driven
supply chains to demand-driven value chains. This will entail huge investments
in creating appropriate infrastructure in post-harvest, logistics, processing,
packaging, retailing, and information systems.<o:p></o:p></span></span><br />
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<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">This transformation cannot be
achieved by the Government alone, as it successfully did in the circumstances
prevailing fifty years ago. Companies specialising in supply chain management,
food-processing, and marketing will need to work closely with the farmers to
tap the emerging opportunities. However, a variety of policy constraints deter
sizeable investments by such Corporates today. Foremost among them is the
non-implementation of the ‘Model APMC Act’ by many states. In addition, the
Essential Commodities Act (ECA) imposes stock limits and curbs movements from
time to time, further affecting the viability of agri-businesses and
food-processors. Therefore, policies related to trade and marketing in
agriculture need a significant overhaul if farmers have to benefit from the expanding
food consumption in the country.<o:p></o:p></span></span></div>
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">Leveraging
technology to raise production, reduce wastage and plugging leaks <o:p></o:p></span></span></b><br />
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<span style="font-family: Calibri;"><span lang="EN-IN" style="font-size: 12pt; line-height: 107%;">Technology can play a vital role in
raising farm yields, improving nutritional quality of food, reducing use of
natural resources and in dealing with wide variations in weather conditions.
Over the past few decades, India has indeed successfully leveraged technology
to increase production of many crops. In wheat, for example, technological
interventions and innovations have raised production from a mere ten million
tons during early-1960s to nearly hundred million tons today. However, there is
an urgent need to develop varieties of seed that can adapt or overcome the
effects of climate change, besides</span><span lang="EN-IN"> </span><span lang="EN-IN" style="font-size: 12pt; line-height: 107%;">serious biotic stresses
and poor soil conditions. This is particularly pertinent given that the latest
IPCC report has warned of an increased risk to food security and drinking water
due to global warming, drought, floods and erratic rainfall. Since 65% of
India’s total sown area meets its requirements from rainwater alone, it is time
to invest in a wide spectrum of technology interventions that will make
agriculture weather-proof. <o:p></o:p></span></span></div>
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">On its part, the Government must
craft a policy framework that encourages investment in research, and articulate
a National Vision on critical traits relevant to India, in order to channelise
the R&D efforts of private sector also towards this important mission. The
regulatory processes for accelerated introduction of new technologies must also
be streamlined to make them more scientific, transparent, and predictable. This
will enable sustainable intensification of Indian agriculture and increase food
production duly factoring all the constraints, while being sensitive to the ecology
and environment.<o:p></o:p></span></span><br />
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<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">Technology can also be leveraged to
reduce food wastage. It is estimated that 5% to 40% of food is wasted along the
value chain between the farmer and the consumer, depending on the perishability
of the crop and the season. This reduces the availability of food even when the
farmers have produced in adequate quantities. Setting up bag-less storage,
handling, and transportation systems for grains and oilseeds, and world-class
climate-control infrastructure for fruits & vegetables requires
considerable investments. Since the private sector has the required expertise as
well as the financial capacity to invest, it is important to stimulate
investment sentiments by modifying the stifling regulations like the Essential Commodities
Act. <o:p></o:p></span></span></div>
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">Technological interventions can go a
long way in plugging the leakages in the Public Distribution System as well,
the country’s foremost mechanism to reach out to the beneficiaries of the food
security measures. Introduction of bio-metrics and smart cards for
identification, use of electronic weighing machines and setting up of ATMs or
mobile vans for automatically vending essential commodities are some of the
measures that will reduce corruption, and help deliver the benefits to the intended
individuals in full.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span><br />
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">Creating
market-based instruments to reduce the cost of providing food security<o:p></o:p></span></span></b></div>
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">As pointed out already, the Green
Revolution relied on institutions like the Food Corporation, Agricultural
Extension Departments, APMC Market Yards and Fair Price Shops to execute its
chief instrument, the Minimum Support Price. Similar, but contemporary,
instruments and institutions are required to deal with the characteristics of today’s
food economy. <o:p></o:p></span></span><br />
<br />
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<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">The changing patterns of consumption
discussed above require a larger number of food items like vegetables, milk and
meat to be brought under the purview of the institutions and instruments that provide
food security. However, considering the immense cost of implementing MSP in just
two crops in three-and-a-half states, extending this support to at least a
dozen crops spread across 15 states is well-nigh impossible. Instead of relying
on government-administered subsidies alone, a more efficient mechanism would be
to create a market-based instrument, and build institutions that can take such
an instrument to the farmers. These market-based instruments will reduce the
need for the State to engage in commodity operations directly, yet giving the
government the power to influence prices in public interest, whenever required.<o:p></o:p></span></span></div>
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">For the farmers, Commodity
Derivatives such as “Futures” and “Options” are good safeguards as they
facilitate alignment of production with demand. In the absence of future price
signals, farmers are currently forced to make planting decisions based on the
previous season’s prices. Commodity Derivatives can open up new possibilities
for the farmers as they assure them of a post-harvest price before they take a
decision on what to sow.<o:p></o:p></span></span><br />
<br />
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<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">While trading in “Futures” is
currently permitted, this instrument ties the farmer down with the obligation
to deliver at the contracted price, even if the market moves up after harvest.
What the farmers need is a more flexible instrument, which, like the MSP
assures them of a minimum price before planting, while at the same time gives
them the option of opting out if the market prices go up later. “Options”
provide that flexibility. By buying a “put option”, the farmer gets the right
to sell at a pre-determined future price, but does not have the obligation to
deliver if the market moves up. This assurance builds the capacity of farmers
to invest in productivity-enhancing and quality-improving technology and
practices, which in turn raises food production. <o:p></o:p></span></span></div>
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">It is vital, therefore, that the
Forward Contacts (Regulation) Act is amended to permit trading in “Options”. To
help the farmers afford the high cost of the premium typically charged for
“Options”, the market needs to introduce exotic derivatives like caps and
collars. The government too can step in and subsidise the premia, since that
would entail a far less outgo than direct subsidies. Such subsidies would be
better targeted too. <o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 12pt;">
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">To manage the small lot sizes of
farmers and the complexities involved in operating in the derivative markets,
it is also important for the Act to recognise the role of the “Aggregators” who
would offer simpler “options-embedded Over the Counter (OTC) contracts” to
farmers. Private companies would then be motivated to take up this role. This
would serve a twin purpose — the farmers’ needs would be met while private
involvement in the sector would be encouraged. Suitably federated Farm Producer
Organisations can also take on the role of Aggregators. “Options” thus are the
win-win instrument that can help farmers hedge risk effectively and reduce pressure
on the national exchequer by replacing expensive subsidies with an efficient
market-based mechanism.<o:p></o:p></span></span></div>
<span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">Making the nation food secure is the
first step towards achieving the goal of sustainable and inclusive growth for
all. The measures outlined here will not only achieve food security, but also go
a long way in propelling Indian agriculture into the next orbit. With a market
oriented policy impetus and effective public-private-people partnerships, the
agriculture sector in the country can be rejuvenated to offer a new promise for
the new aspirational India.<o:p></o:p></span></span><br />
<br />
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<em><span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><span style="font-family: Calibri;">First published in Swarajya Magazine on Sep 18<sup>th</sup>, 2014 at </span></span><span lang="EN-IN" style="font-size: 12pt; line-height: 107%;"><a href="http://swarajyamag.com/economy/food-security-re-engineering-solutions-for-sustainability/"><span style="color: #0563c1; font-family: Calibri;">http://swarajyamag.com/economy/food-security-re-engineering-solutions-for-sustainability/</span></a><o:p></o:p></span></em></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com1tag:blogger.com,1999:blog-918123006998403597.post-15084294581404111042014-08-05T07:29:00.000-07:002015-02-14T07:29:57.815-08:00Commodity Options: New-age MSP mechanism that can trigger a Rainbow Revolution<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt;"><em>Options can certainly be a win-win instrument not only to
hedge farmers’ risk effectively, but also by replacing expensive subsidies with
an efficient market-based mechanism.<o:p></o:p></em></span></div>
<em>
</em><br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt; line-height: 115%;">A new future for Indian farmers dawned in 1960s with the Green
Revolution. Another such turning point is emerging today, with an opportunity
to craft the next leap for Indian agriculture. An instrument that played a
pivotal role in translating the green revolution technologies into increased
food production was the Minimum Support Price (MSP) assured to farmers.
Institutions such as Food Corporation of India executed this instrument,
complementing the research and extension services rendered by the ICAR-led
public research system.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt; line-height: 115%;">That was half a century ago. Rapid globalization since then,
coupled with increasing purchasing power, have made today’s consumers seek a
variety of food products, such as vegetables, fruits, meat, and milk, going
beyond the green revolution crops, namely, rice and wheat. For the farmer, this
requires a paradigm shift to bring consumer-preferred traits into crops, in
addition to further improvements in productivity. This implies new risks for
the farmers, which cannot be dealt with by the MSP that covers only a few
commodities in a few states.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt; line-height: 115%;">If the cost of implementing MSP in two crops and three-and-a-half
states itself is so taxing on the exchequer, one can only imagine the massive
resources that would be required to support at least a dozen crops spread
across not less than 15 states. A new “Rainbow Revolution” is now required to
take the baton from a tiring Green Revolution. Technology already exists for
such a revolution; we just need a new MSP-like instrument that can cover many
more crops and several states. Instead of relying on a government-administered
subsidy alone, a more efficient mechanism would be to create a market-based
instrument as also build and strengthen institutions that can take such an
instrument to the farmers. Market-based instruments will reduce the need for
the state to engage in commodity operations directly, yet giving government the
power to intervene and influence prices in the public interest by participating
in such a market whenever required.<o:p></o:p></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt; line-height: 115%;">Commodity derivative markets offer such an instrument. Even though
there are opponents to derivatives such as futures and options, the fact
remains that they provide the best safeguards to farmers, simultaneously
facilitating a swifter alignment of production with demand. Today, farmers make
planting choices based on the prices received for previous season’s crops.
There couldn’t be a more inefficient way! Derivatives open up new possibilities
for farmers by assuring them of a post-harvest price before they take a
decision on what to sow. <o:p></o:p></span></div>
<span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt; line-height: 115%;">Trading in futures is currently permitted, but it doesn’t really
help the farmers manage their risk, as it ties them down with an obligation to deliver
at the contracted price, even if the market moves up after harvest. Farmers are
looking for an MSP-like instrument, where they are assured of a minimum price
before planting a crop, and still have the choice of taking advantage of the
market if prices go up later. Options provide such flexibility. By buying a put
option, the farmer gets a right to sell at a pre-determined future price, but
without any obligation to deliver if the market moves up. This assurance not
only provides the best hedging solution to farmers, but also builds their
capacity to invest in productivity-enhancing and quality-improving technology
and practices, in turn raising production and containing inflation without
bringing farmer incomes down. <o:p></o:p></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt; line-height: 115%;">To make this happen, the Forward Contacts (Regulation) Act needs
reform to permit “options”. The high premia typically charged for options can
discourage farmers from extensively participating in the derivatives market.
This can be dealt with by permitting exotic derivatives like caps and collars.
The government could also step in to popularize the use of options for hedging
or subsidize the premia since that would entail far less an outgo than direct
subsidies (see box). Given the small lot sizes of farmers, as well as the
complexities involved in operating in the derivative markets, it is also
important to recognize “aggregators” under the Act who could offer the simpler
“options-embedded Over the Counter (OTC) contracts” to farmers. <o:p></o:p></span></div>
<span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt; line-height: 115%;">Options can certainly be a win-win instrument not only to hedge
farmers’ risk effectively, but also by replacing expensive subsidies with an
efficient market-based mechanism. Do we really have a better option than
permitting “options” to achieve a rainbow revolution? <o:p></o:p></span><br />
<br />
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: currentColor; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0; mso-yfti-lastrow: yes;">
<td style="background-color: transparent; border: 1pt solid windowtext; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt; width: 462.1pt;" valign="top" width="770">
<div align="center" class="MsoNormal" style="margin: 0in 0in 10pt; text-align: center;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN"><span style="font-family: Calibri;">Farmers Hedging in
Mexico<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-IN"><span style="font-family: Calibri;">After joining
the North American Free Trade Agreement in 1994, the Mexico government moved
to liberalize the agricultural sector. The government designed a sustainable
programme of guaranteed minimum price through the use of options to transfer
risk from growers to international markets. The Support Services for
Agricultural Marketing Agency (ASERCA), a decentralized body providing
commercial support to farmers, offered the farmers a chance to participate
for a fixed fee in a programme guaranteeing minimum cotton price. ASERCA
offered a guaranteed price and hedged its own risk by using the fee to
purchase a put option on the New York Cotton Exchange (now ICE Futures US).
The put option gave ASERCA the right to sell cotton on a specific future date
at pre-specified price ( that is, strike price). <o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-IN"><span style="font-family: Calibri;">When the
prices dropped, ASERCA paid farmers the difference between the New York price
at harvest and a minimum price (equivalent to the payoff value of put
option). If prices rose instead, ASERCA made no payment to farmers. By paying
a fee and participating in the programme, a farmer purchased insurance
against a drop in prices below a certain level. ASERCA, in effect, acted as
an intermediary between producers and commodity brokers. The Mexican government,
through ASERCA, subsidized 100% of the premium payment in 1994.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">Source: Innovative Agricultural Insurance
Products and Schemes (by Kang, M. G.)<o:p></o:p></span></span></div>
</td>
</tr>
</tbody></table>
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt; line-height: 115%;">First published in Economic Times on 5<sup>th</sup>
August 2014, at </span></i><i style="mso-bidi-font-style: normal;"><span lang="EN-IN" style="color: black; font-family: "Arial",sans-serif; font-size: 12pt; line-height: 115%;"><a href="http://epaperbeta.timesofindia.com/Article.aspx?eid=31818&articlexml=COMMODITY-OPTIONS-NEW-AGE-MSP-MECHANISM-THAT-CAN-06082014005017"><span style="color: blue;">http://epaperbeta.timesofindia.com/Article.aspx?eid=31818&articlexml=COMMODITY-OPTIONS-NEW-AGE-MSP-MECHANISM-THAT-CAN-06082014005017</span></a><o:p></o:p></span></i></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com5tag:blogger.com,1999:blog-918123006998403597.post-31249939016624689942014-07-22T06:36:00.000-07:002015-02-14T07:04:24.754-08:00Decoding the Union Budget 2104: Agri Sector<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt; text-align: justify;">
<span lang="EN-IN"><span style="font-family: Calibri;">Very few sectors
are as important, yet as beleaguered as agriculture in India. Engaging more
than 50% of the country’s workforce, it offers livelihoods to 75% of the
population living below the poverty line. It consumes 80% of the nation’s fresh
water resources, a quarter of the total electricity and more than 70% of
central government subsidies. However, it accounts for just about 14 per cent
of GDP. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt; text-align: justify;">
<span lang="EN-IN"><span style="font-family: Calibri;">Indian
agriculture is heavily dependent on rainfall, with just about a third of the total
arable area being irrigated. In recent times, temperatures as well as the
variability in rainfall have been increasing, adversely impacting the farm
production.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify;">
<span lang="EN-IN"><span style="font-family: Calibri;">Consequently, the policy agenda must aim to contain
food inflation, yet making farming profitable; make agricultural production and
the farmers more resilient to weather variations; improve productivity of the
subsidy spends, and minimise their market distortion impact.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify;">
<span lang="EN-IN"><span style="font-family: Calibri;">Regrouping the proposals along the above lines will
help decode the Budget. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN"><span style="font-family: Calibri;">Contain food inflation, yet making farming profitable:<o:p></o:p></span></span></b></div>
<span lang="EN-IN"><span style="font-family: Calibri;">Since this
objective has an inherent conflict, the Government is using five different
strategies to tackle the complexity, viz (1) funds have been allocated to set
up two more research institutions of excellence, two additional agricultural
and horticultural universities, and a Kisan TV, (2) substantial resources have
been provided for upgrading the warehousing and agri-tech infrastructure,
besides creating a corpus for ‘Long Term Rural Credit Fund’ to boost
investments, (3) financial support has been extended to <i style="mso-bidi-font-style: normal;">Bhoomi Heen Kisan </i>through NABARD, and to set up a Producers
Development and Upliftment Corpus (PRODUCE) to build the capacity of the
producers organisations, (4) promised that the Central Government will work
closely with the State Governments to reform the APMC Acts, and (5) proposed to
establish a Price Stabilization Fund to mitigate the distress from price
volatility.<o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN"><span style="font-family: Calibri;">Make agricultural production and the farmers more
resilient to weather variations:<o:p></o:p></span></span></b></div>
<span lang="EN-IN"><span style="font-family: Calibri;">Besides giving
impetus to watershed development through a new programme called <i style="mso-bidi-font-style: normal;">Neeranchal</i>, a new scheme called <i style="mso-bidi-font-style: normal;">Pradhan Mantri Krishi Sinchayee Yojana</i>
has also been announced. If the Sinchayee Yojana is implemented as well as the
earlier <i style="mso-bidi-font-style: normal;">Pradhan Mantri Gram Sadak Yojana </i>that
made a significant difference to the rural road, we can hope for better days
ahead in irrigating farms. Funds have also been allocated to establish a
National Adaptation Fund to mitigate the challenges arising out of climate
change. One would have liked to see some funds allocated to a reworked crop /
weather insurance scheme too. That didn’t happen.<o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN"><span style="font-family: Calibri;">Improve productivity of the subsidy spends, and
minimise their market distortion impact:<o:p></o:p></span></span></b></div>
<span lang="EN-IN"><span style="font-family: Calibri;">Quite rightly,
it has been announced that MNREGA will now be substantially linked to
agriculture and allied activities. Shortage of labour during the peak agricultural
operations was a major problem of the farmers so far. It is also good to see
the Government’s commitment to restructure FCI, and improve the efficiency of
food grain management in the country. Perhaps the most important announcement
related to agriculture in the Budget is the scheme to provide to every farmer a
soil health card in a Mission mode. This will go a long way in scientifically
rationalising the fertiliser usage and reducing the subsidies.<o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 8pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN"><span style="font-family: Calibri;">In sum, all of these steps will put more money into
the hands of the farmers!</span></span></b></div>
<div class="MsoNormal" style="margin: 0in 0in 8pt; text-align: justify;">
<span lang="EN-IN"><span style="font-family: Calibri;"></span></span> </div>
<div class="MsoNormal" style="margin: 0in 0in 8pt; text-align: justify;">
<span lang="EN-IN"><span style="font-family: Calibri;"><em>First published in the Rural Marketing Association of India's Special Budget Edition</em> <em>at</em> <a href="http://www.rmai.in/pdf/rmai%2021-07-2014.pdf"><em>http://www.rmai.in/pdf/rmai%2021-07-2014.pdf</em></a></span></span></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com1tag:blogger.com,1999:blog-918123006998403597.post-34571039225271389922014-06-27T07:15:00.000-07:002015-02-14T07:16:13.935-08:00Curb food prices without harming the farmers <div dir="ltr" style="text-align: left;" trbidi="on">
Various measures have been deployed to combat food inflation. Subsidies on food and fertilisers, imports of food as well as regulations to prevent hoarding of farm produce did succeed in stabilising prices from time to time. But such crisis management has been able to provide only short-lived relief, and prices have gone up from 2007.<br /><br /> Bringing down food inflation will benefit the consumer, but make prices unattractive to farmers. This will accentuate poverty. Unremunerative prices discourage investments in agriculture, causing supply-side shortages, fuelling inflation further. So, the most effective way of tackling this issue is to focus on bringing down consumer prices, ploughing a larger share of the consumer spend back to the farmer.<br /><br /> First we need to lower transaction costs. The Agricultural Produce Market Committee (APMC) Acts mandate all farm produce should be brought to mandisfor auctioning, making these platforms virtual monopolies. The farmer pays to transport his produce over long distances, before knowing the price at which his produce would be sold, or whether any other market would have paid a better price.<br /><br />The journey from farm to consumer involves multiple levels of transportation, handling expenses, commissions of agents and a mandi cess, adding nearly 20% cost to food prices. This absurdity was acknowledged years ago, and anew Model APMC Act recommended by the Centre in 2003.<br /><br />This Model Act must be implemented in all states. Unless farmers have the freedom to sell at farm-gate or other transparent platforms directly to buyers, transaction costs will remain high and drive consumer prices higher. Next, we need to cut wastage. Anywhere from 5% to 40% of food is wasted along the chain, depending on the perishability of the crop and the season. First, market instruments must empower farmers to produce as per tomorrow's demand, rather than be guided by yesterday's prices.<br />
<br />
If the Forward Contracts Regulation Act (FCRA) is amended to permit trading in options, farmers are assured of a minimum price when sowing, based on future projections simulated by a market consensus. This will align production volumes to future demand conditions and minimise wastage. We need large investments to set up climate-controlled infrastructure to enhance the shelf life of farm produce. The private sector has the capacity to invest and add value to such infrastructure.<br /><br />But regulations like the Essential Commodities Act (ECA), which impose stock limits and curb movements, create uncertainty, acting as a deterrent to such long-term investments. We need to add value to farm produce by facilitating food processing on a much larger scale. Food processors do not find it worth their while to engage with farmers directly due to APMC restrictions. And the ECA does not distinguish between hoarders and genuine market players. The risk management capacity of food processors is squeezed, because options are not permitted under FCRA. So, reforms in APMC, ECA and FCRA are critical to mobilise investments in the food processing sector.<br />
<br />
India's agricultural yields are far below the best-in-class. Depending on the crop, productivity improvements can range from 20% to 100%. Though Indian farming has seen progress, induction of technology and mechanisation is still below par. Agriculture is still exposed to high climate variation risks. Given that around 65% of India's total sowed area meets its requirements from rainwater alone, it is imperative to invest in technology to make agriculture climate- and weatherproof.<br /><br />These include introduction of specially-developed seeds that withstand extreme weather, diverse soil conditions and various biotic stresses. Solutions like crop and weather insurance are also essential to whet the risk-taking capability of the farmer, who can then invest to step up productivity, participate more effectively in agricultural value chains and garner alarger share of consumer spends.<br /><br />Market-distorting subsidies have to be rationalised to make agri-business more viable and bring investments into the sector. Private enterprises engaged in agribusiness must focus on research and innovation to make agriculture remunerative to farmers and ensure the products are relevant to consumers.<br /><br /><em>First published in Economic Times on 27th June 2014 at <a href="http://economictimes.indiatimes.com/opinion/curb-food-prices-without-harming-the-farmers/articleshow/37280685.cms">http://economictimes.indiatimes.com/opinion/curb-food-prices-without-harming-the-farmers/articleshow/37280685.cms</a></em><br />
<em></em> </div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com0tag:blogger.com,1999:blog-918123006998403597.post-58661899774512727902014-06-14T22:17:00.000-07:002014-06-14T22:17:49.232-07:00Why are food prices rising unabated? What can we do about it?<div dir="ltr" style="text-align: left;" trbidi="on">
<em>This is the transcript of an interview given for the forthcoming issue of CII's Economy Matters:</em><br />
<br />
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">Why are the food prices rising unabated despite
several measures taken by the government?<o:p></o:p></span></span></b></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Firstly, let's set the context correctly. The government has an
unenviable task of walking a tightrope between the diametrically opposite
expectations of the farmers for higher prices and the consumers for lower
prices. Given that the majority of our farmers are small and resource-poor, and
the consumers are largely low or middle-income, the government cannot
short-change either constituency for the sake of the other.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">In this backdrop, let’s recount the </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">key actions </span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">taken by the
governments</span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"> </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">from time to time</span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">, and the
limitations of such actions, because of which the prices continue to rise</span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">.<o:p></o:p></span></div>
<span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">When the objective is to balance conflicting interests, any government’s
first strategy is to subsidise. </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Subsidies on inputs</span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"> like water, power, credit, and fertiliser
to keep the cost of production low; and then subsidies on </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">food itself</span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"> by buying at high
support prices from the farmers </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">and </span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">selling at lower prices to the poor consumers through the public
distribution system</span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">. No doubt,
subsidies have delivered the expectations to a large extent. But, given </span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">the fiscal
position of the government, this strategy is neither scalable nor sustainable
beyond a point. Once that point is reached, as we have now, the subsidies
strategy leaves both the farmers and the consumers dissatisfied despite
consuming massive amounts of money. Additionally, the resultant market
distortion discourages the private investment in the sector, and the value chains
remain under-developed. <o:p></o:p></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Another strategy that's adopted is to </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">import food products</span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">, or ban the exports
in times of shortage. </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Given the
fleeting speed at which</span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"> the international commodity markets move, our responses are often too
late. The problem is further compounded by the weak market intelligence system
the governments typically have, and the complex logistics of the global trade</span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">. In times of shortages, expectedly,
the domestic </span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">prices are sky-high while the crops are standing in the fields, raising
the price expectations of the farmers; then the import </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">consignments usually arrive </span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">just about </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">the </span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">time the </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">farmers </span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">are ready to </span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">harvest their crops</span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">, and the
prices start falling like there is no bottom! <o:p></o:p></span></div>
<span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Imposing stock limits</span><span lang="EN-IN" style="font-family: "Arial Narrow","sans-serif"; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"> to prevent
hoarding of farm produce is yet another measure</span><span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"> that's commonly used
to control prices. This action does soften the prices, but only temporarily.
However, because this measure cannot actually increase the availability of food
in the season as a whole, the prices do go up eventually. Besides, since the
government doesn't distinguish between hoarders and the genuine Agri Businesses
/ Food Processors, such restraints render investments along the supply chain
and processing unviable, and the value chain participants remain fragmented.<o:p></o:p></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-GB" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">One can possibly refine these strategies a bit more, viz. sharper
targeting of subsidies, proactive imports through real-time market intelligence
etc., and keep the prices under check a few weeks longer. The longer-term food
inflation cannot be truly tamed unless the key drivers are appreciated and
managed.<span style="mso-spacerun: yes;"> </span></span><span lang="EN-GB" style="mso-ansi-language: EN-GB;"><o:p></o:p></span></div>
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN"><span style="font-family: Calibri;">What according
to you are the key drivers of food inflation?<o:p></o:p></span></span></b><br />
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span lang="EN-IN"><span style="font-family: Calibri;">While quite a few reasons have been cited for
triggering food inflation, demand outpacing supply is definitely the key cause,
to my mind. Increasing incomes and changing lifestyles & aspirations have spurred
the demand for food items, especially high value products such as fruits,
vegetables, milk and milk products, eggs, fish, and meat. Per capita
consumption of many of these products in India is still significantly below
that of comparable countries, suggesting the likelihood of this trend
continuing in the years to come. Given this scenario, it is crucial that the supply
rises substantially to meet the rapidly expanding demand for food.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: Calibri;"><span lang="EN-IN">That brings us to supply side drivers. Though farm
yields in India have grown significantly over years, they are still largely
dependent on the annual monsoon rains and other vagaries of weather. In certain
crops like vegetables that are more vulnerable, adverse weather conditions
result in serious damages, leading to exorbitant prices for a few months almost
every year</span><span lang="EN-GB" style="mso-ansi-language: EN-GB;"> in some
corner of the country</span><span lang="EN-IN">. Rising Minimum Support Prices
for certain key commodities, especially wheat and rice, have pushed the prices
of those crops up. With the introduction of the Mahatma Gandhi National Rural
Employment Guarantee Act, agricultural wages have risen as a result of labour
shortage, contributing to rising costs of production. Then there are chronic supply
chain deficiencies (high transaction costs due to long chains, huge wastages
due to broken chains, increasing cost of transportation due to rising fuel
costs) that don’t let a fair share of the consumer price flow back to the
producer. The supply chain deficiencies </span><span lang="EN-GB" style="mso-ansi-language: EN-GB;">also </span><span lang="EN-IN">prevent </span><span lang="EN-GB" style="mso-ansi-language: EN-GB;">the </span><span lang="EN-IN">demand
signals </span><span lang="EN-GB" style="mso-ansi-language: EN-GB;">from flowing
seamlessly </span><span lang="EN-IN">to the farmer</span><span lang="EN-GB" style="mso-ansi-language: EN-GB;">. In the absence of such a mechanism,</span><span lang="EN-IN"> most farmer</span><span lang="EN-GB" style="mso-ansi-language: EN-GB;">s</span><span lang="EN-IN"> produce </span><span lang="EN-GB" style="mso-ansi-language: EN-GB;">crops
based on the prices obtained for the previous crop rather than the prices
expected for the crops being planted. This results in huge price swings due to
supply-demand imbalances around the harvest time.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span lang="EN-GB" style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">As a combined effect
of all these complex factors, the food prices in India kept moving up since
2007 when supplies fell short of demand globally; all that the various price
control measures achieved was temporary respite from time to time. In these
seven years, prices of cereals rose unabated, at an average of 10% per annum;
the vegetables also started at a similar rate of 10% per annum, but accelerated
to an average annual rise of 30% in the more recent years.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span lang="EN-GB" style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">More broad-based
reforms in the agricultural policy framework, together with the creation of
certain market based institutions and instruments only can deal with these
complex factors and solve the problem of food inflation in the long run.
Otherwise, one would have to fire-fight every few months to deal with the
crisis.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-IN"><span style="font-family: Calibri;">What are those
reforms, which can really contain food inflation in India?<o:p></o:p></span></span></b></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span lang="EN-GB" style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">There are four areas
of intervention that will make a difference:<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span lang="EN-GB" style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">Reforming the APMC Act
along the lines of new Model Act recommended by the central government in 2003
is the first step. The alternative marketing models envisaged in the Model Act,
viz. Direct Marketing, Contract Farming, and Private Mandis will provide a
healthy competition to the conventional Mandis and offer a choice to the
farmer. These models will be customised to different contexts, eliminating the
non value adding transaction costs that came into being only because the
conventional Mandi was mandated as the only mechanism for a farmer to market
his produce. APMC reform will also help in changing the purely transaction
oriented relation between an Agri business / Food Processor and the farmer in a
Mandi set up, to a reciprocally dependent partnership. This will motivate
Businesses to engage with farmers to raise farm productivity and align crop
quality to consumer demand in mutual interest. This will also lead to
complementary investments in storage and handling infrastructure along the
supply chain that reduces wastage.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: Calibri;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Secondly, </span><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">the Forward Contracts Regulation Act
(FCRA) must be amended to permit trading in ‘Options’.</span><span lang="EN-IN" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> </span><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Farmers will then be assured of a
minimum price at the time of sowing itself, based on the future projections</span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> of demand</span><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> simulated by a market consensus. This</span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> will help</span><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> adjust the production volumes to the
future demand conditions</span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">, thus</span><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> minimising the </span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">potential </span><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">shortages as well as avoidable
wastages, and the consequent price volatility.</span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: Calibri;"><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Solutions
like crop and weather insurance are also essential to enhance the risk-taking
capability of the farmer, who can then invest</span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> in the
required technology and inputs</span><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> to </span><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">step up productivity</span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">.<o:p></o:p></span></span></div>
<span style="font-family: Calibri;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Lastly, the protocols for approving new
technology must be scientific, made transparent and predictable to attract
investments into R&D. </span><span lang="EN-IN" style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">We have some distance to cover in discovering
seeds that will optimize drought tolerance, disease resistance, yield
enhancement, pest resistance, enable nutritional enhancement</span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> etc.</span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: Calibri;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-IN">You mentioned Food
Processing briefly. Can it play an important role in dealing with food
inflation?</span></b><b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB;"><o:p></o:p></span></b></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: Calibri;"><span style="color: black; mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Anywhere from 5% to 40%
of food is wasted along the chain, depending on the inherent perishability of
the crop and the season. This obviously reduces the actual availability of food
even after the farmers have produced. Food Processing offers a solution to
reduce this colossal wastage </span><span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">and contain inflation.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: 14pt; margin: 0in 0in 0pt; mso-layout-grid-align: none; mso-pagination: none;">
<span style="font-family: Calibri;"><span style="color: black; mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">India processes just
about 2% of its agri-based products compared to </span><span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">other </span><span style="color: black; mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">developing countries
such as Malaysia and Thailand who process as much as 40 %. A key constraint for
the growth of the sector is the high prices of processed food</span><span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">,</span><span style="color: black; mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> primarily because of
the cascading effect of taxation along the value chain. Consequently,
consumption of processed food remains low despite rising disposable incomes</span><span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">,</span><span style="color: black; mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> adversely impacting the
investments in this very important sector. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: 14pt; margin: 0in 0in 0pt; mso-layout-grid-align: none; mso-pagination: none;">
<span style="font-family: Calibri;"><span style="color: black; mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Full potential of this
sector can be exploited if processed food products are made affordable at lower
prices through a zero-tax regime. Such a tax regime must be extended for a
minimum period of 5 years to </span><span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">“</span><span style="color: black; mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">communicate</span><span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">”</span><span style="color: black; mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: TimesNewRomanPSMT; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> stability and attract
investment.</span><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"><span style="color: black; mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="font-family: Calibri;">With
the prediction of a deficit monsoon this year due to El Nino, do you see food
inflation going out of bounds soon?<o:p></o:p></span></span></b></div>
<br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="font-family: Calibri;">Just as El Nino was showing signs of weakening, a
monsoon blocker developed in Indian Ocean! It is certainly a situation that
requires close monitoring. More important than the overall deficit in rainfall,
is its spacial and temporal distribution. There is insufficient visibility on
that count at this time. We therefore need to be prepared with contingent plans
for different micro-regions, to be able to rapidly deploy them as the situation
evolves. A big comfort, of course, is the large stock of wheat and rice
available with the government. So, if at all something goes out of bounds, it
would only be a vegetable here or a fruit there…<o:p></o:p></span></span></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com0tag:blogger.com,1999:blog-918123006998403597.post-67638594280266538082014-05-14T08:41:00.000-07:002014-05-31T08:42:39.376-07:00Sowing the seeds of a farm revival<div dir="ltr" style="text-align: left;" trbidi="on">
<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;"></span><br />
<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Very few sectors are as important, yet as beleaguered as
agriculture in India. Engaging more than 50 per cent of the country’s
workforce, it offers livelihoods to 75 per cent of the population living below
the poverty line. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">It consumes 80 per cent of the nation’s fresh water
resources, a quarter of the total electricity and more than 70 per cent of
central government subsidies. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">However, it accounts for just about 14 per cent of GDP.
Woefully therefore, the farmer’s per capita income is less than one-fifth of
the rest of the country’s average.</span><br />
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<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">A four-pronged policy agenda in agriculture has the
potential to achieve the much desired ‘inclusive and sustainable’ growth of
Indian economy.</span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial Narrow","sans-serif";">Weather-proofing
production, and conserving life-giving natural resources</span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial Narrow","sans-serif";"><o:p></o:p></span></b> </div>
<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Arguably, there has been significant progress in making
Indian agriculture resilient to recurrent droughts. Nonetheless, it remains a
stark reality that the vagaries of nature can potentially cripple the sector at
any time. In addition, dwindling natural resources like groundwater can have
disastrous consequences. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Therefore, any solution will have to weather-proof
production, and replenish and conserve life-giving natural resources, using the
right technologies.</span><br />
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<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">The entire technology spectrum — from better seeds to
precision-farming practices, from micro-irrigation to watershed development,
from renewable energy to power-saving farm equipment — will have to be fully
harnessed. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Over the years, among other policy initiatives,
liberalisation of imports of improved varieties and breeding lines has
revitalised the availability of high quality seeds. The Indian seed market,
estimated at over $1 billion, has grown at double the pace of the global seed
market. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">However, there is a long way to go in developing and
deploying seeds that will address extreme weather variations and poor soil conditions,
besides serious biotic stresses.</span></div>
<div class="body" style="margin: 1em 0in;">
<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">A policy framework that encourages investment in
research, and streamlines regulatory processes for accelerated introduction of
new technologies will enable sustainable intensification of Indian agriculture.</span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial Narrow","sans-serif";">Making farming remunerative,
and enthusing NextGen in agriculture</span></b></div>
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<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">India’s young demographic profile is a great source of
strength. Unfortunately, a future in the agricultural sector does not seem to
evoke enthusiasm among the youth. Income from farming is not only unattractive
but also not commensurate with the risks and drudgery associated with the farm
sector. This has led to farmers moving away from farms to non-farm livelihoods
in villages, besides migration to urban areas.</span></div>
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<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">The next horizon in agricultural progress cannot be
conquered without harnessing the vitality of the youth. This will require a
policy impetus that encourages two vital components: one that enables greater
mechanisation of farm operations to mitigate drudgery and enhance efficiency;
and the other that enables larger value creation through farming that blends
traditional knowledge with new technologies.</span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial Narrow","sans-serif";">Aligning production to changing
consumption trends, and linking farmers to markets </span></b></div>
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<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Rising disposable incomes and growing urbanisation has
brought about a dimensional change in the pattern of consumer demand. The share
of cereals is reducing in the diet, in favour of vegetables, fruits, milk, and
meat. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Besides more variety, today’s consumer demands superior
quality, enhanced safety, and added convenience while shopping or using
products. This dictates a fundamental transformation.</span></div>
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<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Producing what the consumer demands is an entirely
different ball-game from consuming whatever is produced by the farmer. It is a
re-orientation from production-driven supply chains to demand-driven value
chains, and will entail huge investments in creating appropriate infrastructure
in post-harvest, logistics, processing, packaging, retailing, and information
systems. </span></div>
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<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Corporate involvement through vibrant agri-businesses and
food-processing can considerably enhance value for farmers by linking them to
the value-seeking markets. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">However, a variety of policy constraints deter any
sizeable investment by the corporates today. Foremost is the non-implementation
of the ‘Model APMC Act’ by many states. In addition, the ‘Essential Commodities
Act’ imposes stock limits, and curbs movements from time to time, further
affecting the viability of agri-businesses. ‘Forward Contracts (Regulation)
Act’ also requires reform.</span></div>
<div class="body" style="margin: 1em 0in;">
<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Currently, critical risk management tools, such as
Options, are not available. Farmers can realise better prices without undue
risk, by buying Options, either directly or through aggregators. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">This gives them a right to transact at a future price and
not just an obligation, as is the case when only the Futures are available.
Trade and marketing policies in agriculture will need a significant overhaul,
if the farmers have to benefit from the huge consumption dividend offered by
the country.</span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial Narrow","sans-serif";">Sharper targeting of social subsidies,
and vital investments in soft infrastructure</span></b></div>
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<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Over the years, subsidies in the farm sector have
certainly played an important role in aiding resource-poor small farmers.
However, subsidies can be significantly market-distorting. There is also a
concern that systemic leakages significantly dilute the quantum of subsidies
that finally reach the intended beneficiaries. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Direct transfers of subsidies are perceived to be a more
effective alternative. Policies need to sharply target the subsidies to ensure
social security but in a way that does not distort markets. In the current
global and national economic context, market forces are key to unleashing the
true potential of the agricultural sector.</span></div>
<div class="body" style="margin: 1em 0in;">
<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">While past investments in rural areas have enhanced the
quality of hard infrastructure, such as roads, telecom and irrigation, we need
to invest in the complementary ‘soft infrastructure’ now. </span><span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">It is important to create the equivalents of ITIs in the
farm sector to train rural youth and enable better implementation of best
practices. Investments are also needed in soil health and other natural
resource management systems, as also in the emerging agri-services.</span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial Narrow","sans-serif";">Orchestrated action for
sustained resurgence</span></b></div>
<div class="body" style="margin: 1em 0in;">
<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">The policy priorities outlined here need to be carried out
in a concerted manner to create a springboard that can propel Indian
agriculture into a higher orbit. </span></div>
<div class="body" style="margin: 1em 0in;">
<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">The ITC e-Choupal experience in empowering millions of
farmers lends confidence that a synergistic and integrated rural programme can
significantly raise incomes and secure a better quality of life in rural India.</span></div>
<div class="body" style="margin: 1em 0in;">
<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; font-size: 11pt; mso-ansi-language: EN;">Given the right policy impetus and effective
public-private-people partnerships, there is enough reason to believe that the
giant agriculture sector can be re-energised to offer a new promise for
tomorrow’s India.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: "Arial Narrow","sans-serif"; mso-ansi-language: EN;"><div class="MsoNormal" style="margin: 0in 0in 8pt;">
<em>This article was published in the Business Line print
edition dated May 14, 2014 with modified sub-heads </em><span style="font-family: "Arial Narrow","sans-serif";"><a href="http://www.thehindubusinessline.com/todays-paper/tp-opinion/sowing-the-seeds-of-a-farm-revival/article6006734.ece"><span style="color: #0563c1;">http://www.thehindubusinessline.com/todays-paper/tp-opinion/sowing-the-seeds-of-a-farm-revival/article6006734.ece</span></a><o:p></o:p></span></div>
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Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com0tag:blogger.com,1999:blog-918123006998403597.post-45407398990254753422013-12-14T08:42:00.001-08:002013-12-25T02:10:47.784-08:00Livelihoods Promotion: Quest for Scale<div dir="ltr" style="text-align: left;" trbidi="on">
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In spite of the creditable growth of the Indian economy over
the last two decades, the proportion of rural population living in poverty is still
unacceptably high. While many models have successfully supported the livelihoods
of the poor, very few have achieved the desired scale.</div>
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In this backdrop, 'Quest for Scale' was chosen as the theme
of one of the Panels in the 2013 edition of the <a href="http://www.livelihoods-india.org/">Livelihoods India Conference</a>.</div>
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Dr Rajesh Tandon of the <a href="http://www.pria.org/">Society for Participatory Researchin Asia</a>, Mr Brij Mohan
of <a href="http://www.accessdev.org/">ACCESS Development Services</a>, and
Dr Subhashish Gangopadhyay of <a href="http://www.idfresearch.org/">India Development Foundation</a> and I were
the Panelists in this session, moderated by Dr Sankar Datta of <a href="http://www.azimpremjiuniversity.edu.in/">Azim PremjiUniversity</a>. </div>
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I argued that the default model chosen by most organisations
for<b><i> 'Scaling Up' </i></b>is<b><i> 'Spreading Wide'</i></b>. This involves codifying the solution that
worked, and then executing that code in new geographies. This would work so
long as the new context is similar to the one where the solution worked in the
first instance. And the organisation must have capacity to manage scale, be it the
management bandwidth or the quality of execution. </div>
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For example, if a
Microfinance Organisation perfected the process of social mobilisation, risk
assessment of the borrowers, efficiency of cash disbursements as well as
collections etc, the same process can be successfully replicated in a different
geography, unless the socio-cultural or livelihoods context is quite different.
</div>
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In many cases, the scale reduces the 'Unit Costs', but in
several cases, the scale can raise the management costs disproportionately. One
must be cognizant of these issues also before <i><b>'Spreading Wide'</b></i>. </div>
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If the new context is very different, the original solution won't
work; and if the organisation lacks capacity to manage scale, the consequences
can be disastrous.</div>
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There are more ways to scale than <b><i>Spreading Wide</i></b>. Depending
on the 'transferability of the solution' and the 'capacity of the
organisation', one can choose from any of the four other Scaling Models.</div>
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<!--[if !supportLists]-->2.<span style="font-size: 7pt;">
</span><!--[endif]--><b><i>Scaling (or Mining) Deep: </i></b>This involves bringing
more products and services to serve the other current needs of the existing
customers. If the infrastructure and the relationships built to deliver the
original solution can be converted into a <a href="http://www.theageoftheplatform.com/">platform</a>, it can facilitate access to other relevant offerings from third parties, who
otherwise find it difficult to reach out to these customers. Continuing with
the same example of Microfinance Organisation, Mining Deep model could go
beyond lending and bring complementary solutions such as Capacity Building,
Risk Management, Access to Quality Inputs, or Linking to Output Markets. </div>
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<!--[if !supportLists]-->3.<span style="font-size: 7pt;">
</span><!--[endif]--><b><i>Scaling (or Evolving) Along:</i></b> This involves adapting
products and services to serve the evolving needs of the existing customers, as
time goes by. For example, as the incomes of the current borrowers improve, or
as they reach different age bracket, their borrowing needs would change. A
successful push-cart vendor, selling vegetables, may like to borrow ten times
as much amount and set up a Grocery Store. This might mean a completely redesigned
process compared to the process used for the earlier loan size. This is an
often ignored, but smart, scaling opportunity. </div>
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<!--[if !supportLists]-->4.<span style="font-size: 7pt;"> <b><i>
</i></b></span><!--[endif]--><b><i>Scaling (or Stepping) Out: </i></b>This involves adapting
the solution to a completely new value chain. For example, the business model
that worked for building an inclusive agricultural supply chain, could very
well be adapted for skilling human resources for the employment market. While
the Mining Deep model works wherever morphing into platform is feasible, this
model can be explored where value chains are somewhat similar.</div>
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<!--[if !supportLists]-->5.<span style="font-size: 7pt;"> <b><i>
</i></b></span><!--[endif]--><b><i>Scaling (or Multiplying) Through: </i></b>This is like the conventional
franchising model. The code is handed over to a franchisee or a licensee for
execution. One can spread wide, scale along or out, using this model. If the organisation would like to retain control
on the franchisee, there is a need to find a 'stickiness' factor, eg. shared
services at low cost riding on the scale of multiple franchisees (accounts
management, quality audit, training, legal services etc).</div>
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Thus, in my view, the foremost question in the quest for
scale is "which model of scaling is right for me?"</div>
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Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com7tag:blogger.com,1999:blog-918123006998403597.post-68342880871314870102013-10-12T01:12:00.000-07:002013-10-12T01:12:09.954-07:00Will the new CSR mandate be a game changer?<div dir="ltr" style="text-align: left;" trbidi="on">
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As you may know, the <a href="http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf">new Companies Act of India</a> mandates that companies of a certain size and
profitability must spend at least 2% of their net profits on Social Responsibility
activities <a href="http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf">(See Section 135 on Page 80 of the Act)</a></div>
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I was a panelist at the 'CII National Summit on CSR' in
Delhi held on 30th September 2013. These were my opening remarks in response to
the question posed to my panel, "Will the new CSR mandate be a game
changer?"</div>
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The 2% CSR spend is <a href="http://www.moneycontrol.com/news/business/companies-to-spend-rs-15000-20000-cryearcsr-pilot_946996.html">estimated</a> at about Rs 20,000 Crores. This money is less than what Government spends in five days, considering the annual
expenditure budget of Government is some Rs 17 Lakh Crores. Subsidies alone,
out of this total amount, exceed Rs 250,000 Crores! Therefore <b>the 2% CSR spend is not going to bring in
the game-changing resources...<o:p></o:p></b></div>
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However, if Corporate India harnesses its <b>'innovation capacity' </b>and leverages the<b> 'power of partnerships' </b>to solve
India's social and environmental problems, I am sure it can change the game!</div>
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Instead of looking at the 2% amount as 'a philanthropy budget',
if companies can<b> innovatively embed CSR
into their business strategies</b>, larger problems can be solved.<b><o:p></o:p></b></div>
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This could be in the form of <b>'socially inclusive business models'</b>
where the capacities of low income suppliers and distributors can be
strengthened to improve their productivity, market access, and bargaining power,
while enhancing the competitiveness of the whole value chain in which the
company is a part. Eg. <a href="http://www.itcportal.com/businesses/agri-business/e-choupal.aspx">ITC eChoupal</a>.</div>
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On the environmental front, investing
in renewable energy is a low hanging fruit, given our unreliable grid power,
and the high cost of diesel-generated power. Innovation of higher order is
required to build <b>'green supply chains'</b>
that regenerate the natural resources consumed in a business. Eg. <a href="http://www.itcportal.com/sustainability/embedding-sustainability-in-business.aspx">ITC FarmForestry. </a></div>
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Embedding CSR into business strategies would also ensure
that the CSR spends do not get impacted in times of slowdown. Of course, this whole
argument is not to rule out the need for philanthropic spends in cases of extreme
distress.</div>
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Now I come to my second idea. I believe <b>four types of partnerships</b> could contribute to game-changing
outcomes:</div>
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<b><i>Partnerships with other
Corporates</i></b> operating in the same geography or working in the same
domain can create joint projects and / or knowledge platforms for experience
sharing.</div>
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<b><i>Partnerships with CSOs / NfPs</i></b>
for social mobilisation and impact audits.</div>
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<b><i>Partnerships with Communities</i></b>
themselves for gaining deeper insights while designing and executing projects.
Also, Users Groups for democratising common property management.</div>
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<b><i>Partnerships with Governments</i></b>
to create markets for trading "social credits" ala "carbon
credits", and for aligning social subsidies to develop inclusive markets
rather than distorting markets. This is besides the PPPs for building
infrastructure that are already gaining traction.</div>
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While no one stopped Corporates from innovating and
partnering to solve societal problems - indeed several companies have done so,
successfully - the new CSR mandate hopefully inspires many companies to look at
this as a game changing opportunity. </div>
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<b><i>Never believe that a few caring people can't change the world. Indeed
it is the only thing that ever has ~ Margaret Mead <o:p></o:p></i></b></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com2tag:blogger.com,1999:blog-918123006998403597.post-78927074327637967262012-12-15T08:59:00.000-08:002012-12-15T08:59:26.184-08:00Inclusive Agriculture<div dir="ltr" style="text-align: left;" trbidi="on">
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<a href="http://www.fao.org/">Food and Agriculture Organisation</a> (FAO), as a part of the
process to prepare their Country Programming Framework 2012-17, organised a
Workshop on Indian Agriculture, today, at the <a href="http://www.crida.in/">Central Research Institute for Dryland Agriculture</a> (CRIDA) in Hyderabad. </div>
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I was a panelist in the session on "greater inclusion
of women and disadvantaged social groups, and marginalised areas", along with
Dr Suman Sahai of Gene Campaign and Dr Geetha Kutty of Kerala Agricultural
University.</div>
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This is a summary of my remarks:</div>
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Before we can figure out "what we can do to include
these people", we need to understand "why they are excluded" and
"how they are coping"...</div>
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There are multiple causes for exclusion and several ways in
which people cope with the situation. So, the solutions also need to be varied, to be effective. </div>
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Based on the experiences from around the world, FAO may like
to prepare a 'Tool Kit' to enable the practitioners easily analyse the context,
and mix & match the solution themes, rather than starting with a zero base
each time.</div>
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Here are the answers that came top of my mind, for each of
these questions. </div>
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</div>
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<b>Q1: Why are women, disadvantaged social groups, and
marginalised areas excluded?</b></div>
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I think they are locked-up in a vicious circle by some
centripetal forces. Such forces include</div>
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</div>
<ul style="text-align: left;">
<li>historical and cultural reasons (especially true for women,
and socially disadvantaged groups)</li>
</ul>
<ul style="text-align: left;">
<li>vested interests that benefit by locking these people in a
cycle of dependency, after helping them out of a tricky situation (eg. informal
money lenders in the villages)</li>
</ul>
<ul style="text-align: left;">
<li>natural resource constraints and other risks inherent to
agriculture (eg. water scarcity in rainfed areas, challenges of hilly areas,
commodity price risk).</li>
</ul>
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While the efforts of the Government succeeded only partially
to date, the markets have not been interested in these people either as
producers (because of no marketable surplus) or as consumers (because of low
income). As a result, most of these people stay locked in a vicious circle.</div>
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<b>Q2: How are they coping?</b></div>
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</div>
<ul style="text-align: left;">
<li>Some are resigned to their fate, while some are satisfied
with a low-level equilibrium</li>
</ul>
<ul style="text-align: left;">
<li>some resort to violence and extremism to change the
situation, while</li>
</ul>
<ul style="text-align: left;">
<li>some aspire for a better future and rely on their
entrepreneurial energies</li>
</ul>
<br />
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Yet, a large majority are still stuck in a vicious circle!</div>
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<b>Q4: What are the solution themes?</b></div>
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Logically, the only way this vicious circle can be broken is
by applying sufficient centrifugal force. Sources of such force include</div>
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</div>
<ul style="text-align: left;">
<li>disproportionate deployment of resources at strategic points
(currently the Government spends are spread across several initiatives, as a
result they are not able to break the vicious circle anywhere)</li>
</ul>
<ul style="text-align: left;">
<li>orchestrating synchronised interventions at multiple points through
a collaborative effort (markets get interested as they now see profits in
raising incomes of the poor, instead of competing for a share of small wallets.
eg ITC eChoupal ecosystem)</li>
</ul>
<ul style="text-align: left;">
<li>collective action by the affected people themselves (eg
Amul, SHGs supported by SERP in Andhra Pradesh)</li>
</ul>
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<b>Several activities form part of these solution themes, such
as:</b></div>
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</div>
<ul style="text-align: left;">
<li>capacity building of the groups before investing in physical
assets</li>
</ul>
<ul style="text-align: left;">
<li>expand income streams that put cash in the hands of the
women (dairy, agarbatti making)</li>
</ul>
<ul style="text-align: left;">
<li>evolve institutions for risk management (insurance for
weather risk, futures & options for price risk)</li>
</ul>
<ul style="text-align: left;">
<li>leverage technology (ICT, micro irrigation, drudgery reducing
- not labour displacing - farm equipment suitable for women and other labour)</li>
</ul>
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</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com2tag:blogger.com,1999:blog-918123006998403597.post-20515901629531322812012-11-08T10:00:00.000-08:002012-11-08T10:00:57.564-08:00Promoting Exports of Agricultural Products from India<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
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A top of mind question anyone
will have, when we talk of agricultural exports is, "what happens to the
availability and prices of food in the domestic market?" </div>
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<br /></div>
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After all, India has 17% of
world's population, but only 12% of arable land and 4% of fresh water
resources... Should we be exporting at all?</div>
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<br /></div>
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But, exports not only have the
potential to improve farmer incomes - an important necessity, given the low per
capita GDP of the farm sector in India - but also, quite counter intuitively,
can keep the domestic prices low and stable!</div>
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<br /></div>
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Such a possibility is real today
because the world is transiting from a policy of self sufficiency at national
level to a philosophy of resource efficiency at global level. Instead of all
the countries trying to produce every food product they need - an approach
started after the first world war and intensified after the second world war -
each country is now moving towards maximising production of what they are good
at, given their natural endowments, and importing what they have to. That's the
only way to feed a larger, richer and more urban global population by 2050. In
any case, the goal of self sufficiency is unsustainable - per an estimate, when
the per capita food consumption of developing nations reaches today's global
average (mind you, not the average of world's rich nations), we need two more
earths to satisfy the demand even after factoring the productivity gains from
all known technologies! </div>
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<br /></div>
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India has a great opportunity in
this backdrop, because (1) we have rich & diverse agro-climatic conditions,
and (2) there is significant headroom for improvement in farm productivity.</div>
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<br /></div>
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But the game has to be played
differently, to grab this opportunity. Today, we are less than 2% of global
agri exports; of our own total exports, agri constitutes just about 10%; and,
within agri, share of value added products is not even 10%</div>
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<br /></div>
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The new way of playing this game
is to adopt a two pronged strategy, with three distinct action areas under each
strategy...</div>
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<b>Strategy 1: Focus on specific crops & products where India has
comparative advantage.<o:p></o:p></b></div>
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<b><br /></b></div>
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This is key, because, to date,
India has been an adhoc exporter of whichever commodities left over as
surpluses after domestic consumption. </div>
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<br /></div>
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<u>Action Area 1:</u> Ministry of
Commerce already has schemes such as Focus Product Scheme and Market Linked
Focus Product Scheme. What is required is an institutionalised mechanism within
the Ministry of Agriculture to select the products from the agri & allied sector.
Such a mechanism could actively involve the exporters too, besides the
representatives from the State Governments. </div>
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My first cut recommendation would
include spices, marine products, processed cereal products, fresh vegetables
and processed fruits, and meat products.</div>
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<br /></div>
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<u>Action Area 2:</u> As
important as the task of selecting the products to be focused upon, and more
important than offering some standard financial incentives to such products as
is being done conventionally, it is critical to tailor-make country level
strategies suitable to specific competitive contexts of those products. </div>
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For example, the Duty Draw Back
on chilly exports from India is 1%, which does not even neutralise the
incidence of direct and indirect taxes, while China offers an export subsidy of
5% on whole chilly exports and 15% on processed chilly products. The Tariff
Rate Quotas imposed by the USA on leaf tobacco blunts the competitiveness of
Indian leaf tobacco; and India is denied duty free access given by the EU to similar
imports from the LDCs. India must take up such cases of discrimination strongly
in the international fora. </div>
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</div>
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<u>Action Area 3:</u> Value added
exports must be encouraged, to retain more value within India, rather than
relying on basic commodities. A key first step in this regard would be to
announce a stable export policy, instead of banning exports every now &
then. Only then exporters will invest in product development and branding. To
keep the domestic supplies in tact in years of shortage, the exporters could be
asked to balance the stock by importing. </div>
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<br /></div>
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Additionally, differential
incentives, as described in the Chinese chilly example mentioned earlier, for
raw and processed products will help push value added exports and build Indian
brands.</div>
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<br /></div>
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<b>Strategy 2: Enhance the inherent competitiveness of Indian agriculture.
In the focus products, to start with.<o:p></o:p></b></div>
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<b><br /></b></div>
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<u>Action Area 1:</u> Transform
the current supply-driven value chains into demand-driven value chains. This
requires transmission of real-time demand signals from the consumers to the
producers, so that they are able to align production and quality to serve the
market. New technologies need to be inducted to raise farm productivity. Active
engagement of private sector in agricultural extension and marketing is
essential to accomplish these two objectives. Reforming of APMC Acts allowing 'Direct
Marketing' and 'Contract Farming' is a prerequisite to enable such an
engagement.</div>
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<br /></div>
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<u>Action Area 2:</u> Reduce
costs along the agricultural chain. This could be done by minimising tax
incidence and improving infrastructure efficiencies. </div>
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<br /></div>
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Ironically, even the taxes exempted
in spirit are incurred by exporters of agri products, given the agri-specific market
dynamics, because of the way the exemption provisions are written. For example,
sales tax is exempted on purchases made for export purpose; but, it is
mandatory that the purchases must take place after procuring the export order
to qualify for such exemption. In case of agricultural products, given their natural
seasonality of production, purchases have to be made in season without necessarily
having export orders on hand; otherwise one has to sell in distress. Or pay the
sales tax!</div>
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<br /></div>
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Larger investments into agri
infrastructure could be attracted by removing the caps on subsidies applicable
to warehouses built under Grameen Bhandaran Yojana and the Scheme to strengthen
Agricultural Marketing Infrastructure. Also, the Zero Duty EPCG Scheme may be
extended to cover investments in the entire agricultural value chain.</div>
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<br /></div>
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<u>Action Area 3:</u> Reduce
risks in farm production and output prices, by building institutional mechanisms
such as Weather Insurance and Commodity Derivative Markets.</div>
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<br /></div>
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As per the RBI guidelines, corporates
are allowed to hedge their price risks in the international commodity exchanges
only if the position is backed by export / import contracts. In concept, this
is very similar to the sales tax exemption procedure. Exporters of Agri commodities
need to purchase raw material stocks during the season, not only for export
orders on hand, but many times also in anticipation of future export orders. Thus
the exporter who wishes to manage the price risk inherent in such domestic raw
material purchases in advance, against fluctuating prices in international
market, does not have an option to hedge on international commodity exchanges.
As a result, the exporter is subjected to price risk till the time he obtains
an export order for his product. <o:p></o:p></div>
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<br /></div>
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To reduce the price risk in exporting
agri products, Indian exporters with an open stock position, even without prior
export contracts should be allowed to hedge on the international commodity exchanges.<o:p></o:p></div>
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<o:p></o:p></div>
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<b><span style="font-size: 9.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">This is a summary of the presentation
made to the Committee of State Agricultural Ministers
on Marketing Reforms in Tirupati on Oct 30, 2012. <o:p></o:p></span></b></div>
</div>
Sivakumar Surampudihttp://www.blogger.com/profile/17137443084012733786noreply@blogger.com11