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Institutional and Infrastructural requirements of Indian Agriculture TOPIC DISCUSSION



griculture will continue to play an important role in the economic development and poverty alleviation in India even in the era of economic liberalization and globalisation. Generation of gainful employment and income for the rural poor, strengthening of household food and nutritional security and sustainable use of natural resources shall continue to be the main objectives of agricultural development in the country. However, there would be a paradigm shift in the development strategy. Market forces will now greatly guide agricultural production, and private sector would be a useful ally of public sector in the development process. Knowledge will be the key catalyst of growth, besides the traditional sources of growth like land and other resources. These developments will require significant changes in a majority of the existing institutions to keep them relevant in the present context. In some cases, obsolete institutions may have to be replaced with the new ones. This institutional change will be guided by expected impact in terms of increasing economic efficiency, strengthening incentives like protection of intellectual property, providing level-playing field to development agents, encouraging participation of stakeholders, enhancing accountability, etc. Infrastructure will also hold key to success. A major source of competitiveness in agricultural value chains is access to affordable physical infrastructure. This includes infrastructure that: supports on-farm production (e.g. irrigation, energy, transportation, pre- and post-harvest storage), ensures efficient trading and exchange (e.g. tele- communications, covered markets), adds value to the domestic economy (e.g. agro-processing and packaging facilities), and enables produce to move rapidly and efficiently from farm-gate to processing facilities and on to wholesalers (e.g. transportation and bulk storage).The institutions for management of land, water and other common resources should involve their users and other stakeholders for efficient, sustainable and equitable use of these resources. The institutions dealing with agricultural marketing and credit should reach and protect the interests of small farmers, besides increasing economic efficiency. The most significant change will, however, be witnessed in the institutions dealing with creation, protection, exchange and application of new knowledge and technologies. This is because the governance, management and organizations of public research system will have to change to improve their effectiveness and efficiency. The public system will also be required to encourage private research through appropriate incentives and regulatory mechanisms. In particular, protection of intellectual property will be critical; it will determine the linkages between investment, technology and trade, which shall further reinforce the need for institutional change. A strong intellectual property regime will encourage private investment both domestic and foreign and improve access to internationally competitive technologies and make an agricultural economy vibrant. The government may have to play a greater role to monitor such developments and respond accordingly.



griculture Infrastructure is the most essential input regarding the development of Indian agriculture as one third population of the country depends on agriculture sector directly or indirectly. Indian agriculture contributes to the national Gross Domestic Product is about 25 per cent. At present, much emphasis has been on

commercialising agricultural production hence adequate production and distribution of food has become a high priority. This in turn implies that Agriculture Infrastructure like seeds, fertilizers, irrigation sources should be organized to achieve the maximum momentum of growth.The factors like high soil productivity, supply of balanced crop nutrients, efficient water management, improved crops, better plant protection, post-production management for value-addition and marketing, are responsible for higher yield in the Indian agriculture. To achieve this, the government has taken definite steps and improved Agriculture Infrastructure of India. In the present day agriculture, application of modern biotechnologies like DNA finger printing, tissue culture, terminator gene technology and genetic cloning will play a vital role in raising the productivity.



Till March 2007, the anticipated irrigation potential created was of about 102.77 million hectares as against the utilisation of only 87.23 million hectares.


Diffusion of fertilizer consumption in Indian agriculture has been quite widespread. Skewed use of fertilizer is one of the most prominent features of Indian agriculture. We are self sufficient in producing urea but most of potash is imported at higher rates causing less use. Seed market in India is of miniscule amount of just 4.5 bn US$ of total 30 bn US$ world market despite being second largest producer of cereals and vegetables. Seed replacement ratio is around 2-10% which should be around 20-25% as per global standards. Pesticide market is just 2-3% of world market which stands about 1.5 trillion US$

Farm Credit

According to a NSSO survey only 27% households get institutional credit while 22% borrows from money lenders, rest 51% do not have access to any kind of credit. During the financial year 2007-2008, against the target of Rs. 1,52,133 crore, disbursements to agriculture by public sector banks under the plan aggregated at Rs. 1,33,226 crore were only 87.6 per cent of the target. In India agriculture sector gets institutional credit from cooperative banks, RRB and commercial banks. During the time period from year 2002-03 to 2008-09 CAGR of credit from cooperative, RRB and commercial bank were 7.08, 27.32 and 31.2 percentages respectively.

Marketing infrastructure

There are 7383 agricultural produce regulated markets in the country by the end of March 2003. There is uneven spread of these regulated markets in the state of the country. The average area served by each regulated market also varied considerably among the states of India. It varies from 71 sq. km. per market in Delhi, 155 in Haryana, 828 in Rajasthan, 1600 in Himanchal Pradesh, and 2079 sq. km in Assam. The average area served for the country works out to 455 sq. km. looking at the production trends and increasing marketed surplus (70 percent), a storage capacity of 150 MT is still needed. With a view to enhance shelf life of perishables, cold storages in the country have also been promoted. Presently a total of 4411 cold storage are existing in the country with a total capacity of 17.48 million tonnes. Most of these cold storage units are in the private sector. Public and cooperative sector accounts for a very small capacity. The present storage capacity of cold stores is sufficient for only 10 percent of the total production of fruits and vegetables (150 million tonnes). The

demand for cold storage facilities is there for other agricultural products also. Looking to the available quantities of perishable products (fruits & vegetables) the cold storage capacity available in the country is inadequate and requires their promotion both in the producing as well as consuming areas of the State. In the organized sector, there are over 820 flour mills, 418 fish processing units, 5198 fruit/vegetable processing units, 171 meat processing units and about 10,000 pulse mills having 14 MT capacities spreads over the country. India is the world's second largest producer of fruits & vegetables, but about 2 percent of the produce is processed. India is the land of spices producing all varieties, which is processed for valueaddition and export. It grows 22 million tones of oilseeds covering most of the varieties. Other important plantation products include tea, coffee, cocoa and cashew. The processing capacity of the existing units has also been enhanced. Though the country offers vast potential for establishing agro-processing units like for oilseeds, food grains and sugarcane, yet their availability in the number of State is almost negligible. There are also not standardized procedures for cleaning, grading and weighing.

Soft infrastructure

There is hardly 1% of total GDP is spent on research and development in India. Rural infrastructure is also in shambles. In India a truck can run on an avg. 250 kms a day while in developed 500 kms due to bad roads transport. As per the study highlighted that nine-tenths of rural households do not own telephones, half do not have domestic power connections and even the connected households are without power because of outages for almost 17 hours a day in monsoon months and 13 hours a day in other months. Health insurance continues to elude a majority of the country’s poor. Only 10% of India’s total organized workforce has any form of social security. As we see following is the value chain in Indian agriculture. On the basis of this we can understand what are the major areas and subcomponents which require infrastructure investments.

Source: KPMG survey According to KPMG survey following are the infrastructure challenges that India faces Challenges in agriculture infrastructure Pre-harvest infrastructure • Low seed replacement ratio Hybrid seed production is still lacking Low quality seed Extinction of traditional varieties Harvest & post Marketing harvest infrastructure infrastructure • Poor and inadequate mechanizatio n Transportatio n gaps Poor packaging, sorting, grading, & processing • Inaccessible, incomplete and delayed marketing information Presence of too many intermediaries Soft infrastructure • Inadequate returns on investment in research and development Lack of trained human resources Lack of efficient rural

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Poor and unbalanced use of chemical fertilizers and pesticides Lack of proper input distribution infrastructure Erosion of natural resources Poor crop selection and diversificatio n Poor irrigation techniques and over reliance on monsoon Poor accessibility and timely fulfilment of credit needs Poor weather information

infrastructure Poor logistics, storage and cold storage infrastructure Inadequate basic infrastructure like power, roads, water Poor accessibility and timely fulfilment of credit needs

support infrastructure particularly education and healthcare system

Modernizing Irrigation Systems & Techniques
Greater emphasis is required on investments in physical rehabilitation of existing water reserves and on modernization of irrigation systems – essential for improving the efficiency of water use. Considering the irrigation needs in Indian agriculture, emphasis should be given to promote the proven cost-reducing micro-irrigation technology of drips irrigation, which helps to conserve water, reduces fertilizer inputs and ensures higher productivity. Along with this farmer awareness programmes and subsidy incentive are helpful strategies for increasing Agriculture Infrastructure. Moreover proper drainage facilities involving farmer's groups need to be created.

Strong distribution network of Agri-input

In Indian agriculture, multiplication, distribution and availability of good quality seed is crucial to accelerate food production. The MNCs lately had been playing a significant role in seed production and distribution. Timely delivery of fertilizers and agro-chemicals with fair outreach can be maintained with strong distribution network.

Disbursement of Farm credit

The farm credit system in Indian agriculture has been implemented in enhancing production and marketing of farm produce. Not only from domestic financial agencies, Indian agricultural sector received a record $3.8 billion loan sanctioned by World Bank. The farm credit should be increased than before because of the need to enhance agricultural growth to generate surplus for exports. Moreover the ancillary fields of agriculture like the animal husbandry, aquaculture, fish farming, horticulture and floriculture, and farming of medicinal plants requires more investments.

Soft infrastructure needs

As per some estimates Rural Infrastructure investments Need Rs 1,58,313 Crores The India Rural Infrastructure Report, sponsored by Sir Ratan Tata Trust and prepared by the economic think-tank NCAER, said resolution to infrastructure bottlenecks suffers from the fact that while infrastructure in villages is largely owned and run by the government, its funds are constrained. On the other hand, private funds are attracted to areas where rates of return are at least reasonable.Home to 70 per cent of the country's population, rural India requires Rs 92,690 crore (at 2002-03 prices) for providing telecom connectivity, Rs 55,243 crore for power supply, Rs 5,892 crore roads and transport and Rs 4,488 crore for water and sanitation.

Inclusive growth and group approach

For growth to be all inclusive, the agricultural strategy must focus on the 85 % of farmers who are small and marginal. It is now well recognized that the poor are best empowered if they function as a group rather than as individuals and that this is also the best way to secure economics of scale. A group approach could also improve the bargaining power of small cultivators. The approach could range from low levels of collective functioning such as joint investments in lumpy inputs such as tube wells or cooperatives for input purchase and marketing to high levels of collective functioning such as land pooling or even joint purchase or leasing of land and joint farming. The few examples where small and marginal farmers have benefited from contract farming are those where they have entered into contracts collectively rather than individually. One way to possibly encourage marginal farmers and women to form groups for purposes of farming would be to shift at least some of the current subsidies to be available only to groups of such farmers rather than to individuals.

Holistic infrastructure development

Infrastructure development needs to take a systems-approach that addresses all round needs rather than create skewed resources which are either under-utilized or wasted. In future, if a region is targeted for a specific crop, the infrastructure creation/development for that crop needs to address all needs from crop research to irrigation needs for that crop to storage (for both seeds and harvest) and transport infrastructure for the same crop. Soil health awareness must be promoted through a credible system of soil testing and of advice on nutrient needs based on soil tests.

Uniform Policy Framework

As the APMC Act implementation has shown, there are differences between States in regulation which could create imbalances in the agricultural ecosystem, Promoting growth in one state due to favourable policies while another stagnates. States should learn from one another at the time of policy development, emphasizing sustainable crops and techniques. The private sector should also be engaged at the time of policy formulation through industrial bodies such as\ CII and ASSOCHAM to ensure polices are tuned to business realities.

Rationalization of subsidies

There is an urgent need to rationalize subsidies across nutrients and also examine methods by which the delivery of some part of the presently huge subsidies can be transferred from fertilizer producers to farmers or a group of farmers directly.

Filling information gaps

Agricultural extension is critical for narrowing the more general knowledge gaps that exists in our agriculture. States must begin by filling up field-level vacancies in extension and provide much better training, including at SAUs. At the same time, the Centre’s plan to support the KVKs and ATMAs should be synergized and made part of a comprehensive and participatory district planning process. Alternate delivery channels spanning .Rural Knowledge Centres, ICT-based extension, farmer-to-farmer extension, NGOs, and the private sector should also be promoted simultaneously. ATMA’s capacity in relatively neglected areas, such as animal husbandry must be increased and the scope of Strategic Research Extension Plans (SREP) enlarged.

Education, Research & Training

India would do well to learn from international examples such as SENAR, Brazil. Partnerships such as IBSA could be leveraged on setting up a similar scheme. That would have the useful by-product of improving inclusion while furthering the Cause of Indian agriculture.

Public Private Partnerships (PPPs)

PPPs could be a useful tool to accelerate development in various areas of agribusiness. Currently there are PPPs in the areas of contract farming, drip irrigation Projects and terminal markets among others. However the scope of these Projects is still limited and they serve as examples or models rather than be the norm. Industry bodies such as ASSOCHAM, CII, FICCI and IBEF (itself a PPP) could help facilitate interactions with both domestic and international companies and agencies to ensure widespread use of best practices and expand the scale of private participation to result in performance improvement of the agricultural sector.

Institutions as catalyst of agricultural development
The establishment of institutions to provide expertise and skilled human resources in different sectors has been one of the key features of India’s progress towards sustainable development. The institutions span the wide gamut of subject areas necessary for sustainable

development. The leaders of modern independent India envisioned a country with indigenous capacities, and in keeping with this vision, the country is in the process of building up capacities to provide a better quality of life to all its citizens. Agriculture has been one of the core areas of development in India. Constant inputs from R&D activities have greatly benefitted the country through an overall increase of agricultural production.

Various institutional forms those contribute to development of Indian agriculture
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Financial credit institutions Soil Testing Laboratory (STL) Government: Department of Agriculture at Centre, State Research Institutions: ICAR, IARI, IISS, State Agricultural Universities Agri-Input Companies Extension Agencies (KVKs) and NGOs Farm Scientists, Students, Extension officials and development managers.

Agricultural Research/Department of Agriculture

The Indian Council of Agricultural Research (ICAR) is one of the key institutions that has been fulfilling the needs of Indian agriculture through establishing a variety of institutions and programmes. Established in 1929, the Council was re-organized in 1965 and 1973, during which period the spectacular results of Green Revolution were obtained.  The huge extent of ICAR’s operations can be judged by the fact that it now encompasses 46 Central Research Institutes, 4 National Bureaux, 10 Project Directorates, 27 National Research Centres, 90 All India Co-ordinated Research Projects, 261 Krishi Vigyan Kendras (Agriculture Science Centres) and 8 Trainers’ Training Centres.   Additionally, 29 agricultural universities have been established in the country to provide the necessary human resource for scientific agricultural development. Agriculture being the most important sector in India, such a wide network of offices and projects facilitates R&D inputs.

Availability of adequate credit is vital for every sector and agriculture is not an exception. In India, Commercial Banks, Cooperative Banks, and Regional Rural Banks ( RRBs) are

responsible for smooth flow of credit to agricultural sector. But a huge unorganized market exists for credit to agricultural sector in India, which provide timely fund to this sector but at the exorbitant rate of interest. Among organized credit disbursement to agriculture commercial banks play a vital role with a share of about 70% where as cooperative sector and RRBs contribute 20% and 10 % respectively.Kisan Credit Card (KCC) scheme was introduced to provide adequate and timely support from the banking system to the farmers for their cultivation needs. This scheme has made rapid progress and more than645 lakh cards issued up to October 2006.


Insurance is a prime necessity to mitigate uncertainty that persists in agriculture. In India, agriculture is still affected by such factors, which are beyond control of human being. So, there is a great need for agricultural insurance in India. Keeping this in mind, Government of India in coordination with the General Insurance Corporation of India (GIC), had introduced National Agricultural Insurance Scheme (NAIS) from rabi 1999-2000 season. The main objective of this scheme is to protect the farmers against losses suffered by them due to crop failure on account of natural calamities. Agricultural Insurance Company of India (AICIL) which was incorporated in December 2002 took over the implementation of NAIS.

Rural Infrastructure Development Fund (RIDF)

RIDF was announced by the Government of India in 1995-96 to boost public sector investment in agriculture and rural infrastructure. The Fund is raised from the commercial banks to the extent of their short fall in agricultural lending as priority sector. The activities, which have been made eligible for loans from RIDF, include rural roads and bridges, irrigation, mini and small hydel projects, community irrigation wells, soil conservation, watershed development and reclamation of waterlogged areas, flood protection, drainage, forest development, market yard, godowns, apna mandi, rural haats and other marketing infrastructure, cold storages, seed/agriculture/horticulture farms, plantation and horticulture, grading and certifying mechanisms such as testing and certifying laboratories etc.

Micro Finance

Micro finance scheme has been introduced by National Bank for Agriculture and Rural Development (NABARD), the apex bank for agriculture and rural development in India, to improve the access of the rural poor to formal institutional credit and other financial products. In all 547 banks, which include 47 commercial banks, 158 RRBs, 342 cooperative banks are now actively involved in the operation of Self Help Group (SHG)- Bank Linkage Programme to spread the facility of micro finance to the needy small and marginal farmers and tiny entrepreneurs. The programme has enabled nearly 329 lakh poor families in the country to gain access to micro finance facilities from the formal banking system. The institutional framework for agricultural marketing can be understood as consisting of following broad groups or sets: 1. Institutions aimed at regulating the market conduct, structure and hence, the performance (efficiency). In the Indian context, these include: (a) Regulation of primary agricultural produce markets; and (b) Legal and regulatory provisions relating to storage, transportation, packaging, processing, buying/selling and quality specifications. The specific institutions in this category are: State Agricultural Marketing Board (SAMB), State Department of Agricultural Marketing (SDAM), Agricultural Produce Marketing Committee (APMC), Directorate of Marketing

Agricultural Marketing

and Inspection (DMI), Health Department, Civil Supplies Departments of the Central and State Governments, etc. 2. Institutions aimed at providing and maintaining marketing infrastructure include: (a) Physical infrastructure-Yards, roads, storage, cold storage, telecommunications, market information, packaging material; and (b) Institutional infrastructure-The institutions in this category are: SAMB, APMC, Public Works Department (PWD), Food Corporation of India (FCI), Central and State Warehousing Corporations and cooperatives. 3. Institutions involved in administered prices are: FCI, National Agricultural Marketing Federation (NAFED), Cotton Corporation of India (CCI), Jute Corporation of India (JCI), Commission for Agricultural Costs and Prices (CACP), State agencies, and Fair Price Shops (FPS). 4. Institutions entering the markets directly. The institutions in this category are some of the above plus commission agents, producers or consumer cooperatives and processors. 5. Institutions influencing foreign trade (imports/exports). The institutions in this category are lobbies or interest groups, Agricultural and Processed Food Export Development Agency (APEDA) and several others including foreign agencies promoting their products in the country. In the context of changes in the economic environment, owing to the liberalization, privatization and globalization initiatives, there is a need to review the role as well as rationale of many components of the agricultural marketing institutional framework evolved over the years.

Agriculture Extension Institutes:
Public research and extension has played a major role in increasing production and productivity in agriculture and allied sectors in the past. • The National Institute of Agricultural Extension Management is an apex national institute set under the Ministry of Agriculture,Government of India. It assists the State Governments, the Government of India and other public sector organizations in effective management of their agricultural extension and other agricultural management systems. A call centre based extension service will be delivering knowledge and information exactly as per the requirements of the farming community. This system would also help keep a record of what is being delivered to the farmers in terms of knowledge and information. The Kisan Call Centre scheme is available over the complete country. The Kisan Call Centre scheme has been functioning from 21.1.04. The Call Centres can be accessed by farmers all over the country on common Toll Free Number 1551. Agri-Clinics and Agri-Business Centres: The objective is (i) to provide extension and other services to farmers on payment basis through economically viable selfemployment ventures, (ii) to provide necessary support in supply of agricultural inputs and (iii) to support agri entrepreneurial development

Other institutions
➢ E-Chaupal:

E-Chaupal is a business platform consisting of a set of organizational subsystems and interfaces connecting farmers to global markets. It has been initiated by International Tobacco Company (ITC) who is quite active in agricultural sector in India. This e-chaupal business platform consists of three layers each of different level of geographic aggregation. Each of the three layers is characterized by three key elements • the infrastructure(physical or organizational)through which transaction takes place • the entity( person or organization) orchestrating the transactions , and • the geographical coverage of the layer. ➢ Agricultural Commodities Exchanges: To introduce future trading in agricultural commodities in India, two commodity exchanges have been introduced in 2003 for future trading. They are, National Commodity & Derivatives Exchange Limited (NCDEX) and Multi Commodity Exchange of India Limited (MCX). These exchanges are majorly dealing in agricultural commodities. They are involved in forward trading to mitigate price risks of the farmers.

Major Institutional Loopholes

One of the major institutional lacunae in agricultural credit system is the absence of farmers own organizations and participation in the financial delivery system. The state governments should make efforts to facilitate the formation of federations of SHGs for farmers, especially for small and marginal. Despite existence of effective guidelines in this regard, the institutional funds from the banking and cooperative sector are not adequately available to farmers which force them to approach the private sector for agricultural credit at unviable and unsustainable rates leading to heavy indebtedness and high incidence of suicides by farmers The present day agriculture is exposed to growing weather, pest and market risks. The Expert Group recommends the effective utilization of developments in information and space technology in crop and weather surveillance and price monitoring in providing effective crop / weather insurance to farmers. In addition to strengthening existing institutions, agency banking, mobile banking, credit counselling and introduction of comprehensive Bharat Kisan Card (BKC) by using applications of information technology including biometrics, are some of the important ingredients of the recommended rural financial system.

What should be the role????
• All the agricultural finance programs have to achieve some objectives. First objective is the development of local sources for agriculture. For the development of the agricultural sector, it is required that there are developed local sources regarding manures, seeds, and irrigation, implements, so that these can easily be procured by the farmers. Next objective is the proper utilization of the manpower in the rural areas. In case of intensive farming, there is more requirement of manpower and the agricultural finance programs must aim at the utilization of same.

Privatise agricultural extension services. For the government, it involves high cost with low impact of the extension programmes. It has led to growing conflicts between farmers' interest and policy goals. On the other hand, farmers are not able to get need-based, timely services

India’s agricultural institutional and infrastructural needs are widespread, humungous and deeply rooted in the system. A cautious, systematic, well laid out, supported by sufficient credit flow and carrying together motivated, committed and visionary bunch of people are required to overcome this huge problem. Until support from people who are the real beneficiary of this is solicited, this will turn out be a futile exercise. Since we always have great plans to uplift people but seldom take into account themselves and many times there is lacuna in communication and hence in implementation. Both institutional level and infrastructural needs are the first to be seen as opportunities to cash upon then only they will be sorted out in proper manner. Priority should be given to those needs which are immediate and have deeper impacts on agriculture as credit and marketing infrastructure, then proceed for other levels. A sync in approach to address both kind of needs is imperative.

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