Infrastructure Development in Agriculture

Route to Rural Transformation
7 August 2009, New Delhi
KPMG IN INDIA

© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

About the study
This is a briefing paper written by KPMG in India that analyses the opportunities presented by the Indian Agriculture market with respect to its infrastructural shortcomings. The study begins by explaining the role of agriculture in India’s rural markets and highlights the need to immediately address the challenges faced by the sector; it goes on to explain the various challenges entailed in the agricultural supply chainright from issues in pre and post harvesting to concerns about research and development, human resource development as well as inadequacies of rural infrastructure. While highlighting the challenges, the paper uses various examples of successful and innovative cases that bring to light the key opportunities for players across the agricultural value chain. The study concludes with our learnings and recommendations.

© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Foreword from KPMG India
The popular adage “May you live in interesting times” could not have perhaps found a better context in the global economy. The Indian economy too has not been completely immune in the aftermath of the global financial crisis which has hit most sectors and grew at a much slower rate of 6.7percent in 2008-09 compared to its performance in recent years. The Union Budget (2009-10) has revealed the Indian government’s plans to get the economy back to a higher growth rate of 9 percent, including getting the agriculture sector to 4 percent growth rate. Agriculture presents an excellent platform for the government to drive its inclusive growth agenda for rural India. Rural demand is increasingly an

Ramesh Srinivas
Executive Director and Head - Consumar Markets Sector KPMG in India

area of focus for corporate India and presents opportunities that have hitherto not been fully exploited.1 There is a lot that must be done if such ambitious targets have to be met, particularly in modernizing the agricultural sector and ensuring its sustainability. This report addresses a few key interventions that are needed for the growth of the Indian agricultural sector spanning various linkages– both pre and post harvest infrastructure, marketing infrastructure as well as softer aspects of the infrastructure such as human resource development. The latter does not usually merit much attention in agricultural policy, itself an area which needs a rethink.

1 Union Budget 2009-10

© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

have been used to showcase possible solutions to the issues in Indian agriculture – including public private partnerships. Several successful efforts. All rights reserved. We also thank CII for having given us this opportunity through knowledge partnership to participate in the development of agri-infrastructure and the harnessing of the untapped potential of rural India.The report makes a few recommendations to address the gaps in infrastructure supporting the agricultural sector. a Swiss cooperative. . an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. We take this opportunity to thank the industry players for making this endeavor possible. © 2009 KPMG. both domestic and international. Sectors that derive their demand from agriculture such as food processing and food logistics can also benefit from these recommendations and these should have important implications for the rural economy from both an employment generation and social development perspective. The analyses and point of view presented in the report have been gathered and validated through discussions with various industry players and experts. based on analysis of key challenges across various segments of the agri-business supply chain.

The rural market in India is not a separate entity in itself and it is highly influenced by the sociological and behavioral factors operating in the country.Foreword from CII The concept of Rural Marketing in India Economy has always played an influential role in the lives of people. the minds of people who think rural marketing is all about agricultural marketing. CII NR & Executive Director. rural marketing determines the carrying out of business activities bringing in the flow of goods from urban sectors to the rural regions of the country as well as the marketing of various products manufactured by the nonagricultural workers from rural to urban areas. The rural population in India accounts for around 627 million. Triveni Engineering & Industries Ltd. All rights reserved. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. The concept of rural marketing in India is often been found to form ambiguity in Tarun Sawhney Conference Chairman & Chairman. In India. The rural market in India is undergoing a silent but definite revolution on the back of enhanced purchasing power of rural consumers. which is exactly 74. The sheer size of the rural market which has witnessed tremendous growth in the recent years as large sections of rural population transformed into discerning consumers has caught the imagination and incited business interest of the top conglomerates in the country. leaving out a few metropolitan cities. Agriculture Competitiveness Sub-Committee.3 percent of the total population. . a Swiss cooperative. all the districts and industrial townships are connected with rural markets. the changing consumption patterns and increasing overall value of consumption of goods and services. However. © 2009 KPMG.

Changing Infrastructural Scenario The focused market attention on the rural markets is aided by the slowly but surely changing infrastructural scenario in rural India. There was a lot of hope that the present government would address these concerns by allocating funds in budgets. the total number of rural households is expected to rise from 135 million in 2001-02 to 153 million in 2009-10. © 2009 KPMG. It has been also been observed that India’s rural markets are growing at double the rate of urban markets. a Swiss cooperative. All rights reserved. This is likely to result in rural India becoming the largest potential market in the world. According to the National Council for applied Economic Research there are as many middle-income and above households in the rural areas as there are in the urban areas. Moreover. The budget proposals are an acknowledgement of the fact that India’s poor infrastructure needs urgent attention. Several incentives to the agricultural sector which has really been the backbone of the rural economy is bound to favourably and directly impact growth of the rural sector. the corporate sector is discovering the huge potential that can be realized by creating access and focusing marketing efforts in the rural segment. the growth of this sector in terms of increased public investment is of immense necessity at this juncture to revive the fate of the rural economy of India. which in turn is likely to address many of the ills besieging the country’s vast agriculture sector and the bottlenecks facing rural marketing in general and organized rural retail in specific. . an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.Key Trends Rising Purchasing Power On account of rising purchasing power in rural India. Looking at the core concerns of this sector. Government Initiatives The focused approach of the government to bring about overall rural prosperity is evidenced by initiatives. Regional Rural Banks have also been instructed to expand their branch networks and extend their services to non-resident Indians as well to expand their scope in general.

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5 Crop Diversification 4. Background 3.6 Irrigation 01 06 08 10 11 11 17 19 24 26 28 4. Soft Infrastructure 6.2.1 Research and Development 6.1.2 Agri-Inputs Distribution 4.1 Marketing Intelligence / Marketing Information 5.1 Pre-Harvest Infrastructure 4.1 Agri-Inputs 4.3 Soil and Water Management 4.1.2.4 Basic Infrastructure .2.1.Power. Marketing Infrastructure 5.Table of Contents 1.4 Crop Selection 4.3 Support Infrastructure 55 55 56 58 7. Roads. Rural Markets and Agriculture 4.2 Marketing Supply Chain 45 45 52 6. Conclusion 61 65 67 .1. Water 31 31 33 39 42 5.2. Executive Summary 2.1 Harvesting 4.1. Indian Agricultural Linkages 4.2 Human Resource Development 6.1. Agricultural Policy 8. Recommendations 9.2 Harvest and Post-Harvest Infrastructure 4.2 Packaging and Processing 4.3 Logistics & Storage 4.

fruits and vegetables.1 1. which combined with the large farming sector help ensures that agri-business remains the overwhelming contributor to the economy from both a monetary and employment perspective1. leading to sub-optimal productivity in various stages of the agricultural supply chain. coffee. a sector which is blocked by varous issues ranging from poor use of water on the input side to poor packaging and storage on the output side. coarse grains. wheat. . with the second largest arable land bank in the world and ranking in the top three producers of rice. Source: KPMG Analysis Thus. has a dominant position in world agriculture. However.engaging nearly 58 percent of the workforce and contributing to about a quarter of India’s GDP India . 2007 © 2009 KPMG. a Swiss cooperative. agriculture continues to remain the mainstay of the Indian economy . tea. 2006 2 The 'Bird of Gold': The Rise of India's Consumer Market. agricultural supply chain has been examined thoroughly to identify challenges under each step. However. 1 Agribusiness. All rights reserved. the growth of the rural economy is strongly coupled with advances in agriculture. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. CLSA. What are the main challenges? How are they being tackled? Are there any success stories to learn from? The opportunity presented by the rural economy is significant. According to a McKinsey survey conducted in 20072. and jute. Executive Summary Why do we need to look at Indian agriculture? India has experienced strong economic growth in recent years fueled by a booming services sector and increased industrial production. India also has some of the largest livestock populations. the rural India market would grow almost four times from its existing size in 2007 which was estimated at USD 577 billion. study successful examples (both domestic and international) and to recommend potential solutions & interventions. .

there is an urgent need to ensure a uniform policy framework across the country while ensuring holistic development of infrastructure as opposed to the skewed nature of existing infrastructure which is underutilized in certain segments of the value chain such as cold storages but simply inadequate in other segments.2 Agri-Value Chain presence Challenges • Poor cropselection and diversification • Low Seed replacement rate • Low quality seeds • Extinction of traditional variety • Poor and unbalanced use of chemicals (fertilizers & pesticides) Select Cases • Protecting traditional varieties of rice through seed banks in Orissa • DCM Shriram’s networdof Hariyali Kisaan Bazaars for input distribution • Conservation technologies like laser leveler. dry seeding • Tata Kisan Sansar using precision farming • McCain Foods process of growing shepody potatoes • PPP between Punjab government and Pepsico for citrus fruits • Jain Irrigation drip irrigation network • China replacing flood irrigation with drip irrigation Recommendations • Inclusive growth and group approach • Rationalization of subsidies • Modernizing Irrigation System & Techniques • Agricultural extension in filling information gaps • PPPs in contract farming. there have been some recent developments including the launch of terminal markets in various parts of the country. grading & processing • Poor logistics. . a Swiss cooperative. wherein private sector involvement has resulted in significant gains to farmers. storage and cold storage infrastructure • Inadequate basic infrastructure such as Power. zero tilage. Roads Water Select Cases • Mechanization of processing technology in Vietnamdeveloped “Cover split technology” designed to generate a higher ratio of whole seed • Suguna poultry’s unique integration model connecting processors to framers • Chordia Foodpark’s contribution to infrastructure integration • USA’s Warmerdam Center using solar power for cold storage & packing Recommendations • PPPs in Terminal Markets • Uniform Policy framework • Holistic infrastructure development • Harvest & Post-Harvest Infrastructure In the post-harvest segment. All rights reserved. Further. Agri-Value Chain presence Challenges • Poor and inadequate mechanization • Poor packaging. © 2009 KPMG. drip irrigation projects • Pre-Harvest Infrastructure The pre-harvest segment of the agri-value chain has seen some successes especially in the areas of horticulture. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. which could provide a blueprint for the reform of the infrastructure that is currently in place. There is a need to apply the learnings from these ventures which have negotiated the existing challenges to other agricultural areas such as food grains. sorting.

3 Agri-Value Chain presence Challenges • Inaccessible. Several studies have shown the lower realization to farmers from the price paid by the end consumer. .An e-Agriculture Marketing project taken up by the Government of Madhya Pradesh executed on Build-Own-Operate (BOO) basis with a consortium of vendors. especially in healthcare. this vital area of intervention remains largely unaddressed. The need for a second green revolution has long been felt and this could be ushered in by research facilities with closer ties with the agri-business industries. a Swiss cooperative. • Marketing Infrastructure While there are a few examples of state sponsored initiatives in the area of marketing.Direct farmer processor linkages and free market system Recommendations • PPPs in Terminal Markets • Promotion of Rural Knowledge Centres. All rights reserved. ICT-based extension. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Agri-Value Chain Presence Challenges • Inadequate returns on investment in research and development • Lack of trained human resources • Lack of efficient rural support infrastructure particularly education and healthcare infrastructure Select Cases • Brazil’s SENAR-combining literacy education with occupational training Recommendations • Inclusive growth and approach • Holistic infrastructure development • Leveraging partnerships such as IBSA in education. incomplete and delayed marketing information • Presence of too many intermediaries Select Cases • EVKI .A direct marketing initiative by the Government of Andhra Pradesh • Brazil . and the private sector.supply chain thereby improving efficiencies. research and training • PPPs in education. © 2009 KPMG. research and training • Soft Infrastructure The last segment of the agri-value chain that merits attention is certainly not the least important and is perhaps the key to unlocking the potential of Indian agriculture. • FOODNET: Transforming the lives of farmers in Uganda through power of information • Grameen Danone Foods Ltd. development of human resources employed in the area of agriculture as well as enabling better support infrastructure for the rural population. Bangladesh: Success story of a co-operative • Rythu Bazaar (Farmers Market) . demonstrating the need for reduction in the number of intermediaries in the agri.

. © 2009 KPMG. The key would be collaboration between private and public agencies. All rights reserved. a Swiss cooperative. India’s agriculture sector presents immense opportunities for investments if various stakeholders collaborate and develop innovative and effective models that not only look at addressing the issues in India’s agriculture set-up but also introduce best agricultural practices. from rural healthcare to better information networks for farmers. it is clear that some of the sector’s problems can be solved by addressing issues which are not unique to the sector but are inhibiting India’s growth in general – healthcare and roads being two key areas for intervention. Several global examples discussed in the report provide potential models which could be used to develop solutions to the various challenges in Indian agriculture. One of the possible solution avenues could be the use of public-private partnerships across segments from seed research to human resource development. trying to find solutions to tackle various challenges.4 What needs to be done? While we have looked at the various segments of Indian agriculture. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.

. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.5 © 2009 KPMG. All rights reserved. a Swiss cooperative.

poor grading. sorting and packaging of yield are hurting the agricultural base of our economy. which continues to remain the backbone of the Indian economy.6 2. sorting. Issues concerning agri-infrastructure are one of the most prominent challenges that need to be addressed with immediate affect. inadequate and poor fertilizer and pesticide requirements coupled with scanty post-harvest infrastructure including shortage of proper warehouses and storage facilities. rural transport infrastructure. environmental concerns related to poor soil management. Problems exist even in marketing of produce as farmers are handicapped by the lack of information on prices and forecasts. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. storage and cold storage infrastructure • Inadequate basic infrastructure such as Power. Government policies and regulation have also created a lot of unneeded complexity in the system which has discouraged investment in this sector. Lack of proper irrigation and water management. 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 support infrastructure particularly education and healthcare infrastructure © 2009 KPMG. grading & processing • Poor logistics. especially in the context of agriculture. Despite agriculture playing a key role in India’s economy.Harvest Infrastructure • Poor and inadequate mechanization • Transportation gaps • Poor packaging. Background A lot of buzz has surrounded the Indian rural market in recent times. it has been suffering from major roadblocks which have hindered its growth. The lack of agri-support infrastructure has also played spoilsport. Absence of proper research and development institutes. rural healthcare and educational facilities have stifled this sector. . Challenges in Agriculture Infrastructure Pre-Harvest Infrastructure • Low seed replacement rate • Hybrid seed production still lacking • Low quality seeds • Extinction of traditional variety • Poor and unbalanced use of chemicals (fertilizers & pesticides) • Lack of input distribution infrastructure • Erosion of natural resources • Poor crop selection and diversification • Poor irrigation techniques and over reliance on monsoons Harvest & Post. a Swiss cooperative. All rights reserved. Problems have existed at each stage of the value chain. Roads Water Marketing Infrastructure • Inaccessible.

The focus will primarily be on highlighting and overcoming challenges with the agricultural supply chain and issues related to management of resources – human capital. .7 A number of innovative measures have been undertaken by the public and private sectors to tackle these issues and improve the state of India’s agrarian market. © 2009 KPMG. a Swiss cooperative. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. These initiatives have helped transform the landscape of rural India in some parts of the country and it will be the effort in the remaining sections of this report to use these as illustrations to provide insights on overcoming policy and structural challenges facing agriculture in India. All rights reserved. R&D and policy to provide possible solutions from a productivity and modernization perspective. Global case studies have also been used to suggest mechanisms to transform specific sub-sectors within the agrarian economy.

With agriculture being the primary employer of more than half of India’s population. with the agricultural sector growing at 1. “The agrarian crisis has its roots in the collapse of the rural economy. One of the key reasons for the stagnation of India’s agriculture is the falling productivity rooted from structural challenges that have seeped into the base of the sector. The Hindu. Parts of India have started to display signs of affluence. infrastructural and marketing facilities.. express hospitality. Something is terribly wrong in the countryside. All rights reserved.. the benefits of economic growth have failed to percolate to more than two-thirds of the people. net sown area under crops. Agriculture needs to become an income producing activity and farmers should not be left to the uncertainty of weather. but this progress has not been uniform.8 3.S. Larger irrigation facilities. At every level of the livelihood security system. M. However. Unemployment leading to out-migration of the asset-less is growing. financial resources.2 The development of rural India is essential for sustaining the growth levels in the country. there is a tendency to make profit out of poverty. better seeds and agri-inputs at reasonable costs will have to be provided to farmers. With more than 70 percent1 of India’s population living in villages. March 2008 3 Farmers' distress: causes & cures. improvements in the sector could go a long way in enhancing 2008-09 was the poorest year in the last 5 years. and markets. 1 For A New Deal To The Rural Poor. Rural Markets and Agriculture India has emerged as a major global economic power with the economy registering high growth rates in the recent past. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. particularly the underprivileged. (%) Population Income Expenditure Savings Top 20 cities Others 10 31 21 60 20 13 15 8 Rural 70 56 64 32 Total 100 100 100 100 Even with increasing urbanization and migration it is estimated that 63 percent of India's population will continue to live in rural areas in 2025. Challenges with hard and soft infrastructure coupled with poor sources of information and financing have created a lot of distress in the sector. and the area under irrigation have also dropped.6 percent Source: Economic Survey of India. it is imperative that considerable efforts are made to extricate the sector from stagnation.. . " -Dr. 10th September 2004 © 2009 KPMG. Swaminathan3 Agriculture being the mainstay of India’s economy. a Swiss cooperative. The rural regions have not been able to match their urban counterparts. The Hindu. 2008-09 the standard of living of the poor. The growth rate in agriculture sector investment and profitability. 12th March 2008 2 A fruitful investment opportunity. agricultural growth has dropped.. The access to improved inputs and technologies will have to be coupled with provision of finance. in recent years.

the cold storage capacity is skewed towards the northern and eastern regions which with 65 percent of the cold storages concentrated in Uttar Pradesh and West Bengal. Govt.6 Addressing these structural challenges through innovative measures and technologies which effectively link production systems with processing and consumption can lead to self sufficiency in food as well as improvement in rural welfare. inadequate education and healthcare facilities have also inhibited the growth of this sector. connect some of the districts in the country. a new compact between farmers. of Agriculture and Cooperation. All rights reserved. This could not only unearth new opportunities but could also transform these challenges into potentially profitable investments. 5 Report of the Task Force on Development of Cold Chain in India. we could come up with effective solutions. we need to work on resolving some of the self-made problems as well as build mechanisms to address external problems such as climate variability and erosion of natural resources. of which 90 percent are privately owned. Ministry of Agriculture. there is a need for creative and imaginative solutions that increase agricultural productivity. Dept. new organizational structures. The prosperity achieved by augmenting agricultural growth could help to address the issues of a large fraction at the bottom of the pyramid. Only about 48 percent villages are covered with roads. scientists. poor crop selection and management techniques. . National Informatics Center. a Swiss cooperative. Besides the transport. at the same time.4 Rail lines do not even “There is a need for new technologies. of which only 58 thousand Km is National Highway. Nearly 80 percent of the cold storage facilities are accounted for by a single commodity namely potato and they have a utilization of only around 50 percent. In order to achieve this. Hence. The railway route length in the country is only about 70 lakh km and the electrified track is not even bare minimum. administrators. lack of research and development and poor extension of current technologies have resulted in wastages to the tune of INR 500 billion. above all. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.9 Hurdles in the agri-supply chain with respect to poor seed development. Marketing Boards. Agmark © 2009 KPMG. also contribute to greater purchasing power for the poor” Manmohan Singh. The total road length in the country is about 33 lakh km. food production and. farm incomes. poor cold chain and processing infrastructure. India has around 50005 cold storage facilities. The existing rail facilities in the country are also inadequate. of India Aug 2008 6 Agriculture Informatics Division. Further. new institutional responses and. Lack of basic infrastructure such poor roads. businessmen. Prime Minister of India at GAIF April 2008 . bankers and consumers.Paper presented in the General Body Meeting of National Council of State Agricultural. 4 ‘Some potential for agricultural marketing infrastructure projects in India’. A large number of these are of the single chamber and single product type. technologists. inadequate irrigation and water conservation measures. the state of infrastructure for horticultural produce as well as meat products leaves much to be desired. By analyzing the various linkages in the agriculture value chain and identifying the challenges within each. held at Guwahati on 3rd to 4th April 2008.

healthcare Opportunities exist across the value chain (PPP is an emerging option) Agroprocessing Agri-distribution sub-system Private Players Public Participation Agri-input Production and marketing of agricultural inputs such as seeds. Both the government and the corporate sector need to focus on streamlining and aligning these agri-linkages to meet best practices. have taken a toll on yields. Pre-Harvest Soil and water management Post-Harvest Storage and marketing Infrastructure Research and Development Support Infrastructure. The schematic below summarizes various linkages in the agricultural ecosystem. transportation and marketing of dairying. All rights reserved.10 4. fertilizers. water conservation. a Swiss cooperative. Further. such as the use of inferior seeds. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. poultry & Pulping industries.transport. beverage Storage. education. Apart from ensuring shortterm measures such as remunerative support prices and cheap agricultural credit. almost a third of the agri-produce is wasted1 due to poor post-harvest infrastructure and improper handling and storage. etc Agri-output Production of crops. etc Agri Financing Source: KPMG Analysis 1 Indian Agribusiness. there is a need to make substantial long term investments in irrigation. CLSA. Indian Agricultural Linkages India’s agriculture sector needs to revamp and modernize its backward and forward linkages. building rural roads and markets. etc industries. 2006 © 2009 KPMG. providing robust primary education and health facilities in the rural areas. electricity. skewed fertilizer application and improper water management practices. Poor pre-harvest input management. each of which is discussed subsequently. .etc various goods.

1 Agri-Inputs 4. However. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.1. Monsanto 3 Planning Commission 11th 5 year plan © 2009 KPMG.11 4. there is practically no change in the SRR in most states of Northern and Eastern India. misconceptions on cultivating new seeds every season and insufficient money. due to low awareness. 4. . Innovative solutions to input distribution and usage extension could go a long way in creating a sustainable farming system. thus resulting in lower productivity of upto 20-25 percent in self-pollinated crops and as high as 50 percent in cross-pollinated crops3.India Region Lead. Seed is one of the most critical inputs for a farmer to get higher productivity per acre and constitutes only 5-10 percent of the total cultivation cost. The right crop selection techniques can considerably influence the chances of obtaining the desired output. 2 Interview with Mr Sekhar Natarajan.1 Pre-Harvest Infrastructure Improving productivity is not an easy task and requires considerable changes in pre-harvest infrastructure. in India.1.1. • Low seed replacement rate (SRR) Poor farmer awareness and the lack of adequate credit have kept SRR at 2-10 percent levels for key crops versus a more appropriate 20-25 percent. Furthermore. The following section underlines the different issues of the backend supply chain that need to be addressed and also highlights examples of innovative solutions and practices adopted by public and private players to tap the back-end agri-infrastructure opportunity. Seeds saved from the crop over a time. utilize inputs more efficiently and diversify to more sustainable and higher value cropping patterns. New technologies are needed to push the yield frontiers. a Swiss cooperative. except vegetatively propagated crops such as potato or garlic. tend to lose their virility and potency. farmers resort to planting saved seeds every year2. All rights reserved.1 Seeds There is a need to ensure adequate and timely supply of quality inputs of which the supply and quality of seed needs the most urgent attention. Adoption of better inputs can improve output significantly.

There is very little focus on hybrid seed production in public sector. The yields in China at over 200 kg/hectare are about twice than that of India’s. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. • Hybrid seed production still lacking There also exists missing links in the seed production system. Advanced seed research and propagation into other crops is almost non-existent. sunflower. Monsanto 5 Planning Commission 11th 5 year plan 6 Gravy Train. Less than 12 percent of the farmers in India use quality seeds. All rights reserved. a Swiss cooperative. Kotak Securities. rice. etc. India Region Lead. which have often peddled low-quality seeds at premium prices5.75 Public (percent) 50. hybrids of maize. India’s success with high-yielding seed varieties has been largely confined to food grains. Changing Share of Private and Public Sector in Seeds Production Year 2004 2005 2006 Private (percent) 49. Better implementation of high yield varieties. The private sector seed industry in India is growing appreciably and has made significant contributions to BT cotton. August 2008 © 2009 KPMG. China produces 40 percent more rice than India with about 33 percent lower crop planted.25 Source: Planning Commission Rice yields in India are one-half of that of other major producers Inspite of this improvement. A lot of the farmer antipathy for seed replacement has resulted from distrust in government channels. However the private sector has expanded to fill the gap. adequate maintenance of irrigation facilities and consistent investments in developing newer seeds and agri-research have contributed to the sustenance of high yields in China6. Sekhar Natarajan.11 58 57 .12 • Poor quality of seeds One of the major deterrents to high productivity and resultant low yields in India is the use of poor quality seeds by farmers.89 42 42. August 2008 4 Interview with Mr. The Gravy Train. while the rest cultivate saved seeds from their crops or buying inferior quality seeds from nearby rural mandis4. . Source: FAO. Kotak Securities.

class world standards. As a result. India’s paddy and wheat yields are still a third of best in. a Swiss cooperative. All rights reserved. 7 Planning Commission 11th 5 year plan © 2009 KPMG. . the genetic base of rice varieties is being reduced considerably and several traditional seed varieties are now facing extinction. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. FAO. the emphasis on agriculture in India shifted away from biodiversity to increased yield. Much of the same trends are true for other crops7 Paddy yields are a third of best-in-class Paddy(kg/ ha) Wheat yields also similarly low Wheat yields (kg/ ha) Source: RBI.13 • Mediocre improvements in Seed production The improvements in seed production are mediocre by world standards. CLSA Asia-Pacific Markets • Extinction of traditional variety With the advent of the green revolution.

4.1.1. © 2009 KPMG. All rights reserved.M.14 Source . which has been an important cause of deteriorating soil quality. The first step is to ratinalize the current fertiliser subsidy. States must simultaneously strengthen their systems to check quality of inputs. This focus will now have to shift to increase the efficiency of inputs for optimum and sustained production. Information on importance of SRR also needs to be communicated to the farmers and efforts to save traditional varieties are required. .2 Chemicals • Fertilizers India’s past research and development efforts to increase production focused on use of inputs for maximizing production. Swaminathan Foundation There is a need for seed production and distribution system to be revamped by strengthening public sector seed agencies and by involving private trade in seed multiplication and distribution system. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. a Swiss cooperative.S.

subsidizing fertilizers to the extent of 85 percent has also resulted in the illegal flow of these chemicals to Nepal and Bangladesh. All rights reserved. there is an urgent need to rationalize subsidies and also examine methods by which the delivery of some part of the presently huge subsidies can be transferred from fertilizer producers to farmers directly as well as to agricultural research and extension services. this money. Thus. potassium and phosphates fertilizers. thereby creating artificial scarcity at the borders8. This results in less significant gains to the small and marginal farmers which reside in semi-arid and arid regions • It encourages over-use of chemicals leading to long-term soil degradation and water pollution. the budgetary fertilizer subsidy is INR 758 billion. infrastructure or education could give better returns and could be socially more productive. Thus. Bengal. if invested directly in agriculture. • Pesticides Despite having the second-largest arable land acreage in the world. However the need is not only to increase the crop protection but also to sustain agricultural land which can be done by providing the right information on application of inputs at the right time. However. India’s share of the INR 1. this is worsened by the current subsidy policy which has led to a skewed usage of nitrogenous. the challenge for states such as Bihar. A focus on improving yields. as well as higher value-added agriculture. instead of the true recipient which is the farmer • Lastly.15 According to the Union Budget.5 trillion global crop protection market is only 2-3 percent9. CLSA. Merinews. Pricing distortions in inputs has also contributed to this skewed development • Almost a third of the subsidies go to the fertilizer industry. This amount is four times the investment in agriculture sector. is likely to spur the usage of agri-chemicals. The following present the major drawbacks of the fertilizer subsidies: • The fertilizer subsidy primarily benefits states and districts that have abundant water resources as availability of water is a requirement for the use of fertilizers. 2nd April 2009 9 Indian Agribusiness. 8 Subsidies and trans-border smuggling of fertilizers. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. . a Swiss cooperative. 2006 © 2009 KPMG. Assam and Tripura is to ensure that the supplies meant for their farmers is not diverted to the neighboring countries.

policy-makers and industry are key mechanisms to transfer technologies and knowledge. . © 2009 KPMG. SSP(Single Super Phosphate). • The Sewaks are trained in the latest techniques and provide specialised services to farmers Source . suitable cropping techniques and markets.Company website There is significant need to provide the right guidance and training in order to develop necessary skills that would lead to the advancement of India’s agriculture base. research and development. through management. To achieve this. networking and the development of partnerships between academia. provides information on the weather. fungicides and seeds • Most of these products are sourced from reputed suppliers and sold under the ‘Uttam’ umbrella brand Technology Uttam Bandhan • Crop and product demonstrations conducted • Field demonstrations and farmer meets conducted • Soil tests are done for micro nutrients and based on the reports soil mapping is done • Experts emphasize the balanced use of fertilizers • Unemployed youth from villages are enrolled as ‘Uttam Krishi Sewaks’. water conservation and crop management. herbicides. research institutions.com & Hello Uttam • Website. Indian agricultural institutions need to work with industry players on not just design of their curricula but also on areas of immediate relevance such as development of crop varieties conducive to processing. All rights reserved. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. ‘uttamkrishi. • ‘Hello Uttam’ telephonic help lines have been set up to answer the queries raised by farmers Inputs Uttam • Company dealers provide Urea and other agri-inputs like DAP (DiAmmonium Phosphate). Hands-on approaches to training must be strengthened across a broad spectrum.Creating demands through Facilitation Extensions Services uttamkrishi. This requires the development of a broad range of skills at all levels.16 Companies like Rallis and Chambal Fertilizers are supplying agri-chemicals as well as know-how to farmers while also playing the role of a coordinator. MOP (Murate of Potash). Chambal Fertilizers and Chemicals . pesticides.com’. beginning with the farmer. a Swiss cooperative.

seed selection. Poor roads and transportation facilities make it difficult for farmers to travel and procure the right inputs required for sustainable agricultural practices. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. All rights reserved. In addition. The agri-input suppliers are also suffering as the means to tap the rural audience is limited. © 2009 KPMG.2 Agri-Inputs Distribution Poor media reach and lack of communication infrastructure creates impediments for farmers to access the best inputs. . New platforms for marketing of agricultural inputs are required. According to a study by FICCI. Lack of technology and high illiteracy levels add to the roadblocks in the marketing of agri-inputs. a Swiss cooperative.1. farmers also need to be taught how to use the inputs so as to reap optimum benefits from the same. These set-ups also provide credit to farmers to buy the inputs and also impart training on various agri-related practices. awareness on balanced use of inputs and on new research and products. 55 percent of the villages do not have a seed store and over 80 percent do not have repair facilities for agricultural implements.17 4. Many input distributors are now using innovative models that not only provide agri-inputs but also provide a wide range of agri-solutions which include soil testing.

Apparels etc. animal feed.000 acres and impacts the life of apporximately 15. Punjab. veterinary products. • Farm produce buyback opportunities. Chattisgarh. Each centre provides: • 24 x 7 support through a team of qualified agronomists based at the centre. It is a chain of rural centers which provides various encompassing solutions to the farmers under one roof. farm implements & tools. pesticides. Madhya Pradesh. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. irrigation items and other key inputs like diesel.Haryana. seeds. • A wide range of multi-brand agri-inputs like fertilizers. a Swiss cooperative. Consumer Goods and Durables. access to new markets & output related services. Rajasthan. So far over 302 Hariyali outlets have been set up across eight states.000-70. Uttar Pradesh. FMCG. • Other Products and Services: Fuels.000 farmers.18 DCM Shriram’s network of Hariyali Kisaan Bazaar DCM Shriram’s network of Hariyali Kisaan Bazaars is an ideal platform for marketing agri-inputs. Maharashtra and Andhra Pradesh10 10 Company website © 2009 KPMG. Each "Hariyali Kisaan Bazaar" caters to agricultural land of about 50. . petrol at fair prices. • Access to modern retail banking & farm credit through simplified and transparent processes as well as other financial services like insurance etc. All rights reserved.

India Region Lead. degradation has aggravated the challenges facing the agriculture sector in India in its fight to improve productivity.19 4. limited natural resources and climate change. All rights reserved. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. we need to increase yields sustainably by helping farmers produce more using less natural resources. Monsanto 11 Planning Commission 11th 5 yea plan © 2009 KPMG.3 Soil and Water Management The pressing need to accelerate agriculture growth should not be at the cost of sustainability of the natural resource base. • High soil erosion. while also improving their lives.1. a Swiss cooperative. “In the face of growing demand.” Sekhar Natarajan . aggravating top soil losses and surface run-off • Groundwater recharge declining dangerously The issue of natural resource management must be addressed urgently since nearly 2/3rd of India’s farmlands are in some way either degraded or sick11. leading to reduction in fertility and productivity of land • Salinity and alkalinity are causing soils to lose soil carbon and micronutrients due to irrational and unbalanced fertilizer use • Pressure on agricultural land has also increased with crops being sown without any breaks which destroys soil nutrients • Alarming degradation of forests & commons. While not entirely irreversible. .

nonavailability of electricity. poor road. non-availability of electricity. poor road.VII Orissa. poor input delivery. micronutrient deficiency. iron toxicity. Groundwater depletion. soil erosion and floods. decreasing total factor productivity. improper drainage. drought. low SRRs. Jharkhand. poor road. Chhattisgarh Moisture stress.20 Region-specific factors Causing Low Productivity Agro-climatic Region States/Parts of States Region-specific Constraints Severe soil erosion. All rights reserved. inadequate communication infrastructure and marketing Western Himalayan region-I J&K. arsenic contamination. poor road and communication infrastructure Upper and trans-gangetic plains region-V and VI Western UP Punjab. shifting cultivation. poor input delivery system and communication infrastructure Lower and middle gangetic plains regions-III and IV West Bengal. HP Uttaranchal . Bihar. Eastern UP Flood/water logging. NE States. non-availability of electricity. Sikkim Aluminium toxicity and soil acidity. degradation due to heavy rainfall/floods and deforestation. high population growth. high population growth. low SRRs. poor input delivery and communication infrastructure Source: Planning Commission 11th 5 year plan © 2009 KPMG. a Swiss cooperative. low SRRs. salinity/alkalinity. Haryana . . and soil acidity. non-availability of electricity. Eastern Himalayan region-II Assam. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. low SRRs. and high population density Eastern plateau and hills region.

. Techniques such as system of rice intensification (SRI) which aid water conservation while increasing yields dramatically. soil conservation practices such as zero tillage which have gained immense popularity in countries such as Brazil also need to be explored on a larger scale. risk and uncertainty related to the conversion period. The 16th IFOAM organic world conference on Organic agriculture and rural livelihoods in Karnataka. India stated that the organic farmers perceived the conversion from conventional to organic agriculture had improved their livelihoods in multiple ways. improved food safety and reduced vulnerability. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. and improved the access to networks supporting knowledge exchange and political participation. a Swiss cooperative. The above report pointed out that over the long term the conversion to organic farming had improved the farmers net farm incomes. Further. merit large scale deployment to validate their effectiveness. Currently SRI is restricted to a few experimental farmers. Innovative Technology and research extension are critical in addressing these issues. © 2009 KPMG. However. reduced the risk of pesticide poisonings. led to more self-sufficiency. All rights reserved.21 A sustainable farming system needs to be promoted in which natural resources are managed in a way that potential yield and the stock of natural resources do not decline over time. A move towards organic farming would also help in addressing the side-effects of conventional methods. such as temporarily declining yields and the lack of experiences and information are major constraints preventing the adoption of organic farming. Soil health awareness must also be promoted through a credible system of soil testing and advice on nutrient management should be extended.

better soil nutrient distribution. less labor required (especially at peak transplanting time). an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. increases soil quality. All rights reserved. more efficient tractor use (reduced diesel consumption). better access to soil nutrients). subsoil layer is not compacted by tractors (compacted subsoil impedes root growth). Zero-tillage Crop residue mulch Dry seeding Source: Rice Today October-December 2006 New technologies are required to push the yield growth. avoids burning. soil physical structure is maintained (reduced nutrient loss. less leaching of nitrates into groundwater. can keep previous crop’s residue in field for mulch (if appropriate drill seeder is used for seeding). post harvest condition of field is better for succeeding crop. . Less labor required.22 Conservation agriculture technologies Potential benefits relative to transplanted rice Laser leveler Cuts water use. deeper root growth (meaning better tolerance of dry conditions. increased area for cultivation. avoids large cracks in soil after dry periods. soil health maintained). Increases soil water-holding capacity. less water required. a Swiss cooperative. Less water required. but also a dynamic channel for exchange of information. utilize inputs optimally and diversify to more sustainable and more valuable cropping patterns. fewer bunds and irrigation channels. These are all knowledge driven and require not only a strong research and extension system with skilled manpower. © 2009 KPMG. Some of the private players such as Tata Chemicals have set up efficient information extension systems and introduced new technologies which have the potential to establish a sustainable farming system. reduces weed pressure.

. . which provide end-to-end agri solutions. The agronomist at the Sansar uses analyzed information on topography. testing. what kind of fertilizers to use and how much. Haryana and Punjab though its network of Tata Kisan Sansar or farm centres. hydrology. climate. The government of Madhya Pradesh and an agro chemical and seed company Dhanuka Agri-Tech Limited have come together to address the issue of technology extension under the “Public-Private Partnership in Agricultural Extension Management programme” The programme aims to work together in areas like soil . catering to 27. but also help scientists to carry the technologies to the rural areas". establishment of markets and providing credit facilities to farmers.200 villages and almost 25 lakh farmers Precision farming leverages modern satellite and information technology to serve the needs of Indian farmers to analyze soil. Chief Minister. a Swiss cooperative.23 Tata Kisan Sansar – The rise of precision farming Tata Chemicals introduced the concept of precision farming in Uttar Pradesh. cropping systems and crop suitability to advise farmers on which crops to grow. cultivating cash crops to maximize their profit. market trends. "Participation of private organizations in providing Agricultural Extension services will naturally benefit farmers in using new technologies. agriculture fortnights. demonstrations and transfer of technology through cyber dhabas. soils. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Source: Company website Role of Public-Private Partnerships in Natural resource conservation Public and Private players are now coming together to help farmers in soil and water management by providing the much needed research extension and training to them.Shri Digvijay Singh. inform about crop health and pest attacks and predict the final output. technicians analyze soil samples to determine their composition and confirm what the satellite maps have indicated Additionally. Currently. The TKS network runs crop clinics where agronomists use computers to access information from the geographic information system (GIS). crop management. 40 TKVKs and about 800 franchisee TKSs are in operation. farmers’ tour programmes. etc At the soil-testing laboratory. the TKS network operates experimental farms where scientists conduct agricultural research and development. All rights reserved. training. Madhya Pradesh in 2001 © 2009 KPMG.

thus requiring the advice and assistance of more informed players. Source: Unilever sustainable agriculture report © 2009 KPMG. The selection of the right crop is very critical in attaining the desired end product. which helped it to select a wider range of beneficial rotation crops for soil health. . reduce nutrient applications and further implement integrated pest management.24 4. The company runs seminars to educate farmers on best practice and it employs a dedicated field agronomist to support farmers. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Unilever helps farmers in USA to cultivate the right variety of tomatoes. many farmers are not aware of the criticality of crop selection or don’t have enough funds to conduct research about the choice of suitable crops. Unilever conducted research on four farms in USA. Crop selection has also assumed greater importance in terms of current economic sustainability. However. All rights reserved.1. and establish biodiversity programmes.4 Crop Selection The problem of poor crop-choice is prevalent across India. which would be used for its food processing operations. a Swiss cooperative.

The company worked closely with farmers and encouraged them to share the new agronomy practices like relying on quality seed. • While the Indian average yield for Come March. All rights reserved. McCain picked contract farming as the best option. The company exports 10-15 per cent of its output to South and South-east Asian countries and the Middle East. has increased by as much as 60-70 per cent. which were larger in size and had less water content. Business Today. For the kind of potato needed. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. supplying to markets in Sri Lanka. new planting techniques and adopting contemporary methods of potato storing. Himachal Pradesh. • The yield per hectare with McCain's varieties. which was vital for potato growth. it was necessary to develop the seed in cold climate. • McCain Foods India has begun The crop is harvested in September and rushed. Gujarat potatoes is about 15 tonnes per hectare. in Gujarat’s it has increased from about 22 to 27 . a Swiss cooperative. Palanpur. the Shepody potatoes are harvested and sent to the McCain factory in Mehsana. as well as India. April 2009 India © 2009 KPMG. • By 2010.5 tonnes per hectare. After a thorough study. Today.25 McCain Foods India’s process of growing Shepody potatoes-A Logistical Masterpiece McCain Foods entered India in 1997 with an intent to invest INR1 billion ($25 million) in potato fry business. where the tubers are replanted. . as the region is blessed with a stretched wintry condition. Vijapur. That search ended at Mehasana in north Gujarat. the company concluded that Indian potato was not the ideal one for the business. Deesa. From field to fries. where the weather is conducive technology of lesser tubers of greater mass. A team of researchers then took up the task of developing the seed at Lahul Spiti in Himachal Pradesh. After developing the seed the company started a search for the best area for growing the new breeds. As a result the farmer s were not dependent only on the company. to farmers in Gujarat. Potatoes. all MacFries to be made in Source: Company Website. were required. Himmatnagar in north Gujarat and Anand in central Gujarat have emerged as India’s hubs of new breeds of potato. Pakistan. drip and sprinkler irrigation systems. Bangladesh and Nepal. based on its Master crop of potatoes grown in Lahaul-Spiti valley. but did not ask the farmers to grow only potatoes as well as didn’t promise to buy out 100 percent of the produce either.

maize. JISL has adopted contract farming model with nearly 3. March 2009 © 2009 KPMG.000 farmers.26 Jain Irrigation: Supplying farmers with specific variety of hybrid onion seeds that suits their processing needs. One of the first ventures in the state was led by PepsiCo in tomato contract farming in the early 1990s. Food and Agricultural Organization of the United Nations New Delhi. The company accounts for about 40 percent of the dehydrated onion exports from India13. In order to procure onions for processing. Punjab’s state promoted Punjab Agro Foodgrains Corporation (PAFC) has an aggressive target of bringing a fourth of its acreage under non-grains. The other objective was to disseminate the improved technology through farmers’ participatory demonstration. All rights reserved. The company is now planning to enter into contract farming for tomato in Maharashtra and Andhra Pradesh14.000 million tones. Crop diversification is intended to give a wider choice in the production of a variety of crops in a given area so as to expand production related activities on various crops and also to lessen risk. The diversification also helps a state to produce more remunerative crops and can also be used to address the problems of soil and water management. investigations. Jain Irrigation Systems Ltd. In recent times.org 13 Supply Chain for Exports of Dehydrated Onions: Case Study of Jain Irrigation Systems in India. corn and cotton come under contract farming. 12 actahort. The selection of the right variety of crops coupled with an innovative production process and research extension efforts has made JISL one of the trusted and largest providers of white onions not only in India but also globally.1. The Punjab state government has been one of the first movers in this field. and was selected for multi-locational trials both in the Research and Development farms and in the farmers’ fields12. Jain Irrigation undertook a study to identify the right variety of onions suitable for its process as well as the country’s climate. (JISL) has the largest onion dehydration unit in Asia with an annual capacity of 120. The results showed that ‘White Creole’ was suitable. The main objective of the study was to improve production and productivity of white onions suitable for dehydration and standardize a package of agronomical practices under short-day tropical conditions using high-tech inputs. The ground water level had also declined due to over exploitation of these resources. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Feb 2008 14 Jain Irrigation plans to expand dehydrated vegetable business. subsequent initiatives have also seen crops like barley. crop diversification has gained significance as cultivation of traditional varieties over a prolonged period had caused degradation of natural resources to a great extent. a Swiss cooperative. 4. potato. about 43 varieties of white onion including exotic varieties suitable for short-day conditions were evaluated during the winter season 1996-97 A few cultivars/hybrids were short-listed for detailed . training and contract farming.5 Crop Diversification Another important factor that needs emphasis is crop diversification. Hindu Business Line. . The government has taken the support of private players through the contract farming route to achieve its target. With these objectives in view.

Fruit growers in the areas where the chilling hours are not static now have opted for kiwi cultivation as a cash crop. the total kiwi yield in Himachal Pradesh was 137 tons • Different varieties of kiwi such as Hayward.600 hours of chill. but Indian farmers have been successful in growing it even at extremely low temperatures. As an alternate. . Parmod Kumar in Contract Farming in India: Options and Implications for Small and Large Farmers (2005) Himachal Pradesh is using crop diversification to fight climatic changes Himachal Pradesh. While apple is the main fruit crop. apricots. Some of the farmers are growing kiwi at an altitude of 8. at least 200 farmers in the Kullu valley alone have taken up kiwi cultivation. almonds and plums are the major commercial crops of Himachal Pradesh. Abbot. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.000 to 1.27 PAFC targets of contract farming One-fourth of Punjab acreage to be under non-grains Source: PAFC. farmers in Himachal Pradesh are increasingly moving towards commercial cultivation amongst which kiwi is one of the most preferred crops. while kiwi requires just 200 hours of chill for a favourable crop. has approximately 200. known as the fruit bowl of the country. other fruits like pears. The state earns more than INR 25 billion from cultivation of fruits and vegetables.000 hectares of land under horticulture cultivation yielding about half a million tons of different kinds of fruit. All rights reserved. cherries. Recently the production of apple has been severely affected by adverse climatic changes. • In 2008. peaches. Apple orchards require 1. a Swiss cooperative.500 feet © 2009 KPMG. Allison and Bruno are cultivated on almost 120 hectares of land • Kiwi typically needs temperate climate to grow. Impact • As per horticulture department estimates.

as well as 10 kilowatt-hours of electricity per day per area). Governments have led the expansion of large-scale irrigation. which consumes large amounts of energy to pump water. May 2009 15 Indian Agribusiness. 2006 © 2009 KPMG. Each point distributes a precisely controlled dose of water and nutrients directly into the root zone of the plant. Cleantech Group LLC. Switching from surface (also called flood irrigation) to localized irrigation can result in approximately 25 percent water saving and growing high-value-added crops can improve economic efficiency. The drip irrigation system is expected to save up to 70 percent of the water when compared with flood irrigation techniques (Farmers typically use flood irrigation.6 Irrigation India’s agriculture output remains volatile and hostage to the monsoons. water availability for irrigation is increasingly constrained. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. A survey by the Ministry of Agriculture also found that half of the total farmer holdings in India are not irrigated. All rights reserved. The quality of irrigation facilities and regular availability of water are also major concerns. but in many basins groundwater is now being mined rapidly. Also. despite having the highest amount of land under irrigation in the world. with another 20 percent being only partly irrigated15.1. Drip systems can provide a 30 percent efficiency improvement in the use of fertilizer. a Swiss cooperative. increasing overall yields up to 230 percent according to Europe’s Renewable Energy and Energy Efficiency Partnership (REEEP) Source: REEEP assists €15M drip irrigation buy in India. CLSA. Irrigation accounts for 85 percent of water withdrawals in developing countries.28 4. and the rapid growth of the sector has been based on the availability of huge quantities of low-cost water. For years. The growth in irrigation coverage has slowed markedly after the Green Revolution and 60 percent of the gross sown area still remains primarily rain-fed. groundwater provided a profitable new resource. Jain’s drip irrigation systems deliver water using a network of pipes that have a series of outlet points. Many private companies such as Jain Irrigation have invested in new irrigation techniques which have improved the efficiency of water usage as well as enhanced productivity. but performance has been suboptimal. . Water use efficiency can be addressed by improvements in Irrigation management and practices. much of which is wasted.

To be implemented in 75 villages across 31 districts in Maharashtra.000 acres of cotton farmland has the potential to reduce water use by 22 percent. and improve yield by 30 percent Source: China invests $23M in drip irrigation. which produces 30 percent of the country’s cotton16. All rights reserved. Oct 2008 17 Unilever sustainable agriculture report © 2009 KPMG. efficient water distribution and utilization systems using solar pumps. Unilever has helped the industry improve yield of gherkins by up to 60 percent since its initial involvement in 199817. save 6 million liters a year. reduce chemical fertilizers by 10 percent. a Swiss cooperative. 16 China invests $23M in drip irrigation. the project involves development of rain water harvesting and water storage structures. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.29 China has also invested heavily into drip irrigation. increase cultivable area by 5 percent by eliminating ditches. One experimental farm yielded water savings of up to 40 percent. with their promise of shared responsibility and managed risk. NABARD has signed a memorandum of understanding with Jain Irrigation Systems Ltd for its ‘Village Development Plan’ and implementation of Natural Resource Management and Dry Land Agriculture. Cleantech Group LLC. Oct 2008 Public-private partnerships. One of the most recent initiatives addressing this issue is the public private partnership between National Bank for Agriculture and Rural Development (NABARD) and Jain Irrigation. The country recently pumped in approximately INR 1 billion to set up a drip irrigation system powered by solar panels in the arid Xinjiang region. . Cleantech Group LLC. development cropping plan and contract farming along with modern agricultural practices Source: Jain Irrigation Company website Unilever has also entered into a PPP with Ministry of Agriculture and academic institutions to find ways to fund drip irrigation systems in the states of Karnataka and Tamil Nadu in Southern India. In the Chinese Xinjiang region. have also been seen as means of creating the right incentives to address the issues of water management. as well as reduced the amount of chemicals needed. replacing flood irrigation with drip irrigation on just 5. Unilever operates in Karnataka and Tamil Nadu through a contract farming model for its supplies of gherkins.

A solution to pre-harvest infrastructure challenge The issues related to pre harvest infrastructure have been successfully addressed when public and private players have collaborated to come up with the solutions to better agricultural practices. The Punjab government with the support of Pepsico is one of the best examples of public private partnerships. • Contribution: Leveraged services of • Contribution: Facilitated creation of Nursery Infrastructure. 2008 © 2009 KPMG. in more partners international experts. All rights reserved. a Swiss cooperative. The collaboration has resulted in a win-win situation for stakeholders and assisted the farmers to improve yields as well as enhanced their standard of living. provided access to various varieties Punjab Government • Objective: Interested in localizing the supply base of Citrus Juice • Heightened farmer interest • Creation of a world class source of planting material for the Punjab Farmers - choice based on evaluation of 34 varities of citrus and 16 rootstocks sourced from International quality nursery infrastructure • Gearing up to deliver to Punjab farmers . . Pepsi Co • Objective: Looking for diversification of their agricultural base and increase farm incomes.Annual capacity of 4 million saplings Source: Pepsico International Presentation. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.30 PPP . specialized training on grafting & planting. made available land for “demonstration plots” bought .

31 4. . etc. grading and packaging facilities at the village level is about 7 percent for food grains and 30 percent for fruits and vegetables18. banana fig. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. vapour heat treatment in major mango growing belts. it needs investment in infrastructure that can promote efficiency by reducing transaction costs and market risks. “The annual physical and value loss to farmers due to lack of post harvest infrastructure is estimated to be around INR 500 billion” . and chipmaking machine. mechanization also enables efficient utilization of inputs such as seeds. are being adopted by the growers.2. Besides its contribution to the multiple cropping and diversification.1. etc. packaging of coconut water. cleaning. sorting.1 Mechanization Agricultural machines increase productivity of land and labour by meeting timeliness of farm operations and increase work output per unit time.. kinnow clippers. fertilizers and water. a Swiss cooperative. potato diggers. Machines have also been developed/ installed for different specialized uses such as cool sterilization (irradiation) for sprouting in potato and onion.Ministry of Food Processing Industries 4.2 Harvest and Post-Harvest Infrastructure If Indian agriculture has to be globally competitive. 18 Planning Commission 11th 5 year plan © 2009 KPMG. different machines have been developed for effective cultivation and intercultural operations.2. To keep pace with improved production and productivity. coconut peelers.1 Harvesting 4. It has been estimated that loss of primary produce before reaching the market due to lack of proper handling. dehydration of different produce. Machines such as mango harvesters. All rights reserved.

1. The cashew processing industry in Vietnam has made significant contributions to enhance exports. Such means of transport do not facilitate transport of goods to far-off market places. The constraints in promotion of mechanization include requirement of equipment for each agro-climatic zone. a Swiss cooperative. inadequate irrigation facilities. the number of processing companies increased from 6 in 1986 to 30 in 1994 (with total capacity of 75000 tons/year) to 62 in 1999 (with total capacity of 250000 tons/year) to about 120 in 200319. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. rural road connectivity has often been ignored. forcing the farmer to dump his produce in nearby markets even if the price obtained there is considerably low. Kotak Institutional Equities 4.32 India still suffers from lower mechanization The availability and use of improved equipment have enabled states like Punjab and Haryana to achieve high levels of land productivity. low investment capacity of the farmers. . Only a small number of villages are joined by railways and pucca roads. Development of rural roads can contribute up to 36-68 percent reduction in transport expenses20. the progress of mechanization in most other states has been slow and its benefits of timely and precise operations are not reaching the majority of farmers in full measure. Rural roads play a crucial part of bringing the produce from the field to the transport point and then to the mandis. Source: World Bank. This technology is cheap and is able to generate a higher ratio of whole seed. The developments in processing technology have enabled Vietnam to export cashew in processed form. Vietnam has developed “Cover split technology” designed by Vietnamese technicians. repairs & maintenance facilities etc. Over 90 percent of production is exported. Due to easy availability of efficient technology. All rights reserved. the small and fragmented land holding. know-how status of the farmers. 19 Rabo Bank Report 20 Planning Commission 11th 5 year plan © 2009 KPMG. Small and marginal farmers often use slow moving transport vehicles like tractors and bullock carts to carry their produce to the market.2. Mechanization of processing technology in Vietnam Vietnam is the largest cashew producer in South East Asia and the third largest cashew exporter in the world after India and Brazil. Many small farmers have turned reluctant to market their produce to distant markets considering the high cost and poor quality of transport infrastructure. However.2 Transportation In India. Poor transport infrastructure not only affects the quality of produce but also leads to extensive wastage. especially for perishable products.

2 Packaging and Processing 4. etc. Only around 7 percent of the total quantity sold by farmers in India is graded before sale21. the farmer producing better quality is deprived of a higher price. More often farmers pack their goods in jute sacks (gunny bags) or tightly packed boxes. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. All rights reserved. flour.2. The “Agmark" goods have a wider market and command better prices. which are stacked one above the other.2. While the losses due to poor packaging are more pronounced for horticultural products.1 Grading and sorting The existing grading infrastructure in India is far from adequate.2 Poor packaging Packing and handling of perishables is still in primitive stages in India. Thus. Under the Agricultural Produce (Grading and Marketing) Act. a Swiss cooperative.2.2. pulses and oil seeds as well. . The Government is further streamlining quality control enforcement and inspection and improvement in grading. eggs. Majority of fruits and vegetables are still outside the purview of proper packaging. A Central Quality Control Laboratory has been set up at Nagpur and eight other regional laboratories in different parts of the country with the purpose of testing the quality of agricultural products and applying for the Government's "Agmark".2. The graded goods are stamped with the seal of the Agricultural Marketing Department –AGMARK. the Government has set up grading stations for commodities like ghee. the sales practice usually prevalent at farm level in India includes the sale of heaps of all qualities of produce in one common lot. 4.A solution to quality grading and better packaging Terminal Markets have successfully addressed the problems of packaging and grading while also helping in closing the various gaps in post harvest infrastructure 21 Planning Commission 11th 5 year plan © 2009 KPMG. thereby resulting in no incentive to use superior quality inputs for producing enhanced varieties. it is quite substantial for food grains like staples.33 4. thereby leading to significant damage to the produce. Efficient packaging can make a significant difference in the massive quantity of food grains India loses in the supply chain every year. Terminal Markets. Farmers in India have little to no information of grading infrastructure at primary level and they generally sell their agricultural produce without grading. Also.

an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Terminal Markets is a Public-private partnership model that links production centre to the consumption centre. poultry etc. Similarly. All rights reserved. a Swiss cooperative. Nagpur. Bhopal and Kolkata22 Source: www. Chandigarh. vegetables. However. the proportion of non-horticultural products within the perishable commodities cannot exceed 15 percent of the total through put of the market. Maharashtra State Agricultural Marketing Board 22 IBEF food processing presentation. Non-perishables are also handled in the Terminal Market.msamb. The perishable horticultural produce is cleaned at the collection centres and transported to the terminal markets through vans thereby reducing post harvest losses. such as fruits. meat. . flowers. herbs. Nashik.com.34 Terminal Markets are established under Public Private Partnership (PPP) mode and operate on a Hub-and-Spoke Format wherein the Terminal Market (the hub) is linked to a number of Collection Centres (the spokes). December 2008 © 2009 KPMG. aromatics. These markets help in realizing better returns to the farmers by reducing post harvest losses of perishable commodities and reducing the number of middlemen as well as provide one stop shop for the processors to procure quality raw materials. Rai. The commodities marketed include all kinds of perishable commodities.Mumbai. The produce arriving in the terminal market is graded and stored in the cold storage till it is auctioned through electronic auction system or direct selling. The Government of India is looking to promote terminal markets in 8 cities . the proportion of nonperishables cannot exceed 15 percent of the total throughput of the market. Patna.

innovative business models. 23 FAOSTAT © 2009 KPMG. Hence.35 4. the government is likely to support the industry with an enabling and growth oriented policy.2. wheat.3 Processing The opportunities in the food processing industry are significant. contract farming initiatives and collaborative efforts by public and private players will help to address these challenges and stir the growth of this sector. Thus. New Technologies Food processors need to deliver taste and quality demanded by consumers of both domestic as well as international markets. spices. milk. All rights reserved. thereby helping to alleviate rural poverty. Despite India being an agrarian economy and one of the largest producers of vegetables. lack of grading and sorting. potatoes. the players need to devise a twin pronged strategy of improving agricultural yields coupled with delivering the right quality to different markets. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Agricultural produce that is processed for domestic consumption can not only fetch higher prices and hence higher income for the farmers. The low share of processed food in domestic markets and the export demand for processed products is an opportunity waiting to be tapped. eggs. Agricultural yields can improve only when India adopts innovative technologies to boost crop productivity. fruits. The problem of low productivity is compounded by poor quality of food produce. Players like Adani Fresh in Himachal Pradesh and Desai fruits and vegetables in Gujarat have set up controlled atmosphere (CA) chambers to store the produce appropriately and avoid any wastage. New technologies in post-harvest infrastructure also need to be adopted.23. there is a need to rapidly develop quality support infrastructure for this industry. but also generate direct and indirect employment. government incentives. meat etc. New technologies. . Besides government incentives. the productivity of crops is quite low when compared with international standards. The area of concern begins at the level of production itself. Increasing urbanisation and rise in disposable incomes is expected to push the demand for processed food. Also. which at present is in a poor state.2. a Swiss cooperative. the Food Processing sector has the potential to reduce the burden of subsidies and raise the farmers’ income simultaneously. limited marketing infrastructure and research and development facilities. Pre-cooling and post harvest chilling facilities play a very important role in processing of perishable goods.

Adani Fresh conducts quality testing to check the orchards and trees which would supply the apples for their facilities. Small units could probably find themselves at a cost disadvantage because of higher feed and transport costs. © 2009 KPMG. expensive vaccines and veterinary care services and constraints in accessing cheap and easy credit. feed and health support.36 Post-harvest chilling by Adani Fresh . the approved orchard owners bring their produce to the collection center where they transfer their produce to the plastic crates provided by Adani. including the raising of grandparent and parent flocks.Controlled Atmosphere Chambers Adani Fresh has set up three large CA facilities of 6. In six weeks time. of India Aug 2008 Integration by players Increasing demand for processed food and increasingly stringent quality parameters will drive growth for integrated players.# # Report of the Task Force on Development of Cold Chain in India.integrated players. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. The farmers are then required to transport the produce to the nearest facility. All rights reserved. Govt. Suguna’s poultry integration model The model has created a win-win situation for both the farmer and the integrator. feed intake. weeding out unorganized and non. The apples are then stored in the various CA chambers based on the storage plan and then moved out of the CA chambers as per marketing plan. It has created linkages with farmers in the catchments of its three CA facilities and provides plastic crates for movement of produce from field level aggregation points to its CA facilities. Farmers are provided with day-old chicks. It operates on an integrated approach from farm to market. The performance is monitored on a daily basis with Suguna field staff visiting the farms to check on the health of the birds. Dept.000 MT each at Rewali (Rampur). . a Swiss cooperative. The farmers are paid a growing charge for the birds at the end of the period. rearing day-old-chickens (DOC). of Agriculture and Cooperation. contracting production. size. Integrators include large regional firms that incorporate the various aspects of production. shine and appearance. growth and mortality levels. compounding feed. providing veterinary services and wholesaling. the birds are weighed and are ready to be sold by Suguna through its own retail outlets as well as other retailers and exporters. The apples are once again tested at the CA facility and payments are made based on various grades and other parameters like colours. Once the field testing is done. Ministry of Agriculture. Lower prices for poultry in South India can be attributed to the high level of integration in these markets. Senj (Theog) and Rohru.

Each mega food park will cater to a minimum catchment of five districts and will provide all facilities right from the farm gate to the retail shelves. The company is planning to expand across the country and also increase its exports in the near future. Poultry farms have traditionally been concentrated in southern India with nearly 60-70 percent total output coming from the southern states. including collection and distribution and central processing centres. Suguna has also been exceptional in introducing organized poultry farming in north India. Nov . Financial express. 2006 Centre receives 40 EoIs to set up Rs 2. Tehelka. 2008 © 2009 KPMG. Functions like sorting. a Swiss cooperative.Infrastructure Integration Many state governments have planned to set up Mega Food parks which are aimed at bringing together all players in the value chain so as to minimise wastages and facilitate better inventory management and production planning.com.37 Source: Company website Suguna has emerged as the leader in the Indian poultry broiler segment with its unique business model.24 Mega Food Parks. but Suguna’s successful foray in north Indian states like Punjab and Delhi has helped link farmers in a market in which 80 percent of poultry farming until recently has been in the non-organised sector. . The parks would be set up through private consultants with the government providing grants of up to Rs 500 million each. The proposed mega-food parks will be between 10 and 100 hectares in size and 30 locations across India have already been identified. Financial express. procuring and sale of broiler chickens in north India. Nov . food incubation-cum-development will take place in these food parks.500-cr mega food parks. All rights reserved.25 24 The Great Indian Chicken Run. July 2009 & MOFPI 25 SEZ status for mega food parks on the anvil. grading and packaging along with irradiation. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Suguna’s entry has also led to an organised method of producing.

The growers will also be trained how to grow Amla and Aloe Vera crops on barren lands. tomato.38 Uttarakhand is emerging as a favourite destination for setting up food parks A mega food park is being set up at Haridwar with processing units mainly for manufacturing juices. It aims to achieve this by offering infrastructure. All rights reserved. Some of the infrastructural amenities include Product Development Centre. farmers in the state will become financially independent as their produce will be sourced for processing. . hot destination for food parks. State Government’s role in attracting investments The Uttrakhand government is expecting more such proposals.000 jobs in the initial phase. herbal products and fruit pulp by Baba Ramdev The herbal and juice park is expected to attract investments to the tune of Rs 5 billion. Jain Irrigation Systems is also following suit and is scouting for 300 acres of land in Uttrakhand for setting up a food park and irrigation systems with an investment of INR 4 billion. Also. cucumber and wheat grass are proposed to be established. incubation & the right marketing strategies. In the first phase. carrot. 2009 The Chordia Food Park in Maharashtra is also small step towards a level playing field for the small and medium food processing industry. Analytical and Quality Control Laboratories and Cold Storage and Warehouse. Pilot Plant. With the launch of a mega food park at Haridwar. The park. June. the park will generate as many as 20. The government is also taking pro-active steps like a single window system to attract more investments. a Swiss cooperative. Business Standard. will be a boon for the growers of these fruits and vegetables. Source: Company website © 2009 KPMG. tulsi. The state government also wants to take benefits from the central scheme which is offering heavy subsidy such as providing a subsidy of INR 500 million per park to private investors. mint. The state government is also aiming at increasing food processing export business in the hill state. Amla. factories for processing juices of bottlegourd. Aloe Vera. spread over 95 acres of land. especially in the hills where the state government last year declared a hill development policy under which it is offering a slew of sops including transport and power subsidy. bittergourd. Source: Uttrakhand. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.

some of the private players such as PepsiCo. for example. to support production through. it has been observed that over the past decade. Reliance Life Sciences and McDonalds have modified their sourcing channels to include contract farming. The FCI remains the nodal agency for procurement and distribution.3 Logistics & Storage India suffers an estimated food grain and agriculture produce loss of over INR 5 billion due to the lack of adequate post harvest infrastructure and inefficient supply chain management27. Ministry of Consumer Affairs. the supply of farm inputs. All rights reserved. land preparation and the provision of technical advice26. The Central Warehousing Corporation (CWC) which is the biggest warehousing infrastructure in the world remains grossly under-utilized with average annual occupancies of less than 72 percent. the farmer agrees to provide certain quantities of a specific agricultural product which should meet the quality standards of the purchaser and be supplied at the time determined by the purchaser. . a Swiss cooperative.28 26 Food and Agriculture Organization of the United Nations 27 Government Bureau 2007 28 Department of Food and Public Distribution. In turn. Bharti Retail © 2009 KPMG.39 Contract Farming . Food Grain procurement and distribution in India is still largely under government control. The magnitude of the wastage and consequent losses lends itself to initiatives which can bring about massive improvements in the supply chain as increased income to farmers. In addition to this. Typically. about 1 million tones of food grains rotted in the FCI godowns raising questions over the storage and transport infrastructure.Closing the gap between farmer and processor In order to bridge the gap between farmer and processor. the buyer commits to purchase the product and. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.2. capital inflow and also leads to assured markets for crop production 4. in some cases. Presntation on The Challenges in Farm Fresh BusinessVinod SawhnyPresident and COO. Some of the clear benefits of contract farming which creates a beneficial situation for both farmers and processors are: • Integration of the supply chain to help ensure timely availability of quality and quantity of raw material for processors • Significant reduction of the procurement cost for food processors by removing the middlemen • Food processors can source raw material as per their requirements at low costs • Private sector participation increases the scope of technology transfers.

Dept. of India Aug 2008 © 2009 KPMG. Economic research report (United States. Ministry of Agriculture. Marketing Boards. The cold storage facilities for meat in India are almost negligible and in states like West Bengal. A large number of these are of the single chamber and single product type. 29 Indian wheat and rice sector policies and the implications of reform. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. The total road length in the country is about 33 lakh km. The lack of double lane roads has a negative effect on the speed of transport means. All rights reserved. of Agriculture and Cooperation.30 Besides the transport. of Agriculture and Cooperation. Dept. Further. reduces the transport time and costs of transportation of the commodities. of which 90 percent are privately owned. The existing rail facilities in the country are highly inadequate. Dept. A welldeveloped and efficient system of transportation helps in the expansion of markets. Further innovations in technology such as Integrated Information System for Food grains Management (IISFM). no. although increasing. The number of goods carrier vehicles. The government concern has been mainly to develop single lane roads. Economic Research Service) . is inadequate for transporting goods by road. but could help increase efficiencies significantly.Paper presented in the General Body Meeting of National Council of State Agricultural. Only about 48 percent villages are covered with roads. the state of infrastructure for horticultural produce as well as meat products leaves much to be desired. . of which only 58 thousand Km is National Highway. Nearly 80 percent of the cold storage facilities are accounted for by potato. Railway wagons are also used for transportation of agricultural commodities from wholesale markets to consumption centers. of India Aug 2008 32 Report of the Task Force on Development of Cold Chain in India. for the FCI need to be rolled out to a wider network than the current reach. Precedents for such policy exist in China. procurement would have marginal impact on prices of wheat and rice. The air cargo facilities are also available in limited number of states. Govt. Existing air cargo facilities are in poor condition and much below the international standards. Govt. of Agriculture. FCI has taken the first step towards better management of food procurement and distribution by awarding a contract for bulk movement to a private player Adani Agri-Logistics in 2008. to help ensure transparency in information and provide visibility on stock around the country. but more needs to be done. held at Guwahati on 3rd to 4th April 2008 31 Report of the Task Force on Development of Cold Chain in India. they have a utilization of only around 50 percent. whose large population underlines the need for efficient management of food security.40 In 2007 a USDA ERS study29 found that decentralization of food grain . India has around 500031 cold storage facilities. Ministry of Agriculture. 41) 30 ‘Some potential for agricultural marketing infrastructure projects in India’. However railway route length in the country is only about 70 lakh km and the electrified track is not even bare minimum. there is none for a commonly consumed product such as fish32. a Swiss cooperative. Rail lines do not even connect some of the districts in the country. There is an urgent need for other innovations in transport and handling.

All rights reserved. This needs to be supported with other interventions to help ensure a comprehensive cold chain network which covers transport vehicles. an agricultural network spread along 27 . an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. located in California’s San Joaquin Valley (USA). creation of controlled atmosphere facilities in cold storages. The installation commissioned in early 2008. a Swiss cooperative. Some of them are • Setting up Special Passages for vehicles with perishable goods akin to those in China in the Green Corridor. is anticipated to produce 1.41 The task force set up by the Indian government in 2007 to study the cold chain infrastructure situation in India published a report making a host of recommendations to remedy the cold chain infrastructure in the country. USA’s Warmerdam Center is one of the largest solar energy systems in the agriculture industry The Warmerdam fruit packing facility. • Allowing cold chain receipts as negotiable instruments similar to warehousing receipts • Providing financial incentives for investments in cold chain infrastructure including subsidies and interest rate subventions In the 2009 budget the govt. has announced 100 percent tax deduction on investments in cold chain facilities. The use of alternate sources of energy such as solar power for cold storage & packing facilities could play a significant role in Indian Agricultural infrastructure which faces an acute power deficit situation. . To support this operation.000 km. hosts one of the largest solar energy systems in the US agriculture industry. etc. the solar initiative will offset 60 percent of the electrical power needs of their packinghouse and cold storage facilities Source: Conergy. The Warmerdam plant is known for innovative handling.2 MWh per year. Factors such as cost efficiency and environment sustainability also need to be accounted for while developing and modernizing existing storage and packaging infrastructure. Company website © 2009 KPMG. cooling and packaging of produce such as cherries and kiwis. Developed countries have used alternate sources of energy to develop cost efficient and environment friendly agriculture infrastructure.

2. May 2008 36 India’s Water Economy: Bracing for a Turbulent Future by John Briscoe. Senior Water Advisor at the © 2009 KPMG. needs to be taking larger scale action based on experiences gained from such actions to help ensure India does not end up with a ‘dry’ future. much needs to be done to improve the condition of roads which connect India’s villages to the rest of the country. There is an urgent need to not only reduce the dependence of the sector on power from fossil fuels but also increase the contribution of renewable sources to the total installed capacity for generation. other infrastructure such as roads and irrigation remains low.42 4. The World Bank has in recent years sponsored a number of focused projects designed to alleviate India’s water situation by reviving India’s crumbling tank systems in states such as Orissa and Karnataka wherein less than 50 percent of the state’s land is irrigated. India’s dependence on the monsoon is widely documented. One of the reasons for loss/wastage of agricultural produce is the condition of the roads that connect farmers to marketing centres.4 Basic Infrastructure . 33 Central Electricity Authority 34 Hydro Power which accounts for roughly 25 percent of installed capacity is not included here. 35 Transport System in Food Grain Supply and Challenges. currently below 10 percent34. forecasting a grim picture by 2020. Roads. However despite the fact that it is public knowledge that India’s water supply is not adequate in some areas. most of the work in water conservation for agriculture has been restricted to private enterprises or the work of NGOs. While the agricultural sector enjoys subsidized (or free in some cases) electricity. roads. This would have the welcome side-effect of providing continuous power supply to rural areas which currently don’t receive 24 hrs of supply in most parts of the country. a Swiss of the KPMG cooperative. Water The role of physical infrastructure in the economy has merited and received a lot of attention from policy makers. It is believed that around 710 percent of produce is lost in Transportation and Warehousing in the agricultural supply chain35. etc not all of them directly serving the rural areas or agriculture. . Innovative techniques like drip irrigation have not made inroads into Indian agriculture despite the fact that the two main staple crops – rice and wheat consume high quantities of water per unit area of cultivation when compared to other crops such as sorghum and beet. While the 2009 budget augments the funding for national highway infrastructure. In 2005. GM-Concor. These projects also aim to increase farmer incomes through a participatory approach that encourages diversification into higher value and less water-intensive crops. by when India’s demand is expected to exceed all known sources of supply. a World Bank report36 examined India’s water situation. India has a power deficit of over 20GW (18 percent peak deficit)33. However significant investments have been devoted to power. All rights reserved. highways. The govt.Power. HD Gujrati. an Indian Partnership and a member firm World Bank network of independent member firms affiliated with KPMG International. Further.

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Role of Organized retailing in improving Agri-infrastructure The emergence of organized retailing in recent years has increased demand for quality produce leading to rising private sector investment in supply chain infrastructure. Backward integration by organized retailers is expected to have positive implications on the entire agri-value chain. Organized retailing can empower farmers with technology and provide them better market access. It can help to lower marketing costs by bringing the farmers and retailers closer, leading to lower prices for consumers and higher realization for farmers. Many retail players such as Relaice, Bharti-Walmart retail, Aditya Birla retail, etc. have invested in improving the back-end processes of the supply chain. The growth of organized retailing is likely to increase private investment and lead to improved capital, infrastructure and human resource formation in the agriculture sector.

Reliance Farm to Fork Model
Contract farming Integrated rural hubs for procurement and processing Cold chain and warehouses Transportation Food Retailing

• Contract farming for
fruits and vegetables along with integrated production management

• Acquiring tracts of land in
several states to serve as integrated rural procurement and processing hubs for aggregation and segregation

• Hub and spoke
model with large wholesale terminals feeding into distribution centers

• Integrated logistics
services across road, rail, sea and air

• A network of
discount stores, hypermarkets, supermarkets and convenience stores to cater to both the urban and rural population

• Fruits and vegetables
to be focus areas but other cash crops and grains also on the radar

• Already in advanced negotiation
for 700 acres in Punjab

• Focus on cold
chain as well as green houses

• Similar plans to be replicated in
4-6 states across India

• Largely owned but
convenience stores under franchisee model for quick rollout

• Modeled along the traditional
village marts, these will also serve as retailing points selling agri-inputs and delivering credit and financial services

• Dry groceries, fruits
& veg, dairy to be focus areas

• Also investing in food parks and
processing hubs in Punjab andHaryana to enhance value addition
Source: KPMG Report ‘Processed Food and Agribusiness - Opportunities for Investment in India’ 2007

• Export opportunities
to Europe and Middle East

© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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5. Marketing Infrastructure
In addition to direct physical infrastructure required to support the agricultural sector, there is a strong need to supplement it with marketing information / intelligence while addressing various challenges in the supply chain.

5.1 Marketing Intelligence / Marketing Information
Even though there has been considerable progress to provide farmers with market information relating to prices, farm inputs and weather forecast, such information in remote rural villages is not easily accessible. Small and marginal farmers in India generally have limited access to pricing information and knowledge regarding improved and mechanized farm techniques, which could improve their productivity. Farmers also lack ready access to quality inputs and critical information such as weather forecasts that could help them improve the quality of their produce.

Information access is often a tedious and time consuming process for farmers due to less developed media & communication infrastructure in rural regions. Although the Government uses the radio and television to broadcast market prices, the low penetration of radio and television media at 19 percent and 41 percent respectively in rural areas beats the purpose1. Penetration of print media is equally low; 28 percent in rural regions, due to low rate of literacy rate in

1R K Swamy BBDO guide to Market Planning, Volume II, 2007

© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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remote rural villages. However, on the other hand, the price quotations are also sometimes not reliable owing to the time-lag. Due to improper access to market intelligence and pricing trends, farmers readily accept whatever price is offered to them by the mandi traders. As a result, traders are well-positioned to exploit the farmers through practices that sustain system-wide inefficiencies. Farmers have limited or nil knowledge of the price obtained by intermediaries in the wholesale market. Such inefficiencies drastically increase transaction costs and slash potential profits for the rural Indian farmers. Hence, there is an urgent need to make the farmer aware of price trends for various crops so that he can accordingly plan his choice of produce. In recent times, private players have well supported the Government efforts to spread marketing intelligence among farmers. ITC’s e-choupal and the operations of other players like Tata’s Kisan Sansar have strengthened the competitive ability of small farmers in India. Co-operative farming is considered to be a boon in a country where land holdings are marginal and farmers are exploited to sell their produce at a price which does not even recover their cost. e-choupal – Private sector initiative connecting farmers electronically e-choupal is a one of its kind initiative launched by ITC, which assists farmers in making informed decisions to sell their produce at an appropriate prevailing market price.

© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

the sanchalak typically aggregates the village demand for these products and transmits the order to an ITC representative.000 to set up and about USD 100 per year to maintain. a Swiss cooperative.47 ITC e-Choupal Business Model The e-Choupal model requires ITC to make significant investments to create and maintain its own IT network in rural India and to identify and train a local farmer to manage each e-Choupal. because many farmers are illiterate. and serves an average of 600 farmers in 10 surrounding villages within about a 5 kilometer radius. The computer. “Bonus points. called a sanchalak. at prices lower than those available from village traders. The case study of e-choupal experience of ITC . Bowonder.org Value Chain Source: Developing a Rural e-hub. as well as to track global price trends or find information about new farming techniques—either directly or. The farmers can use the computer to access daily closing prices on local mandis. increasingly. are given for crops with quality above the norm. Each e-Choupal costs between USD 3. via the sanchalak. the farmer then transports his crop to an ITC processing center. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. They also use the eChoupal to order seed. is linked to the Internet via phone lines or. the sanchalak benefits from increased prestige and a commission paid to him for all e-Choupal transactions. Source: digitaldividend. At harvest time. the e-Choupal system bypasses the Government-mandated trading mandis. All rights reserved. fertilizer. The farmer is then paid for the crop and a transport fee. where the crop is weighed electronically and assessed for quality. typically housed in the farmer’s house. by a VSAT connection. e-Choupal Conventional .B. incurs some operating costs and is obligated by a public oath to serve the entire community. and other products such as consumer goods from ITC or its partners. Vinay Gupta and Amit Singh © 2009 KPMG.000 and USD 6. ITC offers to buy the crop directly from any farmer at the previous day’s closing price. but the host farmer. In this way. which are ” exchangeable for products that ITC sells. The cost of using the system is negligible.

Additional returns could also be generated with written approval from the Mandi Board from the advertisements made at mandis about the agricultural produce and related items such as fertilizer. Objectives The project was implemented to formalize and reorganize the agriculture trading business of Mandi Board by installing cost effective digital infrastructure using the latest information and communication technology to collect and deliver real time information online. in various mandis • Choice to decide when and where to sell • Sell the produce at door through e-Trading • Reduction in losses due to transportation and handling Traders • Transparent procedures and single window disposal • Reconciliation of daily sales. pesticides. a Swiss cooperative. transit permit • Availability of rates in various mandis will help in offering competitive rates to farmers Benefits • Reduction in transportation losses Mandis • Instant reconciliation of accounts. the vendors received remuneration as a percentage of mandi fees. which can effectively lead to good governance through dissemination of information Source: www.in/egov/ifip/dec2006/article1.iimahd. and empowering them through accurate and timely information for effective decision making.mit. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. The infrastructure developed would eventually lead to grain-less Mandis and obviate the need for physical movement of agriculture produce from the farmers' premises to the Mandis. All rights reserved. • Instantaneous access to even remote locations through VSAT connectivity. The project was rolled out by vendors on a BOO basis and was responsible for developing and maintaining necessary infrastructure.PDF 3 www.in/download/e-ready/Chap4.3 Business Model The Madhya Pradesh Government adopted the BOO model to accelerate the project for conserving public resources and secure best technical support in a fast changing technological world. . agriculture produce export order. arrivals etc. transit permits receivables and payables • Effectively monitor its activities • Facilitate implementation of contract farming • Ensure transparency in operations Government • Speedy collection. income tax. to make the operations more effective and completely transparent.mit. seeds. In return. The project is executed on Build-Own-Operate (BOO) basis with a consortium of vendors. farm practices.48 EKVI (e-agricultural marketing) .htm © 2009 KPMG. etc.gov.ernet. etc. analysis and dissemination of information to farmers and traders • Improved tax revenue collection by collating this data with commercial tax.gov. thus benefiting all stakeholders (Farmers. accounts. Traders and the Government).An initiative by Madhya Pradesh Government Background EKVI (e-Krishi Vipanan) is the e-Agriculture Marketing project taken up by the Government of Madhya Pradesh as a part of its e-Governance initiative to facilitate the farmers of the State in taking informed decisions for selling their produce2.2 Farmers • Availability of latest information on rates.in 2 www.

Due to little knowledge about price movements. All rights reserved.49 FOODNET: Transforming the lives of farmers in Uganda through power of information The farmers in Uganda were at the mercy of traders when it came to selling their produce. just like their counterparts in India. For e. FOODNET provides service through FM radio and mobile phones. Farmers in Uganda have found this quite useful and are believed to realize 10-15 percent higher farm gate prices. with the introduction of FOODNET. a regional agricultural network the farmers. and consumers are able to obtain accurate market information whenever they need it. Source: May 2004. .g. who were able to force down the prices and were able to pocket excessive commissions. Every week FOODNET broadcasts a 15 minute radio programme to the nation via 12 FM radio stations in eight local languages. a Swiss cooperative. typing a keyword such as ‘Maize’ will provide an instant update on the prices of maize on markets across the country. ‘FOODNET: information is changing things in the marketplace’ © 2009 KPMG. traders. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. an SMS based price database can be accessed by just typing a keyword. However. Alternatively. farmers were exploited by traders.

Companies like Amul have achieved considerable success adopting this mode of farming. of village societies Total milk handling capacity (million litres per day) Milk collection (billion litres) Milk drying capacity (mts per day) Cattlefeed manufacturing capacity Source: Amul India: The taste of success. Amul was formed in 1946 as a dairy co-operative movement and is managed by the Gujarat Co-operative Milk Marketing Federation Limited (GCMMF).Marketing information through co-operative farming India has witnessed some success in co-operative farming in areas of milk. and processes and markets the fluid milk and products 1 Village Society A village DCS is formed by milk producers and any producer can become a member by buying a share and committing to sell his stock of milk exclusively to it The Amul Statistics Members Union No. Amul is regarded as an epitome of faith which enabled farmers to lift themselves from poverty and created a socioeconomic revolution in the country. February.A Three Tier Structure The district unions in state comprise the state federation.141 10. Business Outlook. 2007 2007-08 13 13. fertilizer. The success of Amul lies in its business model where producers are involved at every stage of operation in addition to professional management which ensures its working similar to that of a private corporation. The Amul Model is an integrated co-operative structure that procures. All rights reserved. processes and markets milk and milk products. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. and sugar but the primary area of grain farming is still far from witnessing success. The AMUL Model .69 626 3090 © 2009 KPMG. which is responsible for marketing milk and milk products of the member unions 3 State Federation 2 District Union A district union is owned by dairy co-operative society (DCS) which buys the milk from all the societies. .50 The AMUL (Anand Milk Union Limited) Model .21 2. a Swiss cooperative.

A single cup is fortified with sufficient nutrients to meet 30 percent of a child’s daily requirements. solar power and biogas. was started by a collaboration of Groupe Danone and Grameen bank to produce a healthy and affordable yogurt targeted to the poor families. which is substantially less than other products in the market. . The milk processing factory relied more on low cost labor and less on technology. Grameen Danone created a local supply chain from scratch. The milk was procured from local farmers who were trained by Grameen Danone. Today.51 Grameen Danone Foods Ltd. Source: Grameen Bank Website © 2009 KPMG. Also the cups for yogurt were made of biodegradable cornstarch to reduce environmental impact. All rights reserved. • Environmental sustainability – The factory was designed to use harvested rainwater. Bangladesh: Success story of a co-operative Grameen Danone Foods Ltd. local women were employed who went door to door in order to sell the products. The success can be attributed to the following factors – • Holistic value chain approach – Grameen Danone’s value chain was simple and involved local community. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Grameen Danone is marketing a 60g cup of yoghurt at 6 cents. To keep costs low. a Swiss cooperative. For distribution and marketing. The model benefits local producers and entrepreneurs while keeping production and distribution costs low.

. The direct impact of the emergence of intermediaries is low price realization by the farmers. All rights reserved. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. This prevailing environment leads to a supply chain that has several intermediaries from the farm to the consumer.Opportunities for Investment in India’ 2007 The agricultural market in India today is dominated by 7 .500 Government authorized marketplaces or mandis.2 Marketing Supply Chain Presence of too many intermediaries Source: KPMG Report ‘Processed Food and Agribusiness . small farmers have limited access to these wholesale markets and they largely rely upon middle-man or commission agents in local rural markets to market their produce given the price risk and time risk of perishable products. Mandis are secondary wholesale markets located in major trading centres that gather large part of farm produce from various rural primary markets. transit and other taxes and service charges levied at various layers. The intermediaries appropriate a sizable proportion of the final sales © 2009 KPMG.52 5. The unreasonably long supply chain results in steep escalation in the total cost owing to procurement. a Swiss cooperative. which are governed by state specific APMC Acts. However.

. Since each intermediary works out a margin for himself keeping the cost escalation in the next phase in mind. the networking or clustering of farmers for the purpose of marketing of their surpluses can be achieved through alliances such as contract farming or cooperative marketing. In view of the predominance of small and marginal farmers in the country. Strengthening the supply chain can benefit the consumers and producers by 20-25 percent4.53 as their service charges. Due to such inefficiencies in the supply chain. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. a Swiss cooperative. and the need for improving their viability in the changing and competitive environment of agri-business. Direct marketing of agricultural produce helps in complete elimination of middle men and commission agents who charge a high level of commission fee from the agriculturists / farmers. better inputs and irrigation facilities. it has been estimated that the price received by the farmers is only about 24 to 58 percent of what the consumer pays. Some of the most efficient and effective models have been discussed below: 4 ICRIER Working Paper 197 © 2009 KPMG. Various direct marketing models have emerged that dilute the power of intermediaries to an extent. All rights reserved. This also helps farmers to take advantage of mechanized farming. leading to economies of scale. it is the farmer (being the first seller) who bears the ultimate cost. Direct Marketing – A step closer to the final consumer Rise in farmer income and reduction in food prices paid by the consumer can be made possible through direct marketing.

one ton of sugarcane produces 140 Kg of Sugar6 (vis a vis 100 kg in India. having achieved leadership status in a wide range of agri products including sugar. . All rights reserved. Thus. Brazils Performance in the Export market (2005) World rank Commodity Exports Ethanol Beef Poultry Corn Pork 1 1 1 4 4 Production 1 2 3 3 4 Market share of global exports 51 24 35 35 13 Export growth rates. Brazil – Direct farmer processor linkages and operational efficiency Brazil is an outstanding success story in agri and food exports. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.g.org/wiki/Rythu_bazaar 6 Rabo Bank Report. farmers bring vegetables and sell directly to the consumers. It has helped in reduction of prices in other vegetable markets and vendors. orange juice. 85 kg in Argentina) in Brazil which is among the highest in the world.wikipedia. 2000-05 79 32 31 48 40 5 en. a Swiss cooperative. thereby eliminating middlemen who exploit both farmers and consumers alike. Ministry of Food Processing Industries © 2009 KPMG.54 Rythu Bazaar (Farmers Market)5 Rythu Bazaar was conceptualized by the Government of Andhra Pradesh in 1999 with the following objectives: • Provide direct interface between farmers and consumers. oilseeds etc. the produce available is economical and farm fresh. For e. meat. helping ensure farmers adopt best practices to enhance crop productivity • The other key enabler is the free market system which has ensured that processors and farmers aim to maximize operational efficiencies.eliminating intermediaries in trade • To ensure remunerative prices to the farmers and provide fresh vegetables to the consumers at reasonable rates fixed every day • Facilitate prompt realization of sale proceeds to the farmers without any deductions • Curb malpractices The Rythu Bazaar Model In this market. The key underlying factors which have enabled Brazil to achieve this position are as follows: • Direct farmer processor linkages: This has had multi-fold benefits including enabling processors to achieve scale in operations which has led to development of sustainable business models.

A seven-step mechanism is required to set-up a research-development-technology transfer continuum involving all stakeholders: • Problem identification and prioritization • Convergence of existing technologies to match the need • Generation of need-based viable technologies using the holistic farming system approach • On-farm assessment and evaluation • Feedback on the technologies • Refinement of technologies. prioritizes the research agenda rationally. In order to improve farm productivities. . continuous introduction and implementation of innovative technologies calls for existence of a strong R&D network. but Indian agriculture is yet to see something on that front. extension. and recognizes that the research mode is not always best suited for product development and delivery. a convergence between R&D agencies within individual ACZs is required. except perhaps in the area of dairy farming thanks in large part due to co-operatives such as AMUL. the efforts have not been rewarding. Since farm-level problems are specific to agroclimatic zones (ACZs). This is purely because of lack of a clearly stated strategy that assigns definite responsibilities. leading to practically no scope for enhancement An exemplary shift is required to transform the present commodity-centric research to a systems approach.1 Research and Development Research and Development (R&D) is another link in the agricultural ecosystem. nothing on that scale has been achieved since. a Swiss cooperative. While substantial investment is made in this regard. Several experts have argued for the need for a second green revolution especially in the area of horticultural products. Some of the common problems ailing the agri-R&D in India are: • Commodity-centric R&D: Lack of a holistic approach involving a matrix of farm enterprises • Compartmentalization of R&D agencies: Lack of effective bilateral flow of information amongst research.55 6. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. which has seen mixed development. While the green revolution ushered in remarkable changes in India’s agriculture. if necessary • Helping ensure timely availability of inputs © 2009 KPMG. This can help bring region-specificity in technologies and their time-bound assessment. Soft Infrastructure 6. All rights reserved. and implementation departments • Poor validation and feedback mechanisms: Lack of large-scale on-farm validation of techniques and feedback thereon.

6. starting from the development of basic literacy skills. a Swiss cooperative. All rights reserved.56 While the above discussed R&D from a systemic standpoint. Public policy should prioritize human resource development at all levels. . To achieve this. Attaining competitiveness in the agro-industrial sector necessitates the development of a broad range of skills at all levels. Indian agriculture also faces issues which relate to the development of human resources. beginning with the farmer. research institutions. through management. research and development. Hands-on approaches to training must be strengthened across a broad spectrum. networking and the development of partnerships between academia. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. vocational and technical guidance to professional qualifications. policy-makers and industry are key mechanisms to transfer technologies and knowledge. research institutions. education. Public policies must also seek to promote linkages between academia. policymakers and agro-industrial stakeholders. © 2009 KPMG.2 Human Resource Development Advancement of any industry depends upon availability of skilled human resource and the agriculture industry is in dire need of highly skilled and trained manpower across different levels to handle various operations. Human resource development needs to cover the entire range from basic infrastructure.

57 The need for context appropriate training and capacity building at all levels starting with farmers is essential. . as is the need to put knowledge into practice. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. a Swiss cooperative. All rights reserved. © 2009 KPMG.

Education is one such component of support infrastructure for agriculture and also a vital driver of human resource development. with attention being paid to activities directly relating to agriculture such as pre-harvest or post-harvest. Incomes and education are of course least among agricultural labourers.3 Support Infrastructure The role of support infrastructure alongside Human resource development in enabling the growth of the sector is ignored often by both policy makers and sector practitioners. Education Half of those engaged in agriculture are still illiterate and just 5 percent have completed higher Secondary education. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. June. . 2008 © 2009 KPMG.58 6. Ensuring food security and farmer welfare thus require support systems to extend technology and scale benefits in a sustainable manner to a huge existing workforce in agriculture that lacks nonfarm skills and is also ageing. a Swiss cooperative. All rights reserved. Graduation Rates by Fields Source: Global Economics Paper No: 169.

In many instances. Thus. food grains.59 India’s state supported agricultural education system consists of one Central Agricultural University. forty-five State Agricultural Universities (SAUs) and four National Institutes of Indian Council of Agricultural Research having the status of deemed universities. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. are not very strong. etc.P Pal Memorial Lecture at the National Academy of Sciences. In addition to the institutes engaged in agricultural education. A Blueprint for Green Energy in the Americas 2007 Garten Rothkopf . Brazil’s SENAR Brazil which also faced the problem of low education in people employed in the agricultural sector. agro-industry and agriculture. MANAGE (Hyderabad) and Agribusiness Management (ABM) programs at IIMA and IIML. 1999 . not just in terms of placement of the students. However a gap remains for educating people at the basic level. among others. There are other education institutes and research centres which are dedicated to certain niches such as veterinary sciences. established an agency. there are institutes/programs dedicated to agri-business management such as IRMA (Anand). FAO 2004. . All rights reserved. common in other nations. India has. Allahabad. particularly medium and small producers. Sources: Training for Rural Development in Brazil: SENAR. vegetables. SENAR combines literacy education with occupational training. SENAR devoted to the rural sector in 1991. to improve productivity and expand output. not only are the resources engaged in agriculture under-educated. Another focus is the preparation of workers. © 2009 KPMG. the linkages to industry. and individual businesses. due to various historic reasons. but also in engaging in industry sponsored research programmes . a Swiss cooperative. In this context. medium. extractive exploitation of animal and vegetable resources. developed an agricultural education system which is somewhat isolated from the rest of the education disciplines1. SENAR has formed an effective partnership with SEBRAE (Brazilian Micro and Small Business Support Service) a public.a vital feature of the university system in other countries. Further. The majority of workers reached by SENAR to date work in cattle raising. even the educated students are removed from the benefits of inter-disciplinary interactions. especially in rural areas. 1 Suresh K Sinha’s B. non-governmental organization that supports small. The stated mission for SENAR (National Service for Rural Apprenticeship) was to develop rural occupational training and social promotion activities for men and women who work in rural areas.

being relevant to the rest of the population as well. © 2009 KPMG. and prophylactics will go a long way in ensuring human health also. responses to recent threats such as the bird flu disease shows that India’s preparedness and infrastructure is low with respect to the health of animals and other organisms which are part of Indian agriculture. a Swiss cooperative. While the interventions required in healthcare infrastructure for humans are not specific to the resources engaged in agriculture. its role as a fundamental element of the support infrastructure in contributing to the development of the economy (the agricultural sector included) has not received much attention. The Indian agricultural institutions would do well to work with industry players on not just design of their curricula but also on areas that merit immediate attention such as crop varieties that also aid in water conservation. The health of the human population is intimately connected to the health of the animal with several fatal and debilitating diseases being common to both man and animal. it is widely known that infrastructure for secondary and tertiary healthcare is inadequate in India.60 A holistic approach to agricultural education in planning future programmes may yield better results than the skewed state we see in India today. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. . These would need to be addressed as part of efforts to improve general health and well being of the Indian populace. Various opportunities to develop resources exist in areas such as food processing in India which itself remains at woeful levels. disease diagnosis. While India has not been subject to national epidemics of the scale of the Mad Cow disease that swept across the UK and other parts of the world in the past. All rights reserved. Health Infrastructure Healthcare in India has not received its fair share of attention from policy makers and as a result. Serious attention to animal health care.

indianexpress. All rights reserved. in 2008. Leakage1. FCI and State godowns will have to improve storing facilities and checking methods. Alternatively while FCI can continue to set policies. . the logistics can be outsourced to private players while targeting the dual benefits of reduced investment for FCI as well as increased efficiencies due to market forces. Irregularities in identification of BPL families.financialexpress. etc. FCI’s role in procurement and distribution of food grains needs a rethink. 1 www. controlled procurement of the grains needs to be ensured to avoid overstocking. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. while the government has constantly increased its expenditure on food subsidy the growth in off takes (Rice & Wheat) has not always increased.com/news/10-lakh-tonnes-of-food-grains-damaged-in-fci-godowns/330283/ © 2009 KPMG. Agricultural Policy by nature has linkages with not just the agricultural sector but also with industrial policy promoting investments across various sectors incl. a Swiss cooperative.com/news/house-panel-finds-over-50-leakage-in-pds/303392/0 2 www. roads. financing. over ten lakh tonne of food grain worth millions of rupees was found damaged over the last decade and additionally FCI spent around INR 25 million to dispose these rotten food grains in addition to around INR 2. Agricultural Policy The role of policy in unlocking the potential of Indian agriculture can’t be overstated.61 7. Losses due to poor quality of packing material and Damaged food grains2. In a telling comment on the inefficiency plaguing the PDS. The storage capacity will also have to be increased to achieve the target or the existing facilities will have to be scaled up. Moreover. Pilferage & theft.4 billion to prevent the loss of food grains during storage. As the graph below shows. Growth in Off take of Rice & Wheat vis-à-vis Food Subsidy Source: Department of Food & Public Distribution This could have been due to host of reasons including Food diversion. retail. As discussed under post harvest section.

Chattisgarh. Puducherry. Meghalaya. Contract farming. Goa. Gujrat. Andaman & Nicobar Island. No. Another key piece of regulation in the agricultural sector especially for horticultural produce is the APMC Act. Orissa. Daman & Diu & Lakshadweep Tamil Nadu Mizoram. Arunachal Pradesh.62 The role of the central government in fixing MSP could be re-examined in the light of findings of the High Level Committee on Long-Term Grain Policy3. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. All rights reserved. Name of State/ Union Territory Andhra Pradesh. The Government of India has circulated model legislation titled “The State Agricultural Produce Marketing (Development and Regulation) Act. Himachal Pradesh. Stage of reforms States /UTs where reforms to APMC Act has been done for direct Marketing. a) Direct Marketing NCT of Delhi 2 States/ UTs where reforms to APMC Act has been done partially. Status as on 31st Mar 09 © 2009 KPMG. J&K. providing a tool to audit as well as track food stocks. Jharkhand. Uttarakhand. States/ UTs. West Bengal. is a step in the right direction and could be extended to freight as well and not just stocks. The states have also attracted considerable attention due to the incentives they offer to attract investment. 2003” to bring about reforms in agricultural marketing. Sikkim and Tripura. discussed earlier. has developed into a hub for food processing industries in particular. Rajasthan. 2008-09. . States/ UTs where there is no APMC Act and hence not requiring reforms. Maharashtra. Further pricing control could be devolved to the states & FCI intervention could be selective where states aren’t adequately geared up4. Madhya Pradesh. Manipur. NCT of Delhi and Uttar Pradesh 1 5 Some of the northern states have also tried to boost the development of agriculture and agri-business industries through various policies over the years and also through proposed measures. Technology needs to be leveraged to bring about greater discipline in the system beginning from tracking status of trucks transporting stocks to ensuring real time stock status at FCI depots. while other states are in the process of amending their respective APMC Acts (see table below for details)5 Sl. c) Private Markets: Punjab and Chandigarh 3 4 Bihar*. Punjab. The table below provides a snapshot of policies across four key northern states. b) Contract Farming: Haryana. Haryana. direct marketing and public-private partnership in management and development of agricultural markets are the major instruments of change among others. and Chandigarh. Assam. Baddi in Himachal Pradesh for instance. Karnataka. Kerala. Contract Farming and Markets in Private/ Coop Sectors. a Swiss cooperative. where APMC Act already provides for the reforms States/ UTs where administrative action is initiated for the reforms. Dadra & Nagar Haveli. Twenty-five states/UTs have already amended their APMC Acts/made varying provisions for the purpose. Nagaland. The Integrated Information System for Food grains Management. 5 Economic Survey of India.

New Agro Industrial Policy. incharge of Departments of Finance. Baddi. to come forward and set up such centres/ institutes. apex cooperatives institutions. Rajasthan New “Rajasthan Agribusiness and Agro Industries Development Policy” drafted for the focused growth of agro sector.63 Punjab New policies Himachal Pradesh Uttarakhand Planning to give interest-free loans for setting up selfemployment agriculture industry (SAI) units under the (SAZs) scheme which is likely to privatise mandis in the new Mandi Act. Paonta Terrace Sahib. A medicinal and aromatic plants export zone has been established covering seven districts and specialised herbal parks are in the offing concessional rate and 50 percent initial seed capital matching the industry contribution within a ceiling of INR 60 millions. Setting up of Single Window Clearance Agency and Monitoring Authority under the chairmanship of the Chief Minister. special agriculture zones industrialization in the field value industrial cash crops. provide Single Window Clearance to Agriculture and Food Processing Industry Corporation of Uttarakhand at Industries. Encouraging more partnerships Dialogue initiated with the province of Manitoba. fermentation. a Swiss cooperative. Single window A special cell called Udyog schemes Sahayak (industry facilitator) set up to help entrepreneurs obtain speedy clearances for setting up industries in Punjab. mushrooms. Govt. to be implemented . tea gardens. APMCs etc. Goalthai and Sansarpur escort services to the © 2009 KPMG. dairy the first phase. All rights reserved. All knowledge electronics and biotechnology have a separate single window service mechanism under Punjab Information and Communication Technology Corporation Ltd. sector industries. the government proposes to and other processed products have agro-based units like which have immense scope in fisheries. Agriculture to driven industries such as IT. to achieve rapid of agriculture and agroprocessing. the centres will also be maintaining a data bank State Government has constituted an Empowered Committee consisting of Secretaries. Canada to set up a joint task force to explore new avenues of investment in agriculture sector in Punjab. nutraceuticals commercial micropropagation.Punjab Agro Industries Corp Ltd (PAIC) (state govt's nodal agency). The State Sericulture farm transferred to Government will support such primary co-operative societies projects by providing land at for better management. farming and various other agriculture and horticulture activities. ‘Herbal Biobusiness Valley of India’. vermicompost. . Apart from providing information and entrepreneurs.Plans to convert state into a 2009 to be announced. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Parwanoo. along with single window agencies at major industrial towns like The single window contract facility would be available at the District Industrial Centres at the District level and State Industrial Development the state level. Under the SAZ programme. The areas identified as priority biobusiness include bio-business through high organic farming. Horticulture Farms have Proposes to encourage private been leased out to private sector entrepreneurs in order to attract technology and investment in production of planting material.

The assistance to the hill state came under Rural Infrastructure Development Fund (RIDF). Sirmaour and Solan districts) and 15 rural drinking water schemes in the state. a Swiss cooperative. Shimla. 3 percent per annum back ended interest subsidy for first 7 years. . have been created to Himachal Pradesh NABARD sanctioned an for 19 minor irrigation Uttarakhand Rajasthan A provision of INR 100 million The State Government will is being made for the soiltesting project with the reimburse 50percent cost of preparation of the project industrial units subject to ceiling of INR 0. Kullu.6 million. Kangra. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. All rights reserved. government taking the help of report to set up new agro institutions for this purpose. 5 lift irrigation and 2 scientists of reputed national Interest Subsidy and exemptions 5 percent back ended interest subsidy for 5 yrs (proposed). Source: Press releases. IBEF State government websites. © 2009 KPMG. State draft Agriculture policy plans. public private partnership state websites . Infrastructure Development Cess and other taxes/levies would Interest subsidy of 10 percent Reduce Vat from 4 percent to for five years for foodprocessing units. Ministry of Food Processing Industry (MFPI) and the Natural Medicinal Plant Board (NMPB) subject to a maximum limit of INR 2 million 6 percent back ended interest 1 percent on all food products subsidy for 7 yrs (proposed) be rationalised and change Sales tax relief & electricity in land use charges would duty waiver for be waived off while External Development Charges would be reviewed in the proposed new agro-policy 12 years (Category-A): 9 Years Category-B) & 7 Years (Category-C). Market Development Fund assistance of INR188 mllion provide financial assistance (comprising 12 flow irrigation deep tubewell schemes for Bilaspur. The state government is also providing subsidy for projects under various schemes of Agricultural and Processed Food Products Export Development Authority (APEDA). Financial Assistance will be released after the Unit is set up and commences its operations. schemes. and on packaging material. National Horticulture Board (NHB).64 Punjab Financial assistance/ Subsidy Rural Development Fund. Sales tax exemption for food processing units for 10 years. Mandi.

. yield a few key recommendations for the sector. © 2009 KPMG. A group approach could also improve the bargaining power of small cultivators. 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. promoting growth in one state due to favourable policies while another stagnates. the agricultural strategy must focus on the 85 percent of farmers who are small and marginal.65 8. to high levels of collective functioning such as land pooling or even joint purchase or leasing of land and joint farming. there are differences between states in regulation which could create imbalances in the agricultural ecosystem. 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. In future. All rights reserved. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. 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. as well as the success of various programmes both public and private. incl. States should learn from one another at the time of policy development. if a region is targeted for a specific crop. international examples. 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 economies of scale. Soil health awareness must be promoted through a credible system of soil testing and of advice on nutrient needs based on soil tests. 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. a Swiss cooperative. Recommendations Our discussion of various issues and challenges plaguing the sector. The approach could range from low levels of collective functioning such as joint investments in lumpy inputs such as tube wells or co-operatives for input purchase and marketing. Inclusive growth and group approach For growth to be at all inclusive. Uniform Policy Framework As the APMC Act implementation has shown.

developmental initiative between India. 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. the Centre’s plan to support the KVKs and ATMAs should be synergized and made part of a comprehensive and participatory district planning process. Education. Brazil. such as animal husbandry must be increased and the scope of Strategic Research Extension Plans (SREP) enlarged.essential for improving the efficiency of water use. Partnerships such as IBSA1 could be leveraged on setting up a similar scheme. NGOs. States must begin by filling up field-level vacancies in extension and provide much better training. Filling information gaps Agricultural extension is critical for narrowing the more general knowledge gaps that exists in our agriculture. © 2009 KPMG. .66 Modernizing Irrigation Systems & Techniques Greater emphasis is required on investments in physical rehabilitation of existing water reserves and on modernization of irrigation systems . 1 IBSA is a trilateral. Industry bodies such as ASSOCHAM. Research & Training India would do well to learn from international examples such as SENAR. Currently there are PPPs in the areas of contract farming. That would have the useful by-product of improving inclusion while furthering the cause of Indian agriculture. ATMA’s capacity in relatively neglected areas. drip irrigation projects and terminal markets among others. All rights reserved. a Swiss cooperative. Brazil and South Africa to promote SouthSouth cooperation and exchange. 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. Alternate delivery channels spanning Rural Knowledge Centres. At the same time. and the private sector should also be promoted simultaneously. farmer-to-farmer extension. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. However the scope of these projects is still limited and they serve as examples or models rather than be the norm. CII. ICT-based extension. Public Private Partnerships (PPPs) PPPs could be a useful tool to accelerate development in various areas of agribusiness. including at SAUs.

12th March 2008 © 2009 KPMG. Public and private players in collaboration with policy need to play a pivotal role in promoting investments in agriinfrastructure and through this transformation enable rural India to grow and prosper. 1 For A New Deal To The Rural Poor. infrastructural and marketing facilities. .67 9. With agriculture being the primary employer of more than half of India’s population. Larger irrigation facilities. Conclusion India has emerged as a major global economic power with the economy registering high growth rates in the recent past. an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International. Challenges with hard and soft infrastructure coupled with poor communication and financing have created a lot of distress for stakeholders in agriculture particularly the marginalized subsistence farmer. better seeds and agri-inputs at reasonable costs will have to be provided to farmers. vocational and technical guidance to professional qualifications. It is imperative that considerable efforts are made to extricate the sector from stagnation. and markets. financial resources. Rural regions have not been able to match their urban counterparts. One of the key reasons for the stagnation of India’s agriculture is falling productivity levels rooted in structural challenges that have seeped into the entire rural supply chain. but this progress has not been uniform. With more than 70 percent1 of India’s population living in villages. particularly the underprivileged rural peasantry. The development of rural India is essential for sustaining the current growth levels in the country. The access to improved inputs and technologies will have to be coupled with provision of finance. The Hindu. Advancement of any industry depends upon availability of skilled human resource and the agriculture industry is in dire need of highly skilled and trained manpower across different operational levels. Agriculture needs to become an income generating activity and farmers should not be left to the uncertainty of weather. education. Parts of India have started to display signs of affluence. a Swiss cooperative. India’s agriculture sector presents immense opportunities for investments if various stakeholders collaborate and develop innovative and effective models that not only look at addressing the issues in India’s agriculture set-up but also introduce best agricultural practices. the benefits of economic growth have failed to percolate to more than two-thirds of its people. All rights reserved. Human resource development needs to cover the entire range from basic infrastructure. improvements in the sector could go a long way in enhancing the standards of living in the rural hinterland.

he can be reached at anandramanathan@kpmg.com D. Based in the firm’s Mumbai office. Dharmendra is a Senior Consultant in KPMG’s Consumer & Industrial Markets practice. . Shilpa Taneja.com Anand Ramanathan is a Manager in KPMG's Consumer Markets and Retail practice. Ananya Shah. Based in the firm’s Bangalore office. Rajiv Parekh. Simrat Singh. he can be reached at ddharmendra@kpmg. Sachiv Mehta. Kunal Jain. Based in the firm’s Mumbai office. Ashish Punjabi. Upasana Juneja. Jiten Ganatra and Nisha Fernandes. Based in the firm’s Bangalore office he can be reached at rameshs@kpmg.com The Authors wish to acknowledge the contributions of Preeti Sitaram.Acknowledgements Ramesh Srinivas is an Executive Director in KPMG's Consumer Markets and Retail practice. Analytics and Knowledge practice.com Sonia Topiwala is a Consumer Markets and Retail Analyst in KPMG’s Research. she can be reached at stopiwala@kpmg.

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