BW Communities

Beckoning Solutions

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[TIME TO INNOVATE: Floating rice farming helps protect paddy when floods strike (Reuters) Unlike the financial sector, agriculture does not have quick-fix or sexy solutions. Unlike Wall Street investment banks, which can get a $200-billion booster dose to help recoup losses, farmers cannot aspire to lucrative valuations by private equity firms. Agriculture demands endless patience, meticulous micro-level planning and an integrated approach to the implementation of plodding programmes on soil upgradation, water conservation and pest management. Even when they are done, they take years to yield results. Scholars like Utsa Patnaik of the Centre for Economic Studies, Jawaharlal Nehru University, closely track the impact of agricultural policies on rural lives in India. Time and again, they have shouted themselves hoarse on the crises looming over India’s food security. Sadly, food scarcity will affect the already poor farmer the most. Despite India’s phenomenal growth story, he has not seen his income rise. Instead, in a cruel irony, his unrewarded toil feeds a burgeoning urban population (see ‘Who Will Feed India’ on page 34), we were acquainted with the problems that beset Indian agriculture. Here, we look at a set of feasible solutions that could offer relief. India’s highly-fragmented land holdings can benefit from the scale and efficiency inherent in contract farming, cooperatives and agricultural economic zones (SEZs). For these models to succeed, the underlying mechanisms for good credit, latest technology, quality seeds, right fertilisers, marketing support and remunerative prices are essential. Related Stories Who wil feed india? Distributing Food Better 'There are no easy solutions' Growing Distress Food For Thought Life And Debt When Will Contract Farming Work? Contract farming with corporate sponsorship has considerable potential but is not easy to implement. Farmers fear alienation from their lands, and the governing authorities have not invested any time and effort in dispelling their fears. “We need a code of conduct for contract farming to make it successful,” says M.S. Swaminathan, founder and chairman of the M.S. Swaminathan Research Foundation in Chennai. Productivity comes at a cost. It requires huge investments in technology and other inputs that India’s small and marginal farmers do not have access to. “The private sector can help a great deal, provided state governments free up land for sponsors to build scale in farming,” says Rakesh Mittal, vice-chairman of Bharti Enterprises, who is in charge of FieldFresh Foods, a joint venture between his company and the Philippines-based Del Monte Foods, a producer and exporter of processed fruits and vegetables in partnership with farmers. BUILDING SCALE: Firms such as Rakesh Mittal’s Bharti Enterprises can help farmers improve yields through technology (Amit Verma) At present, every state has policies that regulate land use. “As a single entity, you cannot have more than 17-25 acres either through ownership, long-term lease, or mortgage,” says Mittal. While he insists that a well-meaning corporation never intends to take away farmers’ land, the mistrust among the uneducated rural poor is real and evident. For instance, in Punjab, farmers believe that after six cropping cycles, land can be transferred to the entity cultivating crops on it. “But there is no such law,” Mittal points out. Given the unwillingness of farmers to part with their land, there are only a handful of examples of contract farming in India. “Contract farming is a good idea but for it to succeed, the partnership between the purchaser and the cultivator must be a win-win situation,” says Swaminathan. “Sustained contract farming must be based on some ethics and equity; perhaps there is a need for setting up a Contract Farming Council in every state.” It is not that India did not have a culture of contract farming in the past. The oldest example is the loose contract that sugar factories have with sugarcane growers. Similarly, agreements exist between cigarette companies and tobacco-leaf growers. “In fact, the best form of contract farming is between the government and farmers cultivating wheat and paddy,” says Swaminathan. “After all, the government fixes the minimum support price for rice and wheat every season, and buys the produce.” What corporations bring to the field is credit and technology, both of which require deep pockets. “Besides technological improvements, productivity is also a function of investment. All over the world, productivity increases have happened through an increase in high-cost inputs,” says Gokul Patnaik, chairman of Global AgriSystems, a consulting firm that specialises in agriculture. India, as is evident from foodgrain yields and stagnant productivity in the last decade-and-a-half, is still trapped in a low-input, low-output warp. “Instead of tractors, if we use laser technology, there is optimum use of pesticides because sprayers turn off and on when they detect foliage,” Patnaik points out. But such technology is unaffordable to farmers. Bharti’s FieldFresh Foods has made a modest beginning in contract farming. It works closely with about 80 farmers in Punjab, who grow baby corn over 500 acres in three cropping cycles, especially for exports. “We have an agreement with farmers to purchase their output at a pre-determined price. The quality too is specified in the contract,” says Mittal. In its very first year, these farmers earned 30 per cent more than they would have if they had continued cultivating paddy. {mospagebreak} What About Cooperatives? Almost two in three farmers in India holds one hectare or less, according to the agriculture ministry’s 2000-01 land census. Clearly, cooperatives can hold the key to this issue. But there is far too much political interference in cooperative societies. Prime Minister Manmohan Singh seems to understand this well. Way back in 2004, when the UPA came to power, he said, “Undue interference on the part of government will hamper the fundamental initiative for collective endeavour and ‘co-operative enterprise’.” In India, dairy and sugar cooperatives have worked very well. “But, I am not sure if we can replicate it for food grains,” says Verghese Kurien, who masterminded the country’s White Revolution with the Anand model of cooperative dairy development. “Agricultural cooperatives in India have largely been associated with low performance,” says Tushar Pandey, country head, and chief of strategic (government) initiatives in YES Bank. Agricultural economists feel farmers can scale up production, gain bargaining power and be equal partners in growth. “What can work is cooperative or group farming similar to what exists in Egypt for cotton, where the whole village manages pests and conserves water together,” says Swaminathan. Given the huge numbers of the rural landless, cooperative farming can pull subsistence farming out of its current mess. “But, there is no solution in the absence of political conviction to grow them (cooperatives). This essentially means we need to reduce political interference,” says Gopi Ghosh, officer in-charge, Food and Agriculture Organization (FAO). There is also an urgent need for existing cooperatives to reorient themselves to the changing times. There are only a few cooperatives, such as Amul and the Indian Farmers Fertilizers’ Cooperative, which have done well for themselves. Unfortunately, there is a problem in scaling up and replicating these successes in the absence of a sound regulatory framework. The government must establish an appropriate framework and invite the private sector to put together cooperatives along Public Private Partnership (PPP) models. “This will incorporate a social focus while enhancing the economic viability and efficiency of the undertaking,” says YES Bank’s Pandey. Nevertheless, Vijay Sardana, managing director of Anand Rathi Commodities International, feels that contract and corporate farming have been successful only where the output is pre-defined and huge investment in technology has been made. “But, both do not make the farmer a stakeholder. Cooperatives may be the ideal model to resolve the problem of fragmented land holding provided their activities are transparent,” he says. CONTRACT FARMING: Arrangements like PepsiCo’s deal with Punjab Agro need to be encouraged (Bloomberg) Organic Farming The rapidly-growing $26 billion (Rs 1.04 lakh crore) global organic foods market, in the US, Europe and Japan in particular, is the focus of a small group of farmers in India. “Organic farming is more affordable,” says Suman Sahai, president of the Gene Campaign, research and advocacy organisation. Organic agriculture practice involves preservation of natural bio-diversity and effective management of biological and natural resources to improve farm productivity. “Pest management can be done without chemical fertilizers, pesticides, and genetically-modified inputs,” says Vishwanath B. Narayan, vice-president of Kadur Agro, manufacturers of eco-friendly bio-fertilizers. However, exporting organic food is far from easy. There are 61 standards to be met. The third-party certification process to guarantee organic produce involves exhaustive documentation and high costs. The government provided Rs 100 crore to put in place a system of certification for organic products, but this has not helped. As an alternative, a community-based Participatory Guarantee System (PGS) certification was pioneered in 1998 by Alexander Daniel of the Institute for Integrated Rural Development (IIRD), Aurangabad. Under PGS, farmers guarantee their produce as organic as per norms and standards defined by a local group of farmers. The marketing is based on mutual trust and cooperation between consumers and producers. Globally, 26 million hectares are under organic cultivation as opposed to only 2.5 million hectares in India, and this last figure includes certified forest areas, according to the National Centre of Organic Farming. Integrated Agro Food Parks? The absence of an integrated channel from ‘farm gate to food plate’ has prevented the transfer of desirable agricultural practices, materials, infrastructure and technology to the farmer. It’s this key issue which is sought to be addressed by the Integrated Agro Food Park (IAFP) and its Rural Transformation Centres (RTCs). In this new project, the Indian Farmers’ Fertilizers Cooperative (IFFCO), Green Ports Corporation, a Hyderabad-based real estate company, Wageningen University of Netherlands and YES Bank jointly plan to set up a Rs 2,500-crore agri-economic zone on 2,700 acres of land in Nellore, in Andhra Pradesh. “Increased productivity is the aim; making farmers stakeholders and addressing the demand of domestic consumers is the target,” says Peter Smeets, director of agri-products at Wageningen University. The project aims to help farmers within the Agro Park, and agriculturists within a 100-km radius. The research institute at the Agro Park will provide seeds to the RTCs, to be set up in every village. The RTCs will offer seeds, credit, micro finance and primary health initiatives, besides acting as collection centres. The RTC will enable farmers to get better prices through market linkages that provide them with packaging facilities, cold stores, warehouses, food processing units, and direct access to retail distribution centres, domestic markets and export markets. However, agricultural analysts feel the project will have to survive without any government funding or subsidy in order to be truly successful. “But, this (the IAFP) cannot address food security; it is just a food-processing zone,” says Vijay Sardana, director of Achievers Resources Pvt Ltd, a firm offering agri-business knowledge services. He points out that there are more than 50 agri products processing zones set up by the Agricultural and Processed Food Products Export Development Authority (APEDA). Food Parks announced by the UPA government have also not taken off in India. The land-holding pattern in the new arrangement, which must ensure the next generation does not become a mere employee with no control over the land, will determine the sustainability of this model. “Otherwise, it is purely a business venture,” says Sardana. “As productivity increases, the issue of food security is addressed automatically,” says Kalyan Chakravarthy, country head of the food and agriculture division of YES Bank. “This project is not just about food processing but increasing production.” Indeed, if it is successful, the IAFP model may bring critical relief to the farmer-suicide afflicted regions. The Core Issues Contract farming and cooperatives may still take off, but will achieve little in terms of higher productivity if India does not address the core issues of biological degradation. As Swaminthan says, Indian soil is now hungry and thirsty, after producing crops over thousands of years. “It needs healthcare just as you and I do.” The government has funds to spare under the National Rural Employment Guarantee Scheme (NREGS). “Pasture restoration, soil conservation and watershed development are central to enhancing yields,” says Vijay Mahajan, an IITan who now spearheads Basix, a microfinance institution in Andhra Pradesh. “After all, how many roads can you build in rural areas? Landless labour can be effectively used under the NREGS to regenerate productivity of land and water on both common and private rural land.” Such out-of-the-box solutions for making soil rich and fertile again, and increased investment in research and development on seed varietals with private involvement, may yet kick-start a much-needed revival in the nation’s hinterland. India needs a Second Green Revolution. m.rajendran@abp.in (Businessworld issue 1-7 April 2008)