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Sanjeev Asthana Reliance Agribusiness 1
Agribusiness Status in India…..Issues and Way Forward
By
Sanjeev Asthana
Sanjeev Asthana Reliance Agribusiness 2
Flow of Presentation
Indian Agriculture – Snapshot & Challenges
Development Needs
Suggestions and Recommendations
Sanjeev Asthana Reliance Agribusiness 3
Indian Agriculture - Snapshot
Milk
Largest Producer
91 Mn T
F & V
#2 in the world
129 Mn T
Food Grains
#2 in the world
(218 Mn T)
Cattle / buffaloes
Largest in the world
283 million
Tea
Largest Producer
(0.85 Mn T)
Sugarcane
# 2 in the world
(245 Mn T)
Goat & Sheep
182 million
Fisheries
Marine: 2.7 Mn T
Inland : 3.1 Mn T
Fruits and Vegetables
• 41% of mango
• 23% of Banana
• 24 % of cashew nut
• 10% of onion
• 30% of cauliflower
• 36% of Green Peas.
Meat and Poultry
• 53% of world’s buffalo
• 17% of goat
• Fifth in world egg production
Cereals
• Largest Producer of Pulses
• Second largest producer of Food grains
• Second largest producer of Sugarcane Source: FAO / NHB / Department of Animal Husbandry
All 15 major climates of the World are present in
India
52% of total land is cultivable as against world
average of 11%
India is a multi crop country unlike major ag
economies
We are a large producer and consumer of food
Sanjeev Asthana Reliance Agribusiness 4
Unit – Million Metric Tonnes
Supply-Demand Gap for Selected Food Items
Source: ICRIER, Surabhi Mittal, Working Paper No-209
Emerging Food deficit is a matter of grave concern……
Huge dependency in veg oils & Pulses on imports
Sanjeev Asthana Reliance Agribusiness 5
High value agriculture taking roots over traditional crops
Diversifying Agriculture
Sanjeev Asthana Reliance Agribusiness 6
Big Concerns Today
Supply side equation in production
Low farm realization
Technology and methods out of step ….low yields
Lack of market led agri research
Low investments in agriculture…..virtual collapse
of infrastructure
Distorted resource allocation
The sub par quality and reach of credit flow
Sanjeev Asthana Reliance Agribusiness 7
Yields in Indian Agriculture are well below Global Benchmarks
0
2000
4000
6000
8000
10000
Indi
a
Banglad
esh
Egypt
japa
n
May
amar
World
Ave
rage
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
India China France Pakistan UK World
Average
Yield Comparisons Wheat
Source: Economic Survey 2004-05
Indian Yields compared to
Global Averages
Yield Comparisons Rice
3122Sugarcane
0711Jute & allied
7741Cotton
14752Oilseeds
13811Pulses
12543Coarse Cereals
3821Wheat
5221Rice
Yield Ranking
Production Ranking
Area Ranking
Global Ranking
Indian Ranking Globally on
Area, Production and Productivity
Low Yield
Sanjeev Asthana Reliance Agribusiness 8
Missing Information Link
Source of information for farmers mainly other
farmers
6669 69
21
7 7
0
10 97 8 8
1 3 21 1 23 1 21 03
0
10
20
30
40
50
60
70
80
Crop Prices Sorting/grading
of crops
Post-harvest
practices
Perc
en
t o
f F
arm
ers
Other farmers Agricultural traders
Personal observation Agricultural officers
Contract Buyers Input suppliers
Mass Media Other
Source: World Bank Agricultural Marketing Survey 2005
Issues:
Formal extension system defunct
Info out of step with market need
Low penetration…. of orgn sector
Demand impulse slow to reach
Leading to
Severe SND imbalance
Price volaitility
Extremely low tech adoption
Time to reach, delivery mode and quality of info is crucial……
Sanjeev Asthana Reliance Agribusiness 9
Research Agenda
Research needs to work seamlessly with
market
High quality research but limited outreach
Interface with private sector and farmers
Ag education has to be contemporary
R&D efforts must be in sync with market
Policy to create a better PPP in research
Structured links between lab and farm
Sanjeev Asthana Reliance Agribusiness 10
Declining Share of Public Sector Outlays and
Expenditure under Agriculture & Allied Activities
Source: Planning Commission, New Delhi
(Rs. Crore)
Five Year Plan/Annual Plan Agriculture and Percent Share of
Allied Activities* Total Agriculture and Allied
Activities to Total
Plan Actual Plan Actual Plan Actual
Outlays Expenditure Outlays Expenditure Outlays Expenditure
1 2 3 4 5 6 7
Ninth Plan (1997-02) 42462 37239 859200 941041 4.9 4.0
Tenth Plan (2002-07) 58933 56997 1525639 1489395 3.9 3.8
Eleventh Plan (2007-12) 136381 NA 3644718 NA 3.7 NA
Annual Plan (2007-08)# 8558 8544 319992 292337 2.7 2.9
Annual Plan (2008-09)## 10075 NA 375485 NA 2.7 NA
Declining Public Investments
Resource appropriated by subsidies
Limited Private sector investment
Positive Impact of recent Govt programs being felt…..
Sanjeev Asthana Reliance Agribusiness 11
Fertiliser Subsidy (Rs in Crores)
Skewed Resource Allocation: Fertilizers
Source: The Fertiliser Association of India
Large Subsidy to few states
Same states tend to benefit more from FCI
procurements
Focus should be on creating avenues to
increase farm income
Resource constraints will challenge recapitalization of agriculture
Sanjeev Asthana Reliance Agribusiness 12
Credit Access
The agricultural credit growth is significant
About a quarter of agricultural output
High proportion in agricultural inputs
However
Just about 40% farmers bank through formal system
Just about a fifth have access to a bank loan
Small and marginal farmers…..only 10% can access a bank loan
High lead time for a loan disbursement
Govt policies spurring increased formal sector lending to agriculture
Sanjeev Asthana Reliance Agribusiness 13
Mark-ups
Consumer
Retailer
Sub-Wholesaler
Wholesaler
Market level
commission agent
Consolidator at
Village level
Small /
marginal farmer
< 25%
< 6%
< 10%
< 8%
< 10%
Total mark-up in the chain
Total margin - 60 to 75 %
Margin from farmers to
wholesaler - 30-35%
Wastage - 15-25%
Transportation - 10% approx.
Farmers get 25-30% of consumer price
Source - FICCI Agricultural Summit 2006
Source - FICCI Agricultural Summit 2006
Sanjeev Asthana Reliance Agribusiness 14
Farmer
Village Commission
Agent
Mandi / Localagents
Wholesalemandi
Distributor
Transportation
Processor
Retailer
Consumer
• Low yield / non-standard quality• Price de-linked from market
• Unscientific and unhygienic
handling
• Poor market access• Loss in trade passed onto farmer
• No infrastructure for handling /
grading
•Price quality correlation not assured
• Unscientific method leading to loss of quality / damages
• Inadequate infrastructure
•Rampant wastage•Opportunistic profiteering
• No control on quantity / quality of raw material
• Lack of infrastructure leading to loss of quality
• Lack of infrastructure leading to loss of quality
• High prices• Limited choice
Farmer
Village
Commission
Agent
District
Commission
Agent
WholesalerSub
WholesalerRetailer Consumer
Non value adding players
Disjointed Supply Chain
Sanjeev Asthana Reliance Agribusiness 15
Marketing Infrastructure - Shortages
Considerable expansion but still
Serious regional disparities
Rural roads (about half the villages)….high return proposition
Grading at farmer level - 7%
Storage – about 30%
Cold storage capacity - 10% of production
Inadequate facilities in yards & rural markets
Losses at pre-market stage(Est) Foodgrains 7%
F&V 30%
Spices 10%
Large pipeline of aggressive plans under PPP mode on the anvil
Sanjeev Asthana Reliance Agribusiness 16
Underdeveloped Processing Industry
Fruits and vegetables
2-3% of produce is
processed
8% to 37% lost in storage
and transportation
Inadequate storage and cold
chain
Inadequate processing and
marketing infrastructure
Grains 3% is lost in storage
Country % Processed
M alaysia 83%
South Africa 80%
Phillipines 78%
Thailand 72%
Brazil 70%
USA 65%
India 2-3%
Source : NHB
Sanjeev Asthana Reliance Agribusiness 17
GOI Strategy for Agricultural Marketing Development – Major
Initiatives
15 State Govts: amended APMC Act
Adopted Warehousing Regulations Act
Private sector warehousing/transport companies in procurement for
FCI
Enactment of the Food Safety and Standards Bill 2005
Incentives to agro-processing industries for fruits and vegetables.
Developing 30 mega food parks: "from the farm gate to the retail
outlet".
Recent Developments
Major steps in right direction……lot more needs to be done
Sanjeev Asthana Reliance Agribusiness 18
SABMiller India: Contract farming agreement with barley farmers
Adani Agrifresh: Large investment over next 3 years in supply
chain
Cadbury India Ltd: to promote cocoa farming in 50,000 acres
Mahindra: potato seed development through contract farming
Himalaya Drugs: Sourcing 70 per cent of herbs from farmers
PepsiCo: Introduced high-yielding seeds
International Development Enterprises (India) (IDEI): Identifies
and develops appropriate technologies that help small farmers
Reliance Retail: Established ‘farm to fork’ pan-India network
Agribusiness – Private Initiative
Major initiatives on ground………however scale is the key
Sanjeev Asthana Reliance Agribusiness 19
Lab to Farm – Need of the Hour
Market driven research holds the key
Redefine research agenda - adopt and operate as per local needs
Increase public-private partnership in agricultural research
Mobilize private sector as a catalyst to link lab to farm
Allow usage of public research infrastructure on PPP basis
Scientist and University Fellows can associate with private sector
Research Institutes may adopt and develop package of farm practices
Large potential to harness the potential of Research Institutions
Sanjeev Asthana Reliance Agribusiness 20
Government Support
Upgrade the existing agri marketing infrastructure
Conducive institutional environment to attract private
investment in agri value chain and food-processing
Consistency in reforms & rules and regulations
Deregulation of market….with reasonable controls
Finetune the role play of various agencies
Need to carry forward the momentum in reforms at accelerated pace
Sanjeev Asthana Reliance Agribusiness 21
Thank You!