Case for a paradigm shift in Agriculture in our Country
Our country essentially is heavily reliant on Agriculture and its influence over the health of the economy is significant. About 71.4% of our population is engaged in this vocation for a living. If agricultural performance of such a nation is efficient, its economy, its people and its overall rating in the world could be at the top. As this is not the case with us, some radical steps are necessary to change the face of agriculture. However on the economic front the situation is improving drastically. The GDP growth at 8% is impressive and is buoyant. The stock market is resonating country's goodwill amongst FII. If a boost to agricultural growth takes shape at this stage and is made to be in tandem with growth Industrial production and Service Industry, our rating in the world is likely to become a colossal.
The farming communities in India, who constitute 71.4% of the population, are in abject poverty or close to it, barring a few large and wealthy farmers. They are the ones who are in-charge of Agriculture. They have to perform for recording the much needed growth. With abysmal state of affairs of the farmers, how can Agricultural develop to add muscle to fuel the economic growth? Hence alleviating such fellowmen and to bring them to the mainstream of quality living is very essential for giving a boost to Agriculture and at the same time usher in an egalitarian society in our country. This is also the key to sustained economic progress and growth of the economy. The saying, "the rich are becoming richer and the poor are becoming poorer" is indeed true and the gap will become wider, if we fail to do something drastically to change this situation. We need to at least narrow this gap considerably. It would appear that this is possible.
Our economy places heavy reliance on Agriculture for growth in the GDP. The failing in this area is unrelenting. In the tenth plan, agricultural growth was pitched at 4% aiming to reverse the deceleration in the second half 1990s from 3.2% in the period 1980-1996 to 2.6% in the period 1996-2000. The FM in his Budget speech on the 27th February 2006 has mentioned that if agriculture cannot grow at 4%, it would be difficult to achieve a 10% growth in the GDP, which is the next step to take India forward from its present bullish status. Hence the importance to fuel agricultural growth needs little emphasis.
Growth in Agriculture cannot come the way it is structured to day. According to Mr. K.P.P. Nair, who is well versed with the subject, China has the world's largest number of Farmer Agro Technology Extension Agents [1.5 million], who work with the farmer on the field employing a "Bottom-Up" approach. It is a far cry from India's Krishi Vigyan Kendras [KVKs], whose approach is primarily "Top Down" whereby the package of practice developed by an agricultural scientist on the experimental farm is dished out to the farmer for adoption. Later in this article, we shall see the plight of the average farmer in our country and with such a condition where is he in a position to taadviceound advices? Hence Agricultural practices also need restructuring immediately.
Just as a business is restructured to improve its bottom line, Agriculture also needs similar intervention to recuperate its present health and vitality. When countries like China have restructured their Agriculture to support their economy, there is every reason for us to do similarly. By accelerating and improving agriculture, China is turning to be an Industrial giant in the world. In fact we could do it better than China only if we create a will in us and are able to see Agriculture as a way of business proposition and not as a farmer's problem to produce and distribute.
A lot have been documented and debated about the state of Agriculture in this country and many in his field have eloquently articulated the ills. Many successive Governments have also focused on this important segment. However the results are not commensurate with the inputs the Government has provided. This has resulted in millions of rupees going into this sector year after year without concomitant returns and alleviating the farming community. Even the latest budget tabled on the 27th February 2006 focuses on agriculture in a significant area requiring attention. Towards this end the Government has enhanced the outlay for Bharat Nirman program substantially from the previous year. The FM passionately articulates that "we cannot continue to be Bharat with patches of India. He says that it is important to provide capillary links, take growth to the villages and make it more equitable". He further elaborates that "India spends over Rs.60,000 crores on poverty alleviation but outlays don't translate into outcomes. It cost the Government nearly Rs 4 to deliver Re. 1 to the poor.
There is a living example of Israel making it a great success in the development of Agriculture. The phenomenal success of Israe's agricultural growth in the last 60 odd years can be attributed to:
A commitment to food security
Extraordinary water resource development from a desert
Innovative technological development
Steady increase in the available work force
A unity of purpose in Israeli's Agricultural settlement movements
Unconditional political/economic support
Growing availability of export markets
If a small country like Israel can do it, there is again every reason to follow established practice. India can do it and even better as we have larger land area with some water resource. We will need to resolve and create a will as we have done in other areas.
Under such circumstances, something needs to be done to make Agriculture a productive mechanism. In doing so, initiatives from the private sectors will be a welcome trend in our country. Some corporate have already come up with specific projects but these have just missed the "bull's eye" so to speak. They have however come within the circles of the dart board, close to the bull's eye. This is because of the general belief and practice that corporate is created to make profits to remunerate the shareholder only. While no one can fault this thinking, this note emphasizes the need to look slightly differently and embrace the society as well in the process of delivering benefits to both the corporate and society. When seen in a total context uplift of the masses of this nation can bring in far reaching consequences to the economy as a whole besides remunerating the corporate for the employment of Capital, Human Resources and Technology. Only in recent times business have begun to express concern about the environment they operate around, even though Jamshedji Tata showed the way to embrace the society around the business center, over a century ago. He had the passion to enhance the economic status of India by emancipating the people liking in abject poverty. Our businessmen of to-day could similarly possess this spirit and may now like to see Agriculture as a way of business and invest in it like in business, to reap the fruit of their hard work. There has to be necessarily a passion about the Agri-business, in the minds of the business community. Once this attitude is developed, business would achieve unimaginable success ensuring healthier bottom line in the agri-business.
The CII has also noted as under.
Quote
The Confederation of Indian Industry is bullish on the Indian agriculture and feels the sector can lift its growth rate above the last ten years' average of 2 per cent.
The industry body has also scripted a five-point agri-reforms agenda to boost Indian agriculture and attract private investment in to the sector.
"Indian agriculture is bouncing back. It is scripting its own success story, thanks to rising private investment, which will lead to a faster growth. Faster growth in agriculture tomorrow will happen because of rising private investment in agriculture today," says Y C Deveshwar, Chairman, CII's Agriculture Council, and Chairman, ITC.
The CII, however, cautions that it is unrealistic to expect a repeat of last year's double-digit growth in agriculture, despite the forecast of a normal monsoon. But CII is of the view that in the coming years, Indian agriculture will grow faster than before.
CII's optimism stems from the fact that across India, agribusiness companies are developing new models to reach out to farmers and consumers, providing new technologies, investing more in modern supply chains and in organized food retailing that sells more and more processed food.
According to CII, the surge in private investment is due to increased demand for food and other agricultural commodities. With the income level rising, demand for milk, meat or fish, fruits and vegetables are also increasing. With more urbanisation, Indian families also consume more processed foods, more ready-to-eat foods, etc, says CII. India is becoming a medium-sized agricultural exporter, selling tea, fish, spices and now rice and wheat to foreign countries.
According to CII, smart businesses have realized that it is a growing opportunity to be present in any part of the agricultural value chain, which has led to more investment not only by big companies but even by first-generation entrepreneurs.
Improved rural infrastructure is also playing a key role behind the agri sector's comeback trail. With better rural infrastructure, it is comparatively easier and cost-effective to bring farm produce to the market. Better rural roads, more godowns and cold storages, improving rural electricity supply, will all result in faster growth in agriculture, says CII.
According to CII, Indian farmers are learning to take on the challenge of producing better quality produce at internationally competitive prices. They are willing to use new technologies, and become organized.
Unquote
It is clear from the above that the Corporate has spotted the tip of the iceberg with the business of agriculture. They are already looking at this area to diversify. Companies that have drawn up big plans in the agri-food segment business are Reliance, Pantaloon, Godrej, Field Fresh [Bharti Enterprises], Ballarpur Industries, DSCL, Tata Group and Mahindra & Mahindra. Reliance is looking at building smaller airports to lift fruits and vegetable to the consuming centers or markets.
However it is noteworthy that all these efforts are essentially Contract Farming. Selection of contract farming by the private sector presently would mean getting to areas where wealthy farmers live with large land holdings and give them the contract to buy if the farm produce is of the specified quality. Pepsi started Contract Farming to make tomato in the Punjab area. Hindustan Lever in conjunction with Rallies India and ICICI Bank have experimented contract farming in Horshangabad in the Madhya Pradesh to grow wheat.
This will eliminate those small farmers who have smaller pieces of land and who are struggling to make their ends meet. It is this stratum of the agriculturist that needs attention by the Corporate. Hence Contract Farming in India has not been successful and in fact resented by the majority.
Before we attempt to spell out the alternate way of looking at this issue, let us take a look at the bane of Indian Agriculture.
They are summarized as under:
1. Sub-division and fragmentation of land.
2. Perpetual indebtedness of the farmer in the hands of the local money lender and lately with the banks.
3. Lack of aptitude and knowledge to grow the best suited crop on the land and hence continue what their forefathers put the land for use.
4. Inability to market the farmerÂs produce that would give him the real value.
5. Lack of water facility due to poor monsoon and farmerÂs inability to provide alternate source of irrigation like bore well. There is also a fear in the farmerÂs mind to turn towards crops that need low quantum of water, as he is unsure of success. He has no propensity to take any sort of risk. The dispute over water sharing between states is snowballing and is likely to burst leading to irreparable loss to the nation.
Let us take a close look at each of these.
1 With the growth of the farmer's family, over the years, land gets subdivided. This has been going on for years as a practice even when joint families existed. With the joint family structure withering away this problem continues unabatedly. This has resulted in progressively making the land holding, smaller, overtime. Smaller lands are not conducive to mechanized farming and/or using technology to improve productivity. Constant land disputes disrupt growth process of land use. Some land area is taken away with every bund constructed for separation of the land and with successive fragmentation, the land area gets reduced. If this is freed, the extent of land area useable for cultivation will increase tremendously.
2 Government for long years has asked the Banking Industry to lend full support to the farmer in providing loans for conducting agricultural activities. Even the current Budget [February 2006] makes a big story of granting loans at 7% interest to the farmer. Yet the farmer continues to take loan from the money lender at much higher rate of interest. This is because the money lender has the farmer's land on lien. The farmer is unable to get away from the hold of the money lender. He is already so immersed with the loans he has taken from money lender in the village that sometime he is forced to take bank loans to pay the nuisance off. In this process he defaults the bank loans. He is then left with no other means except to borrow again from the lender, who serves the farmer at his doorstep. On many occasions bank loans that remain unpaid are written off. Appallingly, many political parties make promises to write off these loans during canvassing for election. Many times the farmer takes loan for agriculture purpose and uses for other purposes. If one were to attend the CollectorÂs meet with the farmers once a month that occurs regularly, it will be an eye opener to understand the problems of the farmer, as to why he is unable to repay. I heard one of them say, Sir, Âthe land is a curse on us left behind by our forefathers and we are struggling with it; unable to keep or sell we live with this curseÂ. It saddens one to hear and if this is the plight of most of farmers something needs to be done in absolute terms to alleviate the farmer.
3 With low levels of education and attitudes developed by the average farmer, he grows the crop that his forefathers grew. There is also a fear of changing the crop even if he is tempted, as failure haunts. Government has village level officers to educate the farmer but attitudes works against sane advice for fear mostly, than to adhere. Sometimes water resources also make the problem more acute.
4 With so many issues to tackle, the farmer is indeed tired to manage the marketing of his produce to realise the best value. He is often dependant on the Âaratees or the mandiÂs merchant to buy and give whatever price is settled by the merchant. He is in no position to bargain and get the best price for his produce.
5 With respect to irrigation he is solely dependant on monsoon or the river water from the dams. The river water sharing disputes adds to the misery of the farmer. Those who could afford, have installed bore well in their lands and though this will slowly deplete the water table, there seems no alternative. He is unable to switch to crops that need little water.
Let us take a look at the initiatives that the Government has taken up. The first National agricultural Policy was brought out during 2000. It has said that by the end of next decade, it shall bring self-sufficiency in agriculture. Some of the major policy directions proposed is removal of controls in the agricultural sector, up gradation of technology in order to accelerate agricultural productivity and facilitating active participation by the private sector. Installation of Agricultural price commission to fix farm produce prices indexing with the input costs. There are host of other measures that are pronounced in the National Agricultural Policy that does not read any different from host of other such similar documents by successive Governments in the center.
It can be seen clearly from the above that intentions of the Government are indeed good and well documented as well. In all these programs, the action has to come from the farmer. With several problems cited above, it has become virtually a non-starter for the farmer to develop his vocation. Corporate India has some idea to make it work but may not have thought of doing the business of Agriculture as a way of doing business themselves. This step can improve the Management of Agriculture effectively so that all round benefits accrue. Let us examine, what corprotising agriculture means.
Corporatise Agriculture:
When one thinks of the business of the corporate, strategies becomes the central theme to begin with. If a business already exists, again strategy is essential to make it run more effectively. It was argued before that an intervention is necessary for agriculture to be revitalized through a well thought of strategy. Agriculture will therefore need to be thought as an Industry. Just as steel making or cloth making was initially started by nomads, and later improved by the businessmen in the organized sector, Agriculture should also be looked at in a similar fashion. This activity can be an active diversification process, retaining the core activity of any corporate. Take the example of ITC. They have a paper board factory in Bhadrachalam and need tree trunks as raw material for making paper boards. It is a tribal area with very poor farmers not having enough money to grow anything. They had two options to get their raw material; one to buy from neighboring states or grow it in their area. They opted for the later. They brought cloning technology for making saplings and gave these free to a large number of farmers and bought the grown trees at prices that gave farmers money and happiness. Later ITC embarked on creating e-Chaupal model to help them to buy what and rice for exports and in the process help our farmers to be able to seek relevant information in finding a market for his produce and get the best value for his produce and eliminate the middlemen. While the initiatives of ITC is laudable, the suggested model revolves around the life of the farmer instead of just assisting him to market his produce or contract farming and buying back the produce. The magnitude of problem he faces revolves around in just utilizing his land. This is the central issue that needs attention with deep understanding. As a matter of fact, scalability for their [ITC] paper board plant poses problems as they have to deal with large number of farmers who have one and two acres of land. Let us examine the proposition of corporate taking to farming as a business model.
To begin with, a company can select a group of villages, with an aggregate area of say 10,000 hectares, to conduct farming. This is because large holding will afford the economies of scale that is essential.
1. The corporate can propose to the landowners that they will register a company in the defined territory and make each of the owners of land as shareholders of the company. This will be against the extant of land owned by each farmer. The land can be converted to units, against which shares can be allotted.
2. They shall also propose to the owners of the land that their ownership of land will not undergo any change whatsoever. If a farmer desires to sell his holdings, he could do so as freely as ever. To operationalise this feature, the Government [State] must give credence to this suggestion. Only then the farmer will get the comfort of parting the land to the company. Global Positioning System for generating Digital Maps is available with the Tamil Nadu Government and perhaps elsewhere too. A demat account type can be devised to record the extent of land of the farmer and can be sold or bought like shares.
3. In addition to issue of shares against the land, the company can also consider paying a use amount to the landowner for utilizing his land. This will guarantee some income to the farmer on his land immediately. The Government can benefit by this scheme as there will be no more loans seeking farmer left in the country! The financial health of many banks will bounce back and the Government need not go in for sops in financing the farmer.
4. The company can engage the farmer as a worker on the farm for a wage as labor will be needed by the enterprise for conduct of the agri business no matter how much one mechanises. This will further provide the second revenue stream for the farmer with which he can carry on his livelihood. With initiation of these measures, the farmer will be immediately taken out of the debt trap and his hope of recouping his financial health will be a reality. With this the farmer's psyche will turn to the brighter side of life. This will also arrest the migration of laborer to the cities from the villages thus making laborer available for the company. In addition the biggest gain that shall accrue to the society will be in terms of harmonious living and this will also put an end to Naxalism. Suicidal deaths that are rampant with failure of agriculture will begin to vanish.
5. So by these two measures the corporate is creating a psychological base for the farmer to live peacefully and participate and contribute o enhance the process of productivity.
6. With a large land area without subdivision and fragmentation, its workability improves manifold and the concomitant economies of scale will accrue. Farming can be done with the latest technology available in the field and therefore mass produce at lower cost. It can also market its produce at a sizeable profit than what the farmer derives. With this happening the corporate will be in a position to declare a dividend which will form the third revenue resource to the farmer and surplus can be utilized for village uplift.
7. The company can takeover the cattle of the farmer and maintain them in better health and produce milk to feed the children of the village. This will improve the health of the young ones and thus create health consciousness amongst people. Coupled with education, the nation will begin to grow stronger. The cattle dung can be used in making Organic manure, while keeping the use of Inorganic fertilizers to the minimum.
8. With healthy revenues flowing for the company through such scientific / intensified agriculture, it can build hospitals, schools and godowns for storage of produces. It can also build Agricultural colleges and provide higher education to the youth of the villages and ensure that they are gainfully employed by campus selection for various Agricultural projects throughout the country. It would be argued that these are GovernmentÂs activities and the corporate must not enter this area. Government has tried to run these Institutions for the last five decades and it has been seen that despite best intentions the benefit have not reached the ones it is meant for. After all many projects like road building, sea port construction and airport building which were once predominantly in Government's domain are now undertaken by private enterprises. Similarly these projects can also be done by the corporates. Once privatized, it can function more effectively and deliver the intended service. The FM has mentioned that the Government spends Rs 4 to provide Re 1 as poverty alleviation to the poor. If the Government stops these programs, it shall benefit in large savings and consequently improve the health of the Government. Instead Government can devise suitable measures to compliment the Corporate for their initiative in this area. The Government can withdraw the subsidy on fertilizers and free access to electricity in this process, as the company will generate enough resources to meet these input costs. The Government will stand to be the biggest gainer as the resources committed to this sector shall be freed and used to show a healthy fiscal trend.
9. Companies who are in the consumer goods industry can find market for their products in the rural interiors. The Corporates feel that the major market is in the rural interior after they have saturated the urban community and it will therefore augur well for it to be with the community to build for them and for themselves.
10. A portion of the profit can be set aside for community development in the areas of education/health care. A special mention merits mentioning about education. We need desperately to attain enhancement in levels of education. If companies begin to initiate the process of education at the village levels along with their business activity, it can firstly provide quality education. Secondly it can ensure to provide education to every child in the villages and in the process build a strong edifice for ensuring higher and specialized education of the youth of this country. Bharti Enterprises has just set up a Foundation for undertaking education of the rural folks in Punjab and wants to concentrate on disabled girls in the villages, by creating a corpus of Rs 200 Crores. They say that they are inspired by Bill Gates in this matter. A further refinement in educating the children is to use the medium of instruction as English. If we want our youth of the villages to come to the mainstream of employment and go global, learning English will be very essential. In the same breadth, learning our language is also important giving it equal emphasis. The indifference to learning English needs to be shunned as this will only harm us in the long run and will keep the large proportion of our village folks away from participating in the fruits of development. Mother tongue can be learnt along with English. China, which once closed doors for learning English, to day, has come forward to learn this language at all levels of education in order not to miss the centre stage in the world. With this initiation, China is beginning to reap the benefit. Learning English will automatically lead to employment of every student. Once this is achieved, all social problems connected with education, reservation and employment will begin to disappear. Today the issues of reservations etc are a simple outcome of lack of employment. Caste is made as a facade by active politics. This is manifesting in an upheaval and political mileage is derived to compound it. Affirmative action, a topic of the day, will not be required if we are able to achieve to educate our youth in the villages and employ them appropriately. If one corporate starts this revolution, it will be a run off, for many others to follow. The extent of land is so large that there is space for every corporate to get into and make a great India.
11. Having said the above, it is certain that at first sight the idea may appear to be a non-starter. It is also acknowledged that it is easier said than done. There are two main concerns in this suggestion. Firstly, the State Government's active involvement is necessary. Secondly and perhaps more importantly, the corporate will need to engage change agents to go into villages and spread the advantages of the scheme least the farmer have any apprehensions about the scheme. Unless these two areas are tackled with alacrity, the success of the scheme may be in doubt that much longer. However this hump is only for the pioneer. Once this is scaled, the followers will find it easier. The message of one successful operation is likely to spread like wild fire and will be acceptable to all the stakeholders. There must be a will and total transparency in the scheme.
If the corporates takes interest, it will be a win win situation for everyone. The boom this development will bring about will be greater than any boom witnessed so far. The biggest beneficiary will be the people of India and its Government.
What is the net effect?
Farmer across the country will be emancipated.
Indian Agriculture will leap manifold and there will be no hungry fellow Indian.
Food of excellent quality at affordable prices will be available for all and also find export markets.
Corporate who undertake this scheme can benefit by huge profits from the operations. Their market capitalization will enhance significantly.
They will begin to invest in education and it will automatically lead to employment in the enterprise itself. Those willing to go out can find enough opportunities as well. The corporate can train manpower for their other needs as well.
Government will become healthier and concentrate on core Governance.
India can soon a major power to recon with.
India can then truly be called an egalitarian society.
Indian society, particularly the younger generations will be fully educated and unemployment will begin to disappear.
Violence and unrest amongst people will reduce drastically.
*********************
By: S. Raghavan
Former Director [Marketing]
IBP Company Limited
Mumbai
He can be contacted at
Our country essentially is heavily reliant on Agriculture and its influence over the health of the economy is significant. About 71.4% of our population is engaged in this vocation for a living. If agricultural performance of such a nation is efficient, its economy, its people and its overall rating in the world could be at the top. As this is not the case with us, some radical steps are necessary to change the face of agriculture. However on the economic front the situation is improving drastically. The GDP growth at 8% is impressive and is buoyant. The stock market is resonating country's goodwill amongst FII. If a boost to agricultural growth takes shape at this stage and is made to be in tandem with growth Industrial production and Service Industry, our rating in the world is likely to become a colossal.
The farming communities in India, who constitute 71.4% of the population, are in abject poverty or close to it, barring a few large and wealthy farmers. They are the ones who are in-charge of Agriculture. They have to perform for recording the much needed growth. With abysmal state of affairs of the farmers, how can Agricultural develop to add muscle to fuel the economic growth? Hence alleviating such fellowmen and to bring them to the mainstream of quality living is very essential for giving a boost to Agriculture and at the same time usher in an egalitarian society in our country. This is also the key to sustained economic progress and growth of the economy. The saying, "the rich are becoming richer and the poor are becoming poorer" is indeed true and the gap will become wider, if we fail to do something drastically to change this situation. We need to at least narrow this gap considerably. It would appear that this is possible.
Our economy places heavy reliance on Agriculture for growth in the GDP. The failing in this area is unrelenting. In the tenth plan, agricultural growth was pitched at 4% aiming to reverse the deceleration in the second half 1990s from 3.2% in the period 1980-1996 to 2.6% in the period 1996-2000. The FM in his Budget speech on the 27th February 2006 has mentioned that if agriculture cannot grow at 4%, it would be difficult to achieve a 10% growth in the GDP, which is the next step to take India forward from its present bullish status. Hence the importance to fuel agricultural growth needs little emphasis.
Growth in Agriculture cannot come the way it is structured to day. According to Mr. K.P.P. Nair, who is well versed with the subject, China has the world's largest number of Farmer Agro Technology Extension Agents [1.5 million], who work with the farmer on the field employing a "Bottom-Up" approach. It is a far cry from India's Krishi Vigyan Kendras [KVKs], whose approach is primarily "Top Down" whereby the package of practice developed by an agricultural scientist on the experimental farm is dished out to the farmer for adoption. Later in this article, we shall see the plight of the average farmer in our country and with such a condition where is he in a position to taadviceound advices? Hence Agricultural practices also need restructuring immediately.
Just as a business is restructured to improve its bottom line, Agriculture also needs similar intervention to recuperate its present health and vitality. When countries like China have restructured their Agriculture to support their economy, there is every reason for us to do similarly. By accelerating and improving agriculture, China is turning to be an Industrial giant in the world. In fact we could do it better than China only if we create a will in us and are able to see Agriculture as a way of business proposition and not as a farmer's problem to produce and distribute.
A lot have been documented and debated about the state of Agriculture in this country and many in his field have eloquently articulated the ills. Many successive Governments have also focused on this important segment. However the results are not commensurate with the inputs the Government has provided. This has resulted in millions of rupees going into this sector year after year without concomitant returns and alleviating the farming community. Even the latest budget tabled on the 27th February 2006 focuses on agriculture in a significant area requiring attention. Towards this end the Government has enhanced the outlay for Bharat Nirman program substantially from the previous year. The FM passionately articulates that "we cannot continue to be Bharat with patches of India. He says that it is important to provide capillary links, take growth to the villages and make it more equitable". He further elaborates that "India spends over Rs.60,000 crores on poverty alleviation but outlays don't translate into outcomes. It cost the Government nearly Rs 4 to deliver Re. 1 to the poor.
There is a living example of Israel making it a great success in the development of Agriculture. The phenomenal success of Israe's agricultural growth in the last 60 odd years can be attributed to:
A commitment to food security
Extraordinary water resource development from a desert
Innovative technological development
Steady increase in the available work force
A unity of purpose in Israeli's Agricultural settlement movements
Unconditional political/economic support
Growing availability of export markets
If a small country like Israel can do it, there is again every reason to follow established practice. India can do it and even better as we have larger land area with some water resource. We will need to resolve and create a will as we have done in other areas.
Under such circumstances, something needs to be done to make Agriculture a productive mechanism. In doing so, initiatives from the private sectors will be a welcome trend in our country. Some corporate have already come up with specific projects but these have just missed the "bull's eye" so to speak. They have however come within the circles of the dart board, close to the bull's eye. This is because of the general belief and practice that corporate is created to make profits to remunerate the shareholder only. While no one can fault this thinking, this note emphasizes the need to look slightly differently and embrace the society as well in the process of delivering benefits to both the corporate and society. When seen in a total context uplift of the masses of this nation can bring in far reaching consequences to the economy as a whole besides remunerating the corporate for the employment of Capital, Human Resources and Technology. Only in recent times business have begun to express concern about the environment they operate around, even though Jamshedji Tata showed the way to embrace the society around the business center, over a century ago. He had the passion to enhance the economic status of India by emancipating the people liking in abject poverty. Our businessmen of to-day could similarly possess this spirit and may now like to see Agriculture as a way of business and invest in it like in business, to reap the fruit of their hard work. There has to be necessarily a passion about the Agri-business, in the minds of the business community. Once this attitude is developed, business would achieve unimaginable success ensuring healthier bottom line in the agri-business.
The CII has also noted as under.
Quote
The Confederation of Indian Industry is bullish on the Indian agriculture and feels the sector can lift its growth rate above the last ten years' average of 2 per cent.
The industry body has also scripted a five-point agri-reforms agenda to boost Indian agriculture and attract private investment in to the sector.
"Indian agriculture is bouncing back. It is scripting its own success story, thanks to rising private investment, which will lead to a faster growth. Faster growth in agriculture tomorrow will happen because of rising private investment in agriculture today," says Y C Deveshwar, Chairman, CII's Agriculture Council, and Chairman, ITC.
The CII, however, cautions that it is unrealistic to expect a repeat of last year's double-digit growth in agriculture, despite the forecast of a normal monsoon. But CII is of the view that in the coming years, Indian agriculture will grow faster than before.
CII's optimism stems from the fact that across India, agribusiness companies are developing new models to reach out to farmers and consumers, providing new technologies, investing more in modern supply chains and in organized food retailing that sells more and more processed food.
According to CII, the surge in private investment is due to increased demand for food and other agricultural commodities. With the income level rising, demand for milk, meat or fish, fruits and vegetables are also increasing. With more urbanisation, Indian families also consume more processed foods, more ready-to-eat foods, etc, says CII. India is becoming a medium-sized agricultural exporter, selling tea, fish, spices and now rice and wheat to foreign countries.
According to CII, smart businesses have realized that it is a growing opportunity to be present in any part of the agricultural value chain, which has led to more investment not only by big companies but even by first-generation entrepreneurs.
Improved rural infrastructure is also playing a key role behind the agri sector's comeback trail. With better rural infrastructure, it is comparatively easier and cost-effective to bring farm produce to the market. Better rural roads, more godowns and cold storages, improving rural electricity supply, will all result in faster growth in agriculture, says CII.
According to CII, Indian farmers are learning to take on the challenge of producing better quality produce at internationally competitive prices. They are willing to use new technologies, and become organized.
Unquote
It is clear from the above that the Corporate has spotted the tip of the iceberg with the business of agriculture. They are already looking at this area to diversify. Companies that have drawn up big plans in the agri-food segment business are Reliance, Pantaloon, Godrej, Field Fresh [Bharti Enterprises], Ballarpur Industries, DSCL, Tata Group and Mahindra & Mahindra. Reliance is looking at building smaller airports to lift fruits and vegetable to the consuming centers or markets.
However it is noteworthy that all these efforts are essentially Contract Farming. Selection of contract farming by the private sector presently would mean getting to areas where wealthy farmers live with large land holdings and give them the contract to buy if the farm produce is of the specified quality. Pepsi started Contract Farming to make tomato in the Punjab area. Hindustan Lever in conjunction with Rallies India and ICICI Bank have experimented contract farming in Horshangabad in the Madhya Pradesh to grow wheat.
This will eliminate those small farmers who have smaller pieces of land and who are struggling to make their ends meet. It is this stratum of the agriculturist that needs attention by the Corporate. Hence Contract Farming in India has not been successful and in fact resented by the majority.
Before we attempt to spell out the alternate way of looking at this issue, let us take a look at the bane of Indian Agriculture.
They are summarized as under:
1. Sub-division and fragmentation of land.
2. Perpetual indebtedness of the farmer in the hands of the local money lender and lately with the banks.
3. Lack of aptitude and knowledge to grow the best suited crop on the land and hence continue what their forefathers put the land for use.
4. Inability to market the farmerÂs produce that would give him the real value.
5. Lack of water facility due to poor monsoon and farmerÂs inability to provide alternate source of irrigation like bore well. There is also a fear in the farmerÂs mind to turn towards crops that need low quantum of water, as he is unsure of success. He has no propensity to take any sort of risk. The dispute over water sharing between states is snowballing and is likely to burst leading to irreparable loss to the nation.
Let us take a close look at each of these.
1 With the growth of the farmer's family, over the years, land gets subdivided. This has been going on for years as a practice even when joint families existed. With the joint family structure withering away this problem continues unabatedly. This has resulted in progressively making the land holding, smaller, overtime. Smaller lands are not conducive to mechanized farming and/or using technology to improve productivity. Constant land disputes disrupt growth process of land use. Some land area is taken away with every bund constructed for separation of the land and with successive fragmentation, the land area gets reduced. If this is freed, the extent of land area useable for cultivation will increase tremendously.
2 Government for long years has asked the Banking Industry to lend full support to the farmer in providing loans for conducting agricultural activities. Even the current Budget [February 2006] makes a big story of granting loans at 7% interest to the farmer. Yet the farmer continues to take loan from the money lender at much higher rate of interest. This is because the money lender has the farmer's land on lien. The farmer is unable to get away from the hold of the money lender. He is already so immersed with the loans he has taken from money lender in the village that sometime he is forced to take bank loans to pay the nuisance off. In this process he defaults the bank loans. He is then left with no other means except to borrow again from the lender, who serves the farmer at his doorstep. On many occasions bank loans that remain unpaid are written off. Appallingly, many political parties make promises to write off these loans during canvassing for election. Many times the farmer takes loan for agriculture purpose and uses for other purposes. If one were to attend the CollectorÂs meet with the farmers once a month that occurs regularly, it will be an eye opener to understand the problems of the farmer, as to why he is unable to repay. I heard one of them say, Sir, Âthe land is a curse on us left behind by our forefathers and we are struggling with it; unable to keep or sell we live with this curseÂ. It saddens one to hear and if this is the plight of most of farmers something needs to be done in absolute terms to alleviate the farmer.
3 With low levels of education and attitudes developed by the average farmer, he grows the crop that his forefathers grew. There is also a fear of changing the crop even if he is tempted, as failure haunts. Government has village level officers to educate the farmer but attitudes works against sane advice for fear mostly, than to adhere. Sometimes water resources also make the problem more acute.
4 With so many issues to tackle, the farmer is indeed tired to manage the marketing of his produce to realise the best value. He is often dependant on the Âaratees or the mandiÂs merchant to buy and give whatever price is settled by the merchant. He is in no position to bargain and get the best price for his produce.
5 With respect to irrigation he is solely dependant on monsoon or the river water from the dams. The river water sharing disputes adds to the misery of the farmer. Those who could afford, have installed bore well in their lands and though this will slowly deplete the water table, there seems no alternative. He is unable to switch to crops that need little water.
Let us take a look at the initiatives that the Government has taken up. The first National agricultural Policy was brought out during 2000. It has said that by the end of next decade, it shall bring self-sufficiency in agriculture. Some of the major policy directions proposed is removal of controls in the agricultural sector, up gradation of technology in order to accelerate agricultural productivity and facilitating active participation by the private sector. Installation of Agricultural price commission to fix farm produce prices indexing with the input costs. There are host of other measures that are pronounced in the National Agricultural Policy that does not read any different from host of other such similar documents by successive Governments in the center.
It can be seen clearly from the above that intentions of the Government are indeed good and well documented as well. In all these programs, the action has to come from the farmer. With several problems cited above, it has become virtually a non-starter for the farmer to develop his vocation. Corporate India has some idea to make it work but may not have thought of doing the business of Agriculture as a way of doing business themselves. This step can improve the Management of Agriculture effectively so that all round benefits accrue. Let us examine, what corprotising agriculture means.
Corporatise Agriculture:
When one thinks of the business of the corporate, strategies becomes the central theme to begin with. If a business already exists, again strategy is essential to make it run more effectively. It was argued before that an intervention is necessary for agriculture to be revitalized through a well thought of strategy. Agriculture will therefore need to be thought as an Industry. Just as steel making or cloth making was initially started by nomads, and later improved by the businessmen in the organized sector, Agriculture should also be looked at in a similar fashion. This activity can be an active diversification process, retaining the core activity of any corporate. Take the example of ITC. They have a paper board factory in Bhadrachalam and need tree trunks as raw material for making paper boards. It is a tribal area with very poor farmers not having enough money to grow anything. They had two options to get their raw material; one to buy from neighboring states or grow it in their area. They opted for the later. They brought cloning technology for making saplings and gave these free to a large number of farmers and bought the grown trees at prices that gave farmers money and happiness. Later ITC embarked on creating e-Chaupal model to help them to buy what and rice for exports and in the process help our farmers to be able to seek relevant information in finding a market for his produce and get the best value for his produce and eliminate the middlemen. While the initiatives of ITC is laudable, the suggested model revolves around the life of the farmer instead of just assisting him to market his produce or contract farming and buying back the produce. The magnitude of problem he faces revolves around in just utilizing his land. This is the central issue that needs attention with deep understanding. As a matter of fact, scalability for their [ITC] paper board plant poses problems as they have to deal with large number of farmers who have one and two acres of land. Let us examine the proposition of corporate taking to farming as a business model.
To begin with, a company can select a group of villages, with an aggregate area of say 10,000 hectares, to conduct farming. This is because large holding will afford the economies of scale that is essential.
1. The corporate can propose to the landowners that they will register a company in the defined territory and make each of the owners of land as shareholders of the company. This will be against the extant of land owned by each farmer. The land can be converted to units, against which shares can be allotted.
2. They shall also propose to the owners of the land that their ownership of land will not undergo any change whatsoever. If a farmer desires to sell his holdings, he could do so as freely as ever. To operationalise this feature, the Government [State] must give credence to this suggestion. Only then the farmer will get the comfort of parting the land to the company. Global Positioning System for generating Digital Maps is available with the Tamil Nadu Government and perhaps elsewhere too. A demat account type can be devised to record the extent of land of the farmer and can be sold or bought like shares.
3. In addition to issue of shares against the land, the company can also consider paying a use amount to the landowner for utilizing his land. This will guarantee some income to the farmer on his land immediately. The Government can benefit by this scheme as there will be no more loans seeking farmer left in the country! The financial health of many banks will bounce back and the Government need not go in for sops in financing the farmer.
4. The company can engage the farmer as a worker on the farm for a wage as labor will be needed by the enterprise for conduct of the agri business no matter how much one mechanises. This will further provide the second revenue stream for the farmer with which he can carry on his livelihood. With initiation of these measures, the farmer will be immediately taken out of the debt trap and his hope of recouping his financial health will be a reality. With this the farmer's psyche will turn to the brighter side of life. This will also arrest the migration of laborer to the cities from the villages thus making laborer available for the company. In addition the biggest gain that shall accrue to the society will be in terms of harmonious living and this will also put an end to Naxalism. Suicidal deaths that are rampant with failure of agriculture will begin to vanish.
5. So by these two measures the corporate is creating a psychological base for the farmer to live peacefully and participate and contribute o enhance the process of productivity.
6. With a large land area without subdivision and fragmentation, its workability improves manifold and the concomitant economies of scale will accrue. Farming can be done with the latest technology available in the field and therefore mass produce at lower cost. It can also market its produce at a sizeable profit than what the farmer derives. With this happening the corporate will be in a position to declare a dividend which will form the third revenue resource to the farmer and surplus can be utilized for village uplift.
7. The company can takeover the cattle of the farmer and maintain them in better health and produce milk to feed the children of the village. This will improve the health of the young ones and thus create health consciousness amongst people. Coupled with education, the nation will begin to grow stronger. The cattle dung can be used in making Organic manure, while keeping the use of Inorganic fertilizers to the minimum.
8. With healthy revenues flowing for the company through such scientific / intensified agriculture, it can build hospitals, schools and godowns for storage of produces. It can also build Agricultural colleges and provide higher education to the youth of the villages and ensure that they are gainfully employed by campus selection for various Agricultural projects throughout the country. It would be argued that these are GovernmentÂs activities and the corporate must not enter this area. Government has tried to run these Institutions for the last five decades and it has been seen that despite best intentions the benefit have not reached the ones it is meant for. After all many projects like road building, sea port construction and airport building which were once predominantly in Government's domain are now undertaken by private enterprises. Similarly these projects can also be done by the corporates. Once privatized, it can function more effectively and deliver the intended service. The FM has mentioned that the Government spends Rs 4 to provide Re 1 as poverty alleviation to the poor. If the Government stops these programs, it shall benefit in large savings and consequently improve the health of the Government. Instead Government can devise suitable measures to compliment the Corporate for their initiative in this area. The Government can withdraw the subsidy on fertilizers and free access to electricity in this process, as the company will generate enough resources to meet these input costs. The Government will stand to be the biggest gainer as the resources committed to this sector shall be freed and used to show a healthy fiscal trend.
9. Companies who are in the consumer goods industry can find market for their products in the rural interiors. The Corporates feel that the major market is in the rural interior after they have saturated the urban community and it will therefore augur well for it to be with the community to build for them and for themselves.
10. A portion of the profit can be set aside for community development in the areas of education/health care. A special mention merits mentioning about education. We need desperately to attain enhancement in levels of education. If companies begin to initiate the process of education at the village levels along with their business activity, it can firstly provide quality education. Secondly it can ensure to provide education to every child in the villages and in the process build a strong edifice for ensuring higher and specialized education of the youth of this country. Bharti Enterprises has just set up a Foundation for undertaking education of the rural folks in Punjab and wants to concentrate on disabled girls in the villages, by creating a corpus of Rs 200 Crores. They say that they are inspired by Bill Gates in this matter. A further refinement in educating the children is to use the medium of instruction as English. If we want our youth of the villages to come to the mainstream of employment and go global, learning English will be very essential. In the same breadth, learning our language is also important giving it equal emphasis. The indifference to learning English needs to be shunned as this will only harm us in the long run and will keep the large proportion of our village folks away from participating in the fruits of development. Mother tongue can be learnt along with English. China, which once closed doors for learning English, to day, has come forward to learn this language at all levels of education in order not to miss the centre stage in the world. With this initiation, China is beginning to reap the benefit. Learning English will automatically lead to employment of every student. Once this is achieved, all social problems connected with education, reservation and employment will begin to disappear. Today the issues of reservations etc are a simple outcome of lack of employment. Caste is made as a facade by active politics. This is manifesting in an upheaval and political mileage is derived to compound it. Affirmative action, a topic of the day, will not be required if we are able to achieve to educate our youth in the villages and employ them appropriately. If one corporate starts this revolution, it will be a run off, for many others to follow. The extent of land is so large that there is space for every corporate to get into and make a great India.
11. Having said the above, it is certain that at first sight the idea may appear to be a non-starter. It is also acknowledged that it is easier said than done. There are two main concerns in this suggestion. Firstly, the State Government's active involvement is necessary. Secondly and perhaps more importantly, the corporate will need to engage change agents to go into villages and spread the advantages of the scheme least the farmer have any apprehensions about the scheme. Unless these two areas are tackled with alacrity, the success of the scheme may be in doubt that much longer. However this hump is only for the pioneer. Once this is scaled, the followers will find it easier. The message of one successful operation is likely to spread like wild fire and will be acceptable to all the stakeholders. There must be a will and total transparency in the scheme.
If the corporates takes interest, it will be a win win situation for everyone. The boom this development will bring about will be greater than any boom witnessed so far. The biggest beneficiary will be the people of India and its Government.
What is the net effect?
Farmer across the country will be emancipated.
Indian Agriculture will leap manifold and there will be no hungry fellow Indian.
Food of excellent quality at affordable prices will be available for all and also find export markets.
Corporate who undertake this scheme can benefit by huge profits from the operations. Their market capitalization will enhance significantly.
They will begin to invest in education and it will automatically lead to employment in the enterprise itself. Those willing to go out can find enough opportunities as well. The corporate can train manpower for their other needs as well.
Government will become healthier and concentrate on core Governance.
India can soon a major power to recon with.
India can then truly be called an egalitarian society.
Indian society, particularly the younger generations will be fully educated and unemployment will begin to disappear.
Violence and unrest amongst people will reduce drastically.
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By: S. Raghavan
Former Director [Marketing]
IBP Company Limited
Mumbai
He can be contacted at
posted by Raghavan at 6:57 PM
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