The Hindu Business Line : Developing agri-infrastructure, key to 2nd agri revolution

Seeking modernisation: A file photo of corn piled up at a village near Palladam in Coimbatore districts. Development of agri-infractructure will event post-harvest losses besides ensurig proper storage of the produce. –

Rana Kapoor

While the contribution of agriculture to the country’s GDP has declined from 56 per cent in 1950 to approximately 17 per cent in 2008, there has not been any significant shift in the occupational structure (55 per cent of the work force continues to depend on agriculture). Therefore, agriculture’s importance in terms of economic prosperity and the socio-political fabric of the country remains well beyond its contribution to the national output.

ILL-EQUIPPED

Though India is one of the world’s largest agricultural economies, its agri-business is characterised by a multitude of small-scale, long and fragmented supply chains; high wastages; low share of producers in price realisations; non-integrated processing and marketing establishments, which use mostly outdated technology and are uncompetitive in global markets. It is ill-equipped to meet the growing needs of consumers in terms of quantity, quality and safety. This can be met only by well-conceived agri-infrastructure development.

Creation of adequate agri-infrastructure will raise productivity, reduce transportation costs, increase farmers access to markets and lower production costs. But it needs to be expanded to accommodate growth (it is estimated that a 1 per cent increase in the stock of infrastructure is associated with a 1 per cent increase in GDP) and also to enable transition of Indian agriculture from a supply-driven value chain to demand-led market-oriented supply chain.

MODERN TERMINAL MARKETS

I truly believe that it is essential to establish the required value chain linkages in the areas of agricultural marketing, processing and agro logistics and some of the themes for agri-infrastructure development would include creation of:

Modern terminal markets (MTMs) – It is a concept based on a hub-and-spoke format wherein the central market (the hub) will have the state-of-the-art infrastructure including electronic auction facility, sorting, grading and packing lines, cold storages, warehouses, ripening chambers etc. This would further be linked to a number of collection centres (the spokes), conveniently located in key production areas. These would allow convenient market access to farmers and also facilitate in fulfilling the farmers needs, increasing operational efficiency and effective capital utilisation of the investment. The benefits of MTMs will include:

•Multiple choices for the farmer to market their produce; efficient price discovery; and faster cash settlement.

•Avoid distress sale of produce by enhancing the withholding power of farmers

•Reduction in transaction costs and increasing share of the consumer price to the farmer by eliminating intermediaries and redundancies.

•Availability of graded, sorted, quality and hygienic produce to the consumers.

•Reduction in wastage of the produce and enabling efficient logistics.

AGRO FOOD PARKS

Integrated Agro Food Parks (IAFP’s) entail spatial clustering of different agro-production and agro processing chains with non-agro functions such as energy production, waste and water management. They would integrate the supply side with the demand side of the food chain in an efficient manner. IAFP’s would offer benefits such as:

•Realisation of better quality and price for the produce due to migration of best international practices in production and processing.

•Development of entrepreneurship in the farmers and enabling the development of food processing industry by securing the right linkages.

•Creation of new employment opportunities for rural communities.

•Creation of innovative business models between various stakeholders.

•Boosting the image of our products in the international markets.

•Reduction in post harvest losses, transportation and energy costs.

MECHANISATION

Mechanised handling and storage systems and port-based infrastructure: This includes creation of mechanised food grain/oilseeds bulk handling systems including railway wagons, refer trucks and bulk silos.

There is a need for developing a matching port-based agri infrastructure including dedicated agri-produce handling berths to enable bulk handling as agricultural exports are critically dependent on the capacity and efficiency of ports.

ADVANTAGES

The prime advantages offered by the development of mechanised storage and port-based infrastructure would include:

•Reduction of loading and unloading time due to efficient and mechanised operations.

•Minimisation of the wastage of food grains, oilseeds, processed food and perishables and efficient handling of surplus produce.

Agriculture sector has been the core while formulating the 11th Plan (2008-2012) envisaging diversification, augmentation and modernisation of rural infrastructure as the major element of the strategy for accelerating agricultural growth. There is a need for stronger emphasis on introduction of supportive policy and legal framework and stronger incentives for private sector participation.

This would usher in new players into agri-business who will not only inject investments but also the desired managerial expertise. The pre-requisite for this would be to develop a time-bound, sector-specific, collective and comprehensive blueprint and road map for development of agri-infrastructure on a pan-India basis involving all stake holders. This will unleash India’s agri-business potential and set the conditions for the agriculture sector to grow beyond four per cent.

(The author is Founder/Managing Director and CEO of YES BANK.)

(Business Line invites responses from readers. Responses may be sent to agribiz@thehindu.co.in)