Agricultural Value Chains in India. Ensuring Competitiveness, Inclusiveness, Sustainability, Scalability, and Improved Finance

324 Pages·2022·4.108 MB·English

by  Ashok Gulati, Kavery Ganguly, Harsh Wardhan

India Studies in Business and Economics
Ashok Gulati
Kavery Ganguly
Harsh Wardhan Editors
Agricultural
Value Chains
in India
Ensuring Competitiveness,
Inclusiveness, Sustainability, Scalability,
and Improved Finance
India Studies in Business and Economics
The Indian economy is considered to be one of the fastest growing economies of
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· ·
Ashok Gulati Kavery Ganguly Harsh Wardhan
Editors
Agricultural Value Chains
in India
Ensuring Competitiveness, Inclusiveness,
Sustainability, Scalability, and Improved
Finance
Editors
AshokGulati KaveryGanguly
IndianCouncilforResearchon IndianCouncilforResearchon
InternationalEconomicRelations(ICRIER) InternationalEconomicRelations(ICRIER)
NewDelhi,Delhi,India NewDelhi,Delhi,India
HarshWardhan
IndianCouncilforResearchon
InternationalEconomicRelations(ICRIER)
NewDelhi,Delhi,India
ISSN2198-0012 ISSN2198-0020 (electronic)
IndiaStudiesinBusinessandEconomics
ISBN978-981-33-4267-5 ISBN978-981-33-4268-2 (eBook)
https://doi.org/10.1007/978-981-33-4268-2
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Foreword
Inresponsetochangingconsumptionpatterns,agriculturalproductionhasdiversified
from food grain to high-value commodities including horticulture, livestock and
fisheries.Demandforvalue-addedandnutrient-richfoodsisfastreplacingcalorie-
richgrain-baseddiets.Indiaistheleadingproducerofmilkandasignificantproducer
ofpoultrymeat,eggs,fruitsandvegetablesandpulses.Thisprovidesahugescope
forIndiatocatertorisingdomesticaswellasglobaldemandforthesecommodities
with potential gains for the farmers. Agricultural value chains in India have been
confrontedwithatoughbalanceofimprovingefficiencyandensuringinclusiveness
of the primary producer. This makes farmer–market linkages critical to delivering
assuredreturnstofarmersandensurefarmingremainsprofitable.
This study on Agricultural Value Chains in India analyzes the performance of
tomato,onionandpotato(TOP),grapes,pomegranates,mango,banana,dairy,poultry
andpulsesvaluechainsintermsofcompetitiveness,inclusiveness,sustainabilityand
scalabilityand access tofinance (CISS-F).This isaunique conceptual framework
usedtostudyagriculturalvaluechainsinaholisticmanner.Theauthorsfocusonthe
needandimpactofstrikingabalancebetweenthevariouselementsofCISS-F.The
commodity-specificdeepdivesclearlydemonstratehowdairyvaluechainhasbeen
successful in delivering higher returns to the farmers ((75–80)% of the consumer
price). Integrator-led poultry value chains have been phenomenal in undertaking
costsandrisksassociatedwithpoultryfarming,makingitmuchmoreremunerative
andrisk-freecomparedtobackyardpoultry.SimilargainsintheTOPvaluechains
aremuchawaited,whichcurrentlydeliverabout30%oftheconsumerpricetothe
farmers.AttainingaperfectscoreonCISS-Fmaynotbepossible,buttechnology,
institutionsandmarketswillcontinuetoplayanimportantroleinstrengtheningthese
valuechainsanddeliveringbenefitstothefarmersandconsumers.
We are hopeful that this study will enrich the policy discourse on the need for
improvingmarketingopportunitiesforfarmersbystreamliningandorganizingvalue
chains. This evidence-based research study will be useful for drawing valuable
insights by various stakeholders including policymakers, experts and practitioners
forinformedpolicymaking,balanceddiscourseandimprovedvaluechainpractices.
WeatNABARDandICRIERareextremelyhappytoseetheresearchstudyshape
into a book that will favourably impact the national and global outreach. We take
v
vi Foreword
thisopportunitytocongratulateDr.AshokGulati,InfosysChairProfessor,ICRIER,
whohasbeenachampionofmarketledinclusiveagriculturalgrowthforundertaking
thisimportantresearchstudyandforsteeringtheICRIERteamtowardsavaluable
output.
Dr.DeepakMishra Dr.G.R.Chintala
DirectorandChiefExecutive Chairman
ICRIER,NewDelhi,India NABARD,Mumbai,India
Preface
Indian food basket has become increasingly diversified, and consumption of high-
valueagriculturalcommoditiessuchasfruits,vegetables,milk,eggs,meatandfish,
andvalue-addedfoodhasincreased.Thisdemand-drivenstructuralchangeinIndian
agriculture is attributed to rising incomes, increasing population, urbanisation and
higherexportdemand.Thefast-developinghigh-valueagriculturalmarketsprovide
immenseopportunitytoIndia’ssmallandmarginalfarmerstodiversifytheircropping
patterns,boosttheirincomesandsecuresustainablelivelihoods.
India’ssmallholdersconstitute86.1%oftotalfarmholdings.TheallIndiaaverage
landholding size is 1.08 hectares (ha) (DoAC&FW, Agricultural Census, 2016).
Despitebeingasmallholdereconomy,Indiahasbecomeself-reliantincerealproduc-
tion and is a leading producer of many high value agricultural commodities. India
produced 281.8 million tonnes of food grains, 307.7 million tonnes of horticul-
turecrops,176.5milliontonnes ofmilk,96billioneggs and7.7milliontonnes of
meat during TE 2018–19 (DES, 2020; Horticulture Division, 2020; and DAHDF,
2020).However,thisrecordlevelofproductionwasnotaccompaniedbycommen-
surateincreaseinfarmers’income.Lackofrobustmarketlinkageshaveresultedin
poor price realization for the farmers as well as forcing them to dump or destroy
the fresh produce. Such instances have been reported several times in the case of
horticulture produce which is highly perishable with very low shelf life. Agricul-
tural value chains in India are subject to high fragmentation and intermediation,
resultinginsubstantiallossesinquantityandqualityofproduce,limitedprocessing
capacities, and high price volatility. Agricultural policies in India have primarily
focussed on augmenting production, without giving due attention towards devel-
oping efficient value chains. Further, cereal-centric policies of the government do
notadequatelyrecognizethechallengesfacedbyfarmersgrowingnon-cerealcrops.
Thesepolicieshaveledtoenvironmentaldegradationincludingfast-depletingwater
resourcesinkeyrice-growingstatesaswellassoilcontaminationduetounabated
useoffertilisersandagrochemicals.Thepolicieslackaholisticapproachandlong-
termdirectiontowardssustainabilityandscalabilityofsuccessfulvaluechainsacross
commoditiesandgeographies.
In order to further study the issues and challenges faced by agricultural value
chainsinIndia,NABARDinitiatedaprojectundertheNABARDCentreforResearch
vii
viii Preface
inAgri-EconomicssetupinICRIER.Thisbookisaculminationofthesixcommodity
value chain studies done under this project over three years. The book presents
a comprehensive analysis and evaluation of the performance of selected agricul-
turalvalue chains across major producing regions in India.The conceptual frame-
workof competitiveness (domestic and international), inclusiveness, sustainability
(financialandenvironmental),scalability(CISS)andaccesstofinance(F)helpsto
analyze the selected value chains in a holistic manner. The commodities included
in the study include vegetables (tomato, onion and potato (TOP)), fruits (banana
and mango, grapes and pomegranate), dairy, poultry and pulses (gram and pigeon
pea/tur) accounting for more than half of gross value of output of agriculture and
allied sectors. The research is based on a combination of secondary data analysis,
fieldvisitsanddiscussionswithkeyplayersineachofthevaluechains.
Thebookidentifiesthedriversofchange—technology,institutionsandmarkets,
which together have strengthened agricultural value chains to become competi-
tive, inclusive, sustainable and scalable and improved their access to finance. The
studyfindsthattechnologyhascatalyzedproductivitygainsthroughhigh-yielding
seedsandcross-breedtechnologyformostofthecommoditiesstudiedhere,except
pulses.Marketshaveplayedanimportantroleinthesuccessofdairyco-operatives,
connectingthesmallestmilkproducertourbanmarkets,poultrysectorthroughinte-
gratormodelandgrapesthroughexportmarket.However,similarmarketlinkages
havenotbeenpossibleincaseofbananaandmango.Incaseoftomatoes,onions,pota-
toesandpulses,weakmarketlinkagesexplainextremepricevolatilities.Institutions
relatedtofarmercollectiveshaveensuredsuccessfulfarmer-marketlinkages.Success
oftheIndiandairysectorisascribedtothepioneeringeffortsoftheco-operatives,
particularlyAmul,followedbytheprivatesector,overtime.Grapesvaluechainwas
ledbyMahagrapes,aproducercompanythatsuccessfullylinkedsmallgrapegrowers
toexportmarkets.Integrator-ledpoultrysectorbroughtaboutphenomenalgainsto
thesmallpoultrygrowersintermsofriskmanagement,backendsupportandassured
markets.Commoditiesliketomato,onion,potato,mango,banana,andpulsesareyet
towitnessanysuchsignificantinstitutionalimpact.However,theOperationGreens
scheme launched in 2018 for TOP and further extended to include 22 perishables
willtakesometimebeforeanefficientandinclusivevaluechainsofperishablesare
developed.
The study shows that while some of the agricultural value chains have made
considerableprogressonCISS-F,othershavescopetocatchup.Forexample,while
fruitsandvegetablesshowedlowerdomesticcompetitivenessintermsoflowfarmers
shareinconsumerrupee,dairyfarmershavebenefitedfromhighdomesticcompet-
itiveness.Incaseofinternationalcompetitivenessmeasuredusingnominalprotec-
tioncoefficients(NPCs),allcommoditiesexceptpomegranate,mangoandmilk(co-
operativemodel),arefoundtobeexportcompetitive.Financialsustainabilitydepends
ontheperishabilityandseasonalityofthecrop,whichaffectfarmincomes.TOPand
pulses are extremely price sensitive and driven by traditional marketing practices.
Incaseoffruits,cultivationofbananas,mangoes,grapesaswellaspomegranatesis
profitable,butrequireshugeinvestment.Thefinancialviabilityofdairyco-operatives
isamatterofconcernasabout58%ofdairyco-operativeshaveaccumulatedlosses
Preface ix
primarily because of governance issues. Indian dairying faces significant fodder
shortagewhichfurtherthreatensthefinancialsustainabilityofthesector.Forpoultry
sectortoo,theavailabilityofhigh-qualityandaffordablefeediscriticalforfinancial
sustainability.However,itisenvironmentallyefficientcomparedtoothersegmentsof
thelivestocksector,butchallengedbyfrequentoutbreaksofAvianInfluenza(AI).
Dairyontheotherhandisahugecontributortogreenhousegas(GHG)emissionsand
alsorequiressubstantialquantityofwater.Allfruitsandvegetables,exceptbananas,
are non-water guzzlers, and so are pulses, indicating environmental sustainability.
Scalabilityofagriculturalvaluechainswasmeasuredintermsofareaexpansionor
productivity gains,which impact totalproduction levels, and expansion of exports
and processing capacities. The potential of replicability of successful value chains
acrossothercommoditiesandstateshasbeenstudiedaswell.Finally,existinggaps
infinancing,thecurrentreachoforganizedfinanceandfurtherpotentialofinnovative
financialinterventionhavebeenidentified.
Based on the analysis presented in the book, important policy suggestions to
make agricultural value chains more competitive, inclusive, sustainable, scalable
withimprovedaccesstofinance,havebeenputforth.Thesepolicymeasurespertain
tofourpillars:agriculturalfinance,technology,marketsandinstitutions.Agricultural
marketingpolicyreformshavebeenfocusedonimprovingefficiencyanddelivering
theeconomicgainstothefarmers.TheFarmLaws2020havethepotentialtofurther
strengthenthehigh-valueagriculturalvaluechainsinIndia.
Wehopethattheresearchfindingsandpolicysuggestionspresentedinthisbook
willbeusefulforpolicymakers,financialinstitutions,andpractitioners,inidentifying
thechallengesconfrontingagriculturalvaluechainsinIndiaandframingpoliciesand
innovativefinancingmechanismforeachstakeholderinthevaluechain.
NewDelhi,India AshokGulati
KaveryGanguly
HarshWardhan