Agribusiness Status in India..Issues and Way Forward By Sanjeev Asthana Sanjeev Asthana Reliance Agribusiness 1
Flow of Presentation Indian Agriculture Snapshot & Challenges Development Needs Suggestions and Recommendations Sanjeev Asthana Reliance Agribusiness 2
Indian Agriculture - Snapshot We are a large producer and consumer of food 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 Milk Largest Producer 91 Mn T Fisheries Marine: 2.7 Mn T Inland : 3.1 Mn T Cattle / buffaloes Largest in the world 283 million 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 F & V #2 in the world 129 Mn T Food Grains #2 in the world (218 Mn T) Sugarcane # 2 in the world (245 Mn T) Goat & Sheep 182 million Cereals Largest Producer of Pulses Second largest producer of Food grains Second largest producer of Sugarcane Source: FAO / NHB / Department of Animal Husbandry Tea Largest Producer (0.85 Mn T) Sanjeev Asthana Reliance Agribusiness 3
Supply-Demand Gap for Selected Food Items Unit Million Metric Tonnes 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 4
Diversifying Agriculture High value agriculture taking roots over traditional crops Sanjeev Asthana Reliance Agribusiness 5
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 6
Low Yield Indian Ranking Globally on Area, Production and Productivity Indian Yields compared to Global Averages Global Ranking Area Ranking Productio n Ranking Yield Ranking Rice 1 2 52 Wheat 1 2 38 Coarse Cereals 3 4 125 Pulses 1 1 138 Oilseeds 2 5 147 Cotton 1 4 77 Jute & allied 1 1 07 Sugarcane 2 2 31 Yield Comparisons Rice Yield Comparisons Wheat 10000 8000 6000 4000 2000 0 India Bangladesh Egypt japan Mayamar World Average 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 India China France Pakistan UK World Average Source: Economic Survey 2004-05 Yields in Indian Agriculture are well below Global Benchmarks Sanjeev Asthana Reliance Agribusiness 7
Percent of Farmers Missing Information Link Issues: Source of information for farmers mainly other farmers Formal extension system defunct Info out of step with market need 80 70 66 69 69 Low penetration. of orgn sector Demand impulse slow to reach Leading to Severe SND imbalance Price volaitility 60 50 40 30 20 10 0 21 10 7 7 8 7 9 8 0 1 1 3 1 3 1 1 0 2 2 2 3 Crop Prices Sorting/grading of crops Post-harvest practices Extremely low tech adoption Other farmers Personal observation Contract Buyers Mass Media Agricultural traders Agricultural officers Input suppliers Other Source: World Bank Agricultural Marketing Survey 2005 Time to reach, delivery mode and quality of info is crucial Sanjeev Asthana Reliance Agribusiness 8
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 9
Declining Share of Public Sector Outlays and Expenditure under Agriculture & Allied Activities (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 Source: Planning Commission, New Delhi Declining Public Investments Resource appropriated by subsidies Limited Private sector investment Positive Impact of recent Govt programs being felt.. Sanjeev Asthana Reliance Agribusiness 10
Skewed Resource Allocation: Fertilizers Large Subsidy to few states Same states tend to benefit more from FCI procurements Focus should be on creating avenues to increase farm income Fertiliser Subsidy (Rs in Crores) Source: The Fertiliser Association of India Resource constraints will challenge recapitalization of agriculture Sanjeev Asthana Reliance Agribusiness 11
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 12
Mark-ups Total mark-up in the chain Consumer Total margin - 60 to 75 % Margin from farmers to wholesaler - 30-35% Wastage - 15-25% Transportation - 10% approx. Sub-Wholesaler Retailer < 6% < 25% Wholesaler < 10% Market level commission agent < 8% Consolidator at Village level < 10% Small / marginal farmer Farmers get 25-30% of consumer price Source - FICCI Agricultural Summit 2006 Sanjeev Asthana Reliance Agribusiness 13 Source - FICCI Agricultural Summit 2006
Disjointed Supply Chain Farmer Village Commission Agent District Commission Agent Wholesaler Sub Wholesaler Retailer Consumer Farmer Low yield / non-standard quality Price de-linked from market Processor No control on quantity / quality of raw material Village Commission Agent Unscientific and unhygienic handling Poor market access Loss in trade passed onto farmer Distributor Lack of infrastructure leading to loss of quality Mandi / Local agents Transportation No infrastructure for handling / grading Price quality correlation not assured Unscientific method leading to loss of quality / damages Retailer Consumer Lack of infrastructure leading to loss of quality High prices Limited choice Wholesale mandi Inadequate infrastructure Rampant wastage Opportunistic profiteering Non value adding players Sanjeev Asthana Reliance Agribusiness 14
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 15
Underdeveloped Processing Industry Country %Processed Fruits and vegetables M alaysia 83% South Africa 80% Phillipines 78% Thailand 72% Brazil 70% USA 65% India 2-3% Source : NHB 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 Sanjeev Asthana Reliance Agribusiness 16
Recent Developments 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". Major steps in right direction lot more needs to be done Sanjeev Asthana Reliance Agribusiness 17
Agribusiness Private Initiative 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 Major initiatives on ground however scale is the key Sanjeev Asthana Reliance Agribusiness 18
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 19
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 20
Thank You! Sanjeev Asthana Reliance Agribusiness 21