Thursday, 12 November 2015

Why Agriculture is not an economical viable business?

Before going in to the details of the need for formation of producers organizations we have to look in to the burning issues which are involved in agriculture, for agriculture and disparities among the agriculture economic indicators.

In India, 49% population is still dependent on agriculture while its contribution in GDP is 17% only - Highly mismatch equity
Farmers are not willing to undertake agriculture and there is suicides at alarming rate especially in area under cash crops - Agriculture is in distress and setback to diversifications
Farmers are getting farm gates prices @1/3rd to 1/4th of their produces which is highly mismatch with the corporate models. In any manufacturing and food processing industry are getting more than 50% of the consumer prices. For example tractor industry are getting more than 80 % of the consumer prices. affect viability  
Smooth flow of formal credit of in agriculture is still a challenge especially under investment credit in direct farm sector and agriculture allied sector also. Farmers are getting production credit at interest rates in the range of 9-10 % and investment credit in the range of 14-15% against the stipulated interest rate of 7% and about 12%, respectively due to the leakages and corruptions in institutional financing system. costly credit with hassle
Slow transfer of technology from lab to land in patch up mode by different stockholders according to their mandate and not in a integrated manner. weak extension system with non-holistic approach
Landholding size of farm decreasing day by day. 85% of the Indian farmers are small and marginal and having only 44% of the total land holding. Non-economical size of individual land holdings restrict high degree of mechanization
There is lot of problems in supply of agricultural inputs under regulated markets. Seeds, fertilisers, pesticides. insecticides, fungicides, micronutrients, liquid bio-fertilizers are being regulated by the States. Although, there is lot of margins by aggregation of theses inputs which can cut the agriculture production cost. - Scope of reduction in input cost by aggregation
Marketing is still a challenge for the farmers. There are three main reasons : one is low quantum of market surplus by the individual small and marginal farmers, second one is N number of inter-mediators who are holders also and third one is lack of price discovery of agriculture  produces.  Scope of bulk marketing by aggregation and removal some of the non value addition inter-mediatories  

What are the interventions needed to make agriculture an economical viable business ?
Risk mitigation Measure
Risk bearing capacity
    Hassle free 
    Need based
    Multiplying effect

  Minimum level involvement of middle man
   Direct To Home (DTH) Service

     Locally available raw material based, socially acceptable and Marketable
Adaptation & Mitigation Support
Integration of agriculture

Gist of required supports/interventions to fulfill 5 major areas

Community Mobilization
Agricultural Inputs Support
ü Formation of FCs / JLGs / SHGs / Farmers’ organization / Federation of the farmers through the sensitization programmes

ü Soil Testing Facility / Soil Health
ü Seed Bank
ü Fertilizer Bank
ü Use of bio-fertilizer
ü Insect-Pest Management system
ü Storage Infrastructure Support
ü Support for mechanization system on custom hiring
ü Irrigation scheduling

ü  KCCs
ü  JLGs
ü  Immediate credit needs of the farmers against the harvested crops to avoid distress selling
ü  Formulation of micro potential linked plan (MPLP)
Technology Transfer
Marketing Support
Support for Other Activity
ü Farmers Information Center (FIC)
ü Survey of existing package of practice in respect of the existing cropping pattern
ü Making Comparison Statement of existing package of practices (EPOP)and scientific package of practices (SPOP) for given existing pattern
ü Analyzed the Comparison Statement by group of experts and list out the required interventions
ü Implementation of the required interventions through the FCs/JLGs/SHGs in a demonstrative mode @ 50-50 basis (i.e 50 % by EPOP and 50% by SPOP)
ü FIC should be supported with Agricultural Information Software with updating facility
ü Monitoring and Evaluation by group of experts
ü Documentation for making replicable models

ü Registration of the farmers organization
ü Mobile message system linking with FIC
ü Infrastructure supports for buffer stock for which credit advances given to the farmers to avoid distress selling of the produce
ü Rural Hat
ü Rural Mart
ü DTH Service in selling of Agricultural Produce 
ü Popularization of Various Centrally Sponsored Schemes with Animal Husbandry on priority
ü For dropout students and youths – Capacity building programmes to set up their own units
ü Implementation of UPNRM Projects on BOT basis
ü Supporting agro base small units for specific produce in a cluster mode

What is FPO-GRID ?

A FPO GRID would be networking of existing / newly formed FPOs within particular geographic locations. It may be a networks of FPOs within the State or in two or more States come together without graduating it in to any higher level federation/s. 

Importance of FPO-GRID ?

It will provide easy market assess to newly growing FPOs with minimum efforts and low transaction cost.
One more level mediator can be reduced outside the District/Division.
Most of the FPOs are graduating for doing business of specific commodity like seed production, dairy, poultry, banana, mushroom etc. Hence, during lean period and when there is no own surplus produce are available for marketing, in that period produce / products of other FPOs can be traded through the APMC- Mandi Samiti.
Provide a platform to undertake trading business of agriculture produces/inputs of other FPOs in own area this will give additional margins to FPOs.
Ultimately it will increase economic size of the business, lowering risk, increase margin and a vibrant marketing network can emerged in due course which is necessary for the sustainability of the FPOs.
Seed capital is biggest problem for newly graduated FPOs, hence the strong FPOs can support to weak and newly graduated FPOs.
These FPO-GRID can become a National Market where farmers would have no boundaries.
This FPO GRID will enable to make platform for price discovery which is the biggest hurdle at present while fixing wholesale prices of agriculture produces.       
Example of Trading Business of other FPOs.
Banana produce of Kushinagar Banana Producer Company Limited in District Kushinagar can be traded by FPOs in Lucknow, Kanpur, Ghaziabad, Noida, Ludhiana etc. and earn additional margin as a commission agent.
Kinnoo produce of FPOs in Haryana can be traded by Kushinagar Banana Producer Company Limited in Gorakhpur Mandi ( KBPCL, Kushinagar is planned to undertake trading of Kinnoo in Month of December 2015).
Mango produce of FPOs in Lucknow and Hardoi can be traded by FPOs in Kanpur, Ghaziabad, other cities  and earn additional margin as a commission agent.
  Actions need to be taken :

All the stakeholder especial Producers Organization Promoting Institutes  are requested to think and incorporate it trading in their business model.
All FPOs are requested to take licence of prominent APMC Mandi in their regions. (Kushinagar Banana Producers Company Limited has already registered as a traders in Gorakhpur Mandi ).
Build up data base regarding produces available for sale in future.  
Government Promoting Agencies are required provide grant support for development of a intranet for all the FPOs registered in UP/other States so that they can share the availability of supply of their produces / products and updated Mandi rates of respective regions.
Intranet would also help in extension of technology transfer, bankable model projects, synergy of Centrally and State Sponsored schemes and awareness of other innovative products.
These FPO would be our future partners / helping hands of Governments / Corporate / Financial Institutes, who can help in outreaching our developmental and promotional activities at gross root level as well as they will act as a agricultural extension agencies which is very week and require extra momentum in INDIA.