Institutional Synergies for People-Private Partnership: Agri-business Approach for Small Farmers Public and Social Policies Management (PSPM) Group International Conference on Agricultural Governance,18 th Dec Raghavendra Mandavilli Senior Manager

2 Agriculture to Agribusiness Production Procurement ProcessingRetailing Inputs AGRI - INFRASTRUCTURE Agricultural Value Chain implies the chain from farm Gate to Farm Plate… …However Agribusiness Value Chain corresponding to above activities are following

3 Transition from Agriculture to Agribusiness REMOVAL OF STRUCTURAL BARRIERS Multiple intermediaries Absence of serious entrepreneurs Information transparency Facilitate consolidation of land holdings ATTRACT PRIVATE PLAYERS Investor support for creating an enabling environment PPP approach for project development FOCUS Focus on few crops rather than efforts dispersed across crops and regions. Efforts should be market driven (including state research) & not supply driven CREATE ADEQUATE PHYSICAL INFRASTRUCTURE Physical agri-infrastructure should be geared up to service processing industry & exports TRANSITION TO AGRIBUSINESS

4 Solutions lie in integrated steps Technological intervention right from quality seed production to efficient warehousing and professional packaging is the only way to address these issues Implementing the available technology and also research and development of further technology needs investment Investment required for effective changes in agriculture knowledge and infrastructure capital development can only be done through private investment Mobilizing private Investment needs effective Government policy directives that can be attained through institutional change PPP in case of agriculture is not only government and private corporate tie-up but needs to also include the farmer SHG’s and cooperatives 4

5 Governance Systems – The Need for Innovative Institutional Mechanisms An effective People Public Private Partnership (PPPP) to streamline Production & Consumption Collaborative Community Structures Private Sector: Production, Consumer Interface R&D Public Sector: Delivery, Infra, Institutions to promote consumption The secret to tapping the potential that India holds for upscaling both production and consumption lies in effective institutional partnerships wherein: Collaborative community structures like co-operatives or FPOs are established on- ground to ensure social equity with agricultural growth The Public Sector utilizes its delivery and infrastructure capabilities The Private Sector utilizes its technical and management expertise to optimize production, as well as lead in R&D processes An institutional structure to promote and create awareness on consumption of pulses

6 Governance Systems – The Need for Innovative Institutional Mechanisms The needs are so high for both for resources and management, that PPP mode is a necessity to arrive at a sustainable solution. PPP models have the ability to efficiently cover the last mile in a long-haul problem. Key Areas for Private Sector Participation Seed production Extension of improved package Skill upgradation of farmers Delivery of inputs and services to farmers Technological interventions Crop-insurance & credit delivery Procurement of produce Resource relevant farm mechanization Development of natural resources

7 Farmer Producer Organizations (FPOs) – As a means for Institutional Innovation in Agriculture Agri –cooperatives They have been successful in spreading education and awareness Results are not remarkable in case of Credit access & Business viability for medium and long term. They are often relying on receiving grants, subsidies & loan waiver. Collaborative community model of producers, especially small and marginal farmers, into producer organizations Effective pathways to address the many challenges of agriculture but most importantly, improved access to investments, technology inputs and market. Aggregators of Farmers Producer Organizations (FPOs) can have improved access of through collaborative community model Source: Agri census-2011 ; Image courtesy- The Hindu

8 PPPP: The Way Forward PPPP: People – Private- Public- Partnership is the only sustainable way to achieve capital formation in Agriculture. Being a marginal economy where supply increase is not matched with immediate consecutive demand and as we do not have established trade lines, it is necessary to have enough infrastructure to stop wastage of agriculture produce Infrastructure can only be achieved through Capital formation Given domestic and international economic condition, it is not expected to raise the capital required by the government To achieve sustainable economic growth, one thing that India does not have is time All these macro issues can be addressed through PPPP. With more awareness and pressure on land including local people in ground level policy is of utmost importance.

9 New Win-Win Business Model The models should create a win-win situation for rural industry, rural communities, private investors and the economy as a whole Proposed New Business Model: Social Equity Model Based on the principle of Public Private Partnership (PPP) Implemented/ operated through Cooperatives Financing is easier with either Government, Co-operatives or bigger corporates taking a part in the Agricultural Chain

10 Social Equity Model Local Community PROJECT Agro – Corporate Capital & Overall Management Branding Additional revenue that can be ploughed back Land & Capital up to say 10% stake in the project (Social Equity) Part Management Government Govt funding programmes Fiscal Concessions Funding Management Providing feasible solutions NGO(s) Employment Empowerment Additional Income Meeting certain social goals Financial Institutions

11 Business Merits of Social Equity Projects Due to the scale of operations, makes access to finance easier in relation to standalone agricultural practice Financial Services Low cost quality inputs by ensuring the participating agriculture input companies Input Services Procurement of agriculture directly by retailers, processing companies, exports Procurement & Packaging Services Direct marketing after procurement of agriculture produce Marketing Services Better risk management strategies through weather insurance and price hedging Insurance Service Access to latest technology, marketing information system, and post harvest infrastructure Technical Services Making channels of information (about product specifications, market prices) programmes Networking Services

12 Project Development through FPOs Knowledge delivery Technology Delivery Marketing Strategy Partner Credit Insurance Tie-up with Food Processing Companies Consumer Retailer, Exports FPOs Research Institution Financial Institutions Knowledge Bank Knowledge Bank Investment SPV Innovative Structure PPP Agriculture Project Cooperative Equity

13 Impact Investing - Financial Scaling through FPOs Farmer Linkages Research & Extension Financial Services Agri Infra & Logistics, cold chain Commodity Trading Market Linkage Consumer Orientation Innovative Business Modeling Regulatory Reforms Infra Development Credit Deliverance Action Steps Price Competitiveness Streamlined Supply Chain Agricultural Practices/method Institution & Community led Innovation Market Development Source: YES BANK Analysis FPOs

14 Conclusion Institutional changes are required to enable to such People – Public – Private Partnerships to be implemented Stakeholders involvement is critical for the success of such partnerships and hence the structure should be flexible Land consolidation is a major issue which needs to be addressed taking in to account the interests of all stakeholders Pilot projects need to be taken up to further streamline operational issues that may arise Agriculture is the backbone of Indian economy and we need to address the issues fast to empower the Primary Sector

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