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  • 1. Boosting Agricultural Productivity- Cluster Cooperative Approach Thoughts by: Team Young Turks 05 September 2013
  • 2. Crop Diversification- The right way forward 0 0.2 0.4 0.6 0.8 1 0 2 4 6 8 10 12 Kar Guj Mah MP Raj AP TN UP Har Ker Bih Pun WB Ori Crop Diversification Agricultural Growth Crop Diversification Pecularities of Indian Agriculture Geographies Acquisitions Recruitment & Training Branding Crop Diversification is linked with improved yields and agricultural growth* Growth % YoY Index For Crop Diversif- ication *Source: National Agricultural Statistics and State of Indian Agriculture ** Source: Indian Agricultural Statistics Contribution of different sectors of growth by region and period** • In an era of climate change, crop diversification acts as a useful risk hedging strategy and hence boosts productivity • Much of the agricultural gains in the western region in the 1980’s and the southern and eastern regions in the 1990’s was led by crop diversification policies • Bangladesh also showed a successful correlation between increased agricultural production and crop diversification We observe that states with higher diversification are able to achieve growth rates of above 4%. Incidentally they are also growing from a higher base. Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation
  • 3. Fragmented holdings & rain-fed agriculture- Turning Adversity to Opportunity Fragmented land holdings makes adoption of technology difficult Farmers become subsistence farmers and go for crops that bear least risk i.e foodgrains crops Govt MSP fixing and generational knowledge makes it unviable for cultivation of cash crops The problem of smaller land holdings is going to be entrenched in our system We need to evolve a system which takes into account incidence of small land holdings by agglomerating holdings Overall irrigation potential is 45% of net sown area Low utilization of this irrigation potential means a majority of the agricultural land is rain fed Large irrigation projects entail massive displacement and loss of prime agricultural land Minor irrigation projects are plagued by issues of maintenance System of Rice Intensification and other dryland farming technologies have advanced to considerable extent Solution lies in identifying the best form of cultivation practice customised to suit local agro-climatic and soil conditions Emphasising on implementation of the technologies 0 1 2 3 1970 1976 1980 1985 1990 1995 2000 2005 2010 Average Size of Land Holdings (hectares) Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation
  • 4. Credit & Insurance- Challenging established norms Credit- A farmer’s nightmare Formal credit sources like banks require large amount of paperwork and are intimidating for the poor farmer Informal credit sources like moneylenders charge exorbitant interest rates and stress on placing land on mortgage Kisan credit cards, a much hyped government scheme is yet to permeate the agricultural credit market. Linkage with banks and paperwork makes it difficult to implement Strategy should be two fold- Reducing agricultural production variances to bring down interest rates developing local means of credit availability Local means of credit makes it possible to access credit worthiness with hardly any costs while keeping interest rates low Insurance- Non existent Lack of adequate insurance schemes Government’s NSAI insurance scheme linked to yields has hardly any takers Private player’s lack an incentive to enter the low margin agricultural insurance space Link insurance and credit channels to make it appealing Encourage adherence to a code by using insurance as a carrot Insurance also reduces agricultural income variability for a farmer Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation
  • 5. Supply Chain- A chain of woes Archaic domestic laws Old APMC Act necessitated the presence of series of intermediaries Model APMC Act which corrects this is yet to be adopted by many states and several inter state tariffs remain Farmer gets merely 66% of the price paid by customer for produce Marketing hassles need to be handled by farmer organizations Reducing the number of intermediaries is need of the hour Establishing direct customer touch points for farmers Using technology in this regard Trade regulations Inadequate infrastructure for handling export of perishables Freight charges in India about 50- 100% higher than other agriculturally rich countries Multiplicity of organisations makes quality checks difficult Differing needs viz a viz quality and support requirements for different agricultural products Developing a system which handles individual product export needs and is solely responsible for the same Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation
  • 6. Cluster cooperatives – The way forward Clusters •Crop clusters to develop back to front linkage •Supply of crop specific inputs, credit, technological knowhow, processing and marketing •Research on agro-climatic conditions determining crop and technology to be used •Overcomes problem of small land holdings, lack of irrigation, marketing hassles •Use of SRI and other technologies Cooperatives • Cooperatives for each major crop • Cooperatives to be run by the farmers and for the farmers • Direct touchpoints for farmers and customers • Interest of farmers to be the cornerstone of cooperative establishment • Savings cum credit scheme and insurance guarantee scheme to address these shortcomings Agglomorative diversification , Local Specialisation • Crop diversification at the aggregate level as presence of multitude of crop clusters • Crop diversification also to include letting out of processing plants, houses etc during off-season • Farmers free to use services of cooperatives or directly approach market • State Cooperative Units to coordinate within state transport of produce • National Cooperative Units to decide on import/export possibilities Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation
  • 7. Implementation- Build Systems that Sustain and Grow Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation •Aim is to design a system that factors in need for crop diversification and fragmented land holding •The credit and insurance norms would have to be factored in •The vision to create a self sustaining model is of utmost priority Creation • The aim is to achieve improve agricultural productivity would be through a Four Tier Cooperative model •While most controls of the Cooperatives would rest with the farmers while professionals would manage and run the business. Design Processes and Procedures • A savings cum lending scheme shall be established wherein the farmers would pool in resources at the cooperative level •The cooperatives in consultation with lending institutions shall decide on the loan amounts and interest rates post approval from State Federation Fund and Help Processes Mature •This is the final stage and a self Sustaining Co- operative model would have been in place having followed the three steps. •The cooperatives would thus be independent bodies with positive earnings Self-Sustain
  • 8. Designing the Co-Operative Systems- A Four Tier Structure Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation Tier 4 - The Zone level Federation •The Zone level federation shall decide on policies and procurers for packaging, transporting among various states, exports and imports etc. •Further, this federation shall instruct the state level federations on the ‘type’ of diversification basing on the macro environmental factors Tier 3 - The State Level Federation •The main functions at this stage would market the products and agricultural produce and take the produce from different district federations •Training & Development, Long term planning, conflict resolution, creating a brand and establishing purchase law for raw materials shall also come under the state federation Tier 2 - The District Federation •The main functions at this stage would include procurement of agricultural produce, providing input services such as seeds, technology, know-how to the farmers’ Union and decide on the prices to be paid to the farmers and other members Tier 1 – The Famers’ Union •A society at a smaller level could be formed under the supervision of the district federation •The main functions of the society would include farming activity, selling the produce in the locally according to the local needs and supplying the output to the district union
  • 9. Road to Sustainability for the Cooperatives Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation The first stage is a creation stage. The cooperatives would be formed at this level A situation where every cooperative seeks for funds shall be seen in this stage The procedures would have taken shape and the processes begin to mature The Cooperatives would could still be operating in the red at this phase A set of processes would have been in place which would not be ‘person’ dependent Crop Diversification processes would be taking place The Cooperatives would have enough income at this step to sustain themselves How the tide would change The initial phase would see cooperatives operating in red. With shared resources, shared technology, know how farmers would have better access to tools that would increase productivity With crop diversification, along with diversifying in crops, cooperatives could diversify in packaging, processing and retailing to better margins that could be pumped in back to the system to get HYV and better raw materials and thus leading to sustainable growth
  • 10. The Impact Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation Benefits at farmer level • Focused employment among the farmers as they work under a cooperative model • Would help in reducing variation on incomes YoY • Farmers would have access to new technology and HYV seeds and other raw materials which was otherwise inaccessible • Ease of procuring funding and assurance of the money being spent the right way as every loan would require approve from Zonal Federation Regional level • Better transporting and monitoring facilities would result in efficient results • Computerization of land records would have resulted in better use of land and thus increases scope for diversification at regional level National Level • Increased agricultural productivity brought out by use of technology • Synchronized efforts in the agricultural sector as the zonal federation is the only authority to direct on crop diversification and the other crops that need to grown and such decisions shall be taken considering the macro-environmental factors. • Would help boost agricultural exports and reduce imports
  • 11. The Challenges- Rome wasn’t built in a day Crop Diversification Peculiarities of Indian Agriculture Credit & Insurance Marketing and Trade Solution Implementation Political •Setting up of cooperatives in a non partisan manner •Ensuring large farmers do not establish their hegemony in cooperative functions •Resistances from politically strong intermediary class Economic •Ensuring a self sustaining cooperative model •Problem of defaults especially in case of savings cum lending •Disbursement of cooperative profits in a fair manner •Time of implementation as it goes through red tapism •The fear of monopolisation by cooperatives and food price spiral for customers Environmental •Natural disasters or an infestation by pests spoiling a particular crop •As there is local specialisation, entire area and therefore cooperatives to go into defaults and losses •Lack of adequate coordination between cooperatives and competition to bring in more members, thereby disrupting the planning process