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  1. 1. Redefining the Middleman Concept With a Model To Meet the Cold Storage Shortage Boosting Agricultural Productivity Shiba Prasad Sahoo Suraj Kumar Rath Rajkishore Das Antariksha Pattnaik Prayas Rath Team:
  2. 2. Introduction  By the end of ninth five year plan, India had emerged as the second largest producer of fruits and vegetables in the world (worth US$ 25 billion)  And at the end of tenth five year plan, out of the expected production about 30% (US$ 13 billion) got wasted due to various reasons and did not reach the end consumers.  And every 1% reduction in wastage of fruits and vegetables would translate to savings of US$ 0.13 billion. Post Harvest Loses Pie Chart Enough attention has been paid at the Pre-Harvest stage for boosting up the levels of production by various techniques. But, Post Harvest issues have been grossly neglected or addressed inadequately .
  3. 3. Problem 1: India is short by 10 million tonnes of cold storage capacity WHY THIS REASON ?  Increasing cold storages would save perishable food and mitigate food crisis.  India experiences significant price inflation due to cold storage shortages.  Over 90% of the cold storages are in private sector which are less accessible to most small scale farmers. SCOPE  30 % of total agricultural produce goes to waste every year.  20% of food grain that India produces annually is eaten by rodents.  India stores only 2 % of its farm produce in temperature controlled environment . CAUSES  High operating costs & energy expenses makes setting up Cold Storage Units unviable and uneconomical.  India’s food waste challenge lies in the fact that much of its cold chain infrastructure is outdated.  About 75 % of cold storage capacity in India is suitable only for potatoes.
  4. 4. Problem 2: Monopoly of Middlemen and exploitation of farmers WHY THIS REASON ?  Big retailers or middlemen hoard perishable commodities and create artificial shortages.  The 60% plus margins for middlemen have prevented innovation in Indian retail industry.  The agricultural sector can be exploited by creating Job opportunities in the organized retail segment. SCOPE  A Indian farmer gets only 28% of what the end consumer pays.  More than 17,500 farmers a year killed themselves between 2002 and 2006.  The year 2010 witnessed overall inflation rate crossing 10% for five consecutive months. CAUSES  Farmers are compelled to sell their crop at whatever price they can get due to no safe storage facilities.  While most farmers may be experts at production, they often lack skills in investment and marketing.  Absence of Govt. intervention and lack of huge public procurements.
  5. 5. Solution: Introduction of a government post replacing the middlemen in the current system to initiate and manage the proposed chain of low scale cold storage facilities in rural areas MODEL PLAN Advantage Over Existing System  Will deliver more and cheaper facility than National Centre for Cold Chain Development (NCCD) which is a registered society working with various industry to develop integrated cold chain in India.  About 30-35% of losses can be reduced by transporting the freshly harvested fruits and vegetables in refrigerated containers.  Efficient usage of these cold storage facilities due to their location, being in the vicinity of the farms.  Generates more Govt. job in the agriculture sector. job  Reduces the number of Middlemen, so some of them might be compelled to take the role of Investors.
  6. 6.  Suppose a block consists of 4 villages comprising of 200 farmers.  The PHM first splits them into 4 groups of 50 farmers each depending on their locations and then sanctions the Govt. loan to install the cold storages on behalf of each group.  Each farmer group elects a chief farmer every year who represents that village and ensures transparency in the system by acting as a link between the PHM and the farmers.  A general body is formed consisting of PHM ,BDO, investor, the Sarpanch and the elected chief farmer of each group or village.  This body decides the cost price and selling price of the farmer's harvest after every member’s approval with reference to various demands which at last is executed by the PHM.  This body meeting shall be held every harvesting season.  Emergency meetings may be held depending on various crisis e.g. flood, drought, pest infestation etc.  All Investors under the PHM get a Govt. license.  The license of the Investors shall be reviewed yearly, failing to meet the norms shall result in termination of the license.  Potential investors cannot form union with their own agendas.  The Investor shall always be answerable to the PHM.  A survey of farmers , wastage of harvest, distribution of cold storages are conducted.  The number or size of cold storages will depend on the number of farmers in that area.  Recruitment of PHMs by the State Govt.  Registration of farmers for membership in the cold storage facility chain.  PHM then handles the purchase and installation of Refrigerated Containers or low scale Cold storages setup through subsidized loans by the govt.  Investors will be selected by method of tenders by the PHM. Investors’ Body General Body Farmers’ BodyInitiation Implementation and Functioning
  7. 7. PHM (Post-Harvest Manager)  Only a person with an Agricultural degree and with some years of experience can opt to be a PHM.  One PHM exists under every BDO.  He is an extended member of the Panchayat Samiti.  Handles the accounting work of profits and losses of the farmers.  Organizes Open Market Sale for farmers every harvesting season.  Manages the cold storage facilities under the block level.  Integrates farmer-consumer relationship.  Conducts interactive sessions with farmers regarding hybrid crops ,crop rotation, soil conservation, pest control, natural fertilizers, irrigation, environmental protection etc.  The PHM post is a state govt. job with a monthly salary of around INR 25,000. INVESTOR  With monumental wastage in Indian agricultural sector it would be advisable to rethink seriously into the golden opportunities which this wastage has in store for investors in agro business in India.  They can invest on the raw material and various requirement of the farmers.  They can also cater the needs of transportation, maintenance & security of cold storages .  He sells the harvest of the farmers to the retailers and in return they get a profit % chartered by the PHM only.  He should be a permanent resident of that region.  He should sponsor for organizing various farming related campaigns.  Middlemen can turn out to be investor owing to their position loss due to new PHMs. FARMER  Farmers will pay a minimal amount as tax for storage according to the quantity of their produce.  They can legally file a complaint if the PHM misuses his position.  They should be aware about the current market prices and the demand.  They should try to have higher access to the govt. subsidies or the investor's funding.  They should try to get rid of non scientific and haphazard forms of farming.  They shall pay back the initial loan for the installation of the storage facilities within the time allocated by Govt.  They should be responsible for the safekeeping of the refrigerated containers.  The chief farmer from their respective groups should ensure transparency in the system. Role of Various Stakeholders
  8. 8. Refrigerated Containers
  9. 9.  Govt. should deliver the initial funding for installation and maintenance .  Investor are also a major source of funds as per the necessities of needy farmers.  Farmers also pay a nominal value as tax for usage of the storages. Proposed funding: Rough Annual Budget for a single Block:  Annual budget for PHM =12x25,000 =3 lakhs INR  Installation budget for 4 cold storage =4x5 =20 lakhs INR  Maintenance budget for 4 cold storages = 4x0.5 =2 lakh INR  1st Year budget= 25 lakhs INR minus investments.  Following Years= 5 lakhs INR minus Investments. Monitoring  The PHM maintains a recorded history of the transactions of farmers harvest and provides them monthly bills presenting their harvest cost price, selling price and investor’s payback.  Annual auditing by the Govt. inspection team confirms the billings with the PHM’s transaction record .  Village with highest profit can be motivated by supplying them with more support and allowances.
  10. 10. Impact Measuring Criteria A survey should be conducted to show the following –  Difference in the wastage and spoilage of the produce.  Difference in the prices for the consumers.  Differences in the profit of the farmers. before and after the implementation of the proposed solution.  The gap between scientific know-how and field level do- how can be minimized by technically qualified PHMs.  Fresh investment in organized retail under the PHM will generate around 10 million new jobs in the near future.  It would open enormous opportunities and lead to much-needed investment in cold chain and warehousing.  Will reduce waste by improving logistics, creating cold storage to prevent food spoilage.  Improve hygiene and product safety, reduce counterfeit trade and tax evasion on expensive item purchases.  It will increase choice and reduce India’s rampant inflation by reducing waste and cutting out middlemen.  It will offer the small Indian farmer more competing venues to sell his products and increase his income. IF MODEL EFFECTIVE Consequences
  11. 11. MITIGATION  Govt. will support the funding until the availability of sufficient investors.  They can be educated about investing opportunities in the proposed model.  Installing cold storages run by solar cells.  Incentives like transport and housing should be included in their job.  Convincing local people of the benefits of the cold storage facilities.  Awareness gatherings should be conducted by the PHMs to inform farmers about the drawbacks.  Govt. inspection teams should conduct random raids and take necessary steps. CHALLENGES  Initial unavailability of sufficient investors.  Opposition from the side of middlemen.  Some villages still don't have access to electricity.  Being qualified, some PHMs may be reluctant to work in rural areas.  Unavailability of land for installation of cold storage facilities.  Some farmers might be lured by existing middlemen’s attractive offers.  Any PHM or Investor might resort to corruption.
  12. 12. APPENDIX References  Bio Diversity Library  NCCD (National Centre for Cold Chain Development)  Refrigerated Container price, Wikipedia  Save farmers from greedy middlemen , monitor  Disappearing food; How big are post harvest looses?- World Resources Institute.  New age farmers say no to middlemen and yes to profits-Livemint  Will Govt. free farmers from middlemen-Speak up- DNA  Don’t cut out the middlemen, become one-  India Agricultural Product Service –  Energy efficiency-